A Project Report On

RETAIL MANAGEMENT IN INDIA

Submitted in partial fulfillment for the Award of degree of MASTER IN BUSINESS ADMINISTRATION (MBA)

2010-2012 SHANKARA INTERNATIONAL SCHOOL OF MANAGEMENT & RESEARCH

Submitted By:Amitesh kumar jha MBA Fourth (Sem)

Submitted To:Ms. Ayushi Mathur HOD (SIM)

Preface

Project Study as we Known is essential to supplement to Knowledge worth the Practical Knowledge and to inculcate efficiency. It was observed that due to lack of practical most of the managers are ineffective in their job. Due to this reason Market research of 30 Days has been made an integral part of the syllabus of MASTER IN BUSINESS ADMINISTRATION (MBA) BY SHANKARA MANAGEMENT, KUKAS, JAIPUR, (RAJSTHAN) Project Study is considered a major component of the research remains incomplete till the report has been presented and written. The purpose of project Study is nor well served unless the finding and experience gained are made known to others. Writing of report is the last step in the Market Research Programme. Thus the purpose of Project Study and subsequent of report writing are meant both as a mean of gaining first hand experience in the organization and also an academic exercise. In the above mentioned context. I had a privilege of getting this Market Research. The Project Study is done under RETAIL MANAGEMENT IN INDIA The report gives a true picture of the practical activities done by me within jurisdiction. The effort has been made to collect the relevant information regarding the topic. This present study of RETAIL MANAGEMENT IN INDIA I would like to express my sincere gratitude to all those persons who help me in the preparation of the project. INSTITUTE OF

Acknowledgement

I express my sincere thanks to my project guide, Ms.Ayushi Mathur. for guiding me right form the inception till the successful completion of the project. I sincerely acknowledge him for extending their valuable guidance, support for literature, critical reviews of project and the report and above all the moral support he had provided to me with all stages of this project.

I would also like to thank the supporting my friends, for their help and cooperation throughout our project.

(Signature of student)

Name of Student Amitesh Kumar jha

Project Report on Retail Marketing in India

Executive Summary
The Indian retail industry is now beginning to evolve in the line with the transformation that has swept other large economies. It witnesses tremendous growth with the changing demographics and an improvement in the quality of life of urban people. The growing affluence of Indias consuming class, the emergence of the new breed of entrepreneurs and a flood of imported products in the food and grocery space, has driven the current retail boom in the domestic market. The concept retail which includes the shopkeeper to customer interaction, has taken many forms and dimensions, from the traditional retail outlet and street local market shops to upscale multi brand outlets, especially stores or departmental stores. Though at this moment, it is still premature to say that the Indian retail market will replicate the success stories of names such as Wal-Mart stores, Sainsbury and Tesco but at least the winds are blowing in the direction of growth. Hence, focusing on two aspects of retail marketing i.e. Store Retailing and Non-store Retailing. Store Retailing as the departmental store, which is a store or multi brand outlet, offering an array of products in various categories under one roof, trying to cater to not one or two but many segments of the society and Nonstore Retailing as the direct selling, direct marketing, automatic vending. Therefore, this concept of retail marketing through departmental stores, which is coming up in a big way in India was decided to be studied in detail, through an exploratory and conclusive research.

The objective being to assess the various parameters that influences a buyer to visit or shop at departmental store thereby contributing to its turnover (in terms of sales and profits) hence leading to its overall success. The extensive research brought me to conclude that departmental stores are soon emerging on the top priority lists, amongst the shopping spree in Delhi, as they seem to derive immense pleasure of convenience and exposure to variety under one roof, in their extremely busy lives, when they dont have time for things. Though some of the customers perceive departmental stores to be expensive and only high income categorys cup of tea, the stores make constant efforts to induce them to at least visit the store at once during the sale period, or discount offers. Most of these stores believe in creating not just a marketing activity with its customers, but rather favor relationship building with him so as to convert first time customers into a client. Hence this document entails me through these aspects in great detail, helping me to understand the concept of retail marketing through departmental stores in Delhi.

Chapter 1 : RETAILING THE SUNRISE INDUSTRY 1.1 Introduction to the Project Report : The word retail means to sell or be sold directly to individuals. Retail is Indias largest industry, and arguably the one with the most impact on the population. It is the countrys largest source of employment after agriculture, has the deepest penetration to rural India, and generates more than 10percent of Indias GDP. However, retailing in India has so far, been mostly in the hand of small disorganized entrepreneurs. It is also Indias least evolved industries. In fact, it is not even considered a real industry. The industry suffers from lack of management talent, poor access to capital, unfavorable regulation and denial of access to best practices. The Indian retail industry is only now beginning to evolve in line with the transformation that has swept other large economies. Fifty years of restricting the consumer goods industry, a national mindset which favored denial over indulgence, and a fractured supply chain for agricultural products have all contributed to prevent the development of modern tenants based on scale advancements and consumer preferences. India has some 12 million retail outlets, but many of these act merely as subsistence providers for their owners and survive on a cost structure where labor and land is assumed to be free and taxes nil. Compare this with the global retail industry, which is one of the worlds largest organized employers, is at the cutting edge of technology, and which leverages scale and scope to offer value-added services to its customers. However, only recently has there been an awakening in this sector, with more organized retailers starting to make an impact. The liberalization of the consumer goods industry, initiated in the mid-80s and accelerated through the 90s has begun to impact the structure and conduct of the retail industry. Backed by changing consumer trends and metrics, liberalization in mindsets driven by media, new opportunities and increasing wealth, retailing in India, presents a vast opportunity for a variety of businesses - real estate, store design & operations, visual merchandising logistics and communications, B2C service providers, and FMCG companies who can add to their offers by partnering this revolution. The Indian Retailing Industry stands poised to take off into the 21st century. It is one of the fastest growing sectors in the nation that caters to the world's second largest consumer market. Retail boom is unabating. India has five million retailers with a business volume of

$180 million growing at 5 to 7 per cent a year. The middle class drives retailing anywhere in the world and this segment should have reasonable income. The next driver is availability of variety of goods, products and brands. The third one is sense of awareness. In other developing economies, this transformation has already begun. In many of these countries, organized retail already has a 40 percent share of the market, compared to Indias current levels of 2 percent. As India goes through this transformation, new businesses with sales of 1billion 2 billion US $ will be created in grocery and of 250million - 500million US $ in apparel. Smaller but still interesting opportunities will be created in other sectors like books, electronics, and music. This transformation will also impact the supply chain in agriculture, the tax collections from trade and the way people shop. In the last 10 years, all Southeast Asian countries like Indonesia, Malaysia, Taiwan and Korea have gone through similar phases. China, with a per capita income of $650-700 per annum, is going through the same phase what India is also facing now. Europe went through this phase of retail revolution about 40-50 years ago. It is believed that when a countrys per capita income reaches the level of $1,200 per annum, organized retailing begins to takeover. Though India has a per capital income of $ 400, on the basis of purchasing power parity (PPP) it has already hit the $1200 level. This does strengthen the belief that probably, the right time for organized retailing to click in India has come. This report aims at providing an insight into the emerging trends in the industry and the barriers to change and a perspective on what this industry could become, using the global industry as the backdrop.

1.2 Overview of the Global Retail Industry Retail: world largest industry Retail, with total sales of $ 6.6 trillion, is the worlds largest private industry ahead of financial industries $ 5.1 trillion. It is also home to a number of the worlds largest enterprises. Over 50 of the Fortune 500 companies, and around 25 of the Asian top 500 companies, are retailers. The industry accounts for over 8 percent of the GDP in western economies. Retail: Largest private industry in the world economy A Study by Mc Kinsey states that organized retail accounts for just around 2 percent (out of which modern retail formats account for 7 percent of trade) presently is set to grow at exponential exceeding 35 percent. Fitch estimates the current share of organized retail to grow from 2percent presently to around 15 to 20 percent by 2010. Table 1: Retail Consumption areas US $ billion Existing Companies in the organized sector Food Retailing 130 Food Bazaar (Pantaloon) Food World Subhishka. Clothing & Apparel Jewelry, Watches Home Furnishing Foot wear Beauty Care 12 7 5 1.7 3.6 Pantaloon Westside, Shoppers Stop Tanishq, Titan, Gold Bazaar (Pantaloon) Home Store, Arcus (Pantaloon) Bata, Woodland VLCC, Health & Glow

Source: economic times industry report Traditionally, most retailers have had very localized operations. This localized nature of the industry is changing as retailers face low rates of growth and threatened profitability at home. New geographies will help them sustain top-line growth as well as permit global

sourcing. Profits in retail have steadily been rising and have generated 18 percent shareholder returns between 1994 and 1999. Significantly, retail is also one of the worlds largest employers, accounting for instance 16 percent of the US workforce, Poland 12 percent, China 8percent, India 10 percent and Brazil 6percent. Factors such as scale in sourcing, merchandising, operational effectiveness and ambience have driven the spread of organized retail. Grocery, electronics are examples of categories that compete on the strength of better pricing, which in turn is driven by superior sourcing and merchandising and cost-efficient operations. Wal-Mart, Home Depot and Kingfisher are benchmark retailers in these fields. In apparel, home furnishings and furniture, the advantage is driven by the marketers ability to provide better products in a comfortable ambience at affordable prices. In these cases sourcing capability has to be backed by strong design capability and store management. IKEA and GAP are good examples of this model of retailing. Over the last few decades, retail formats have changed radically. The basic department stores and co-operatives of the early 20th Century have given way to mass merchandisers, hypermarkets, warehouse clubs, category killers, discounters and convenience stores. Each of these formats has been driven by marketers need to offer relevant, distinctive and economic propositions to an evolving consumer base. Global retailers have also reached a position of strength that enables their brand to be leveraged across a wide range of services. Many of them have expanded their offering, over the years to include fuel retail, car retail, convenience services and personal financial services. This has put them in a position where they are not only beginning to capture growth from geographical expansion, but are also entering large new areas of business. The recent evolution of the Internet has helped further broaden the scope of operations of large retailers. Further, a large number of retailers are pursuing innovative aggregation and supply chain-streamlining initiatives using B2B technology.

Chapter 2 : THE RETAIL MARKETING REVOLUTION By 2010, the list of India's top 10 retailers will have at least 5 Indian corporate. Retail Marketing will go through a tremendous change in India this millennium. It will change India's cities, its people, and its households. The Indian consumer is reportedly the largest spender in Singapore and London. It is, therefore, strange that there have, so far, been few efforts to present the product in the right kind of environment in India. Indeed, the right shopping experience does induce Indian consumers to spend more. This is evident from the experiences of retail-outlets like Shoppers' Stop, Music World, Food World, Crosswords, The Home Store, Ebony, Bigjos, Saboos, Standard, Vijay Store and Janaki Das & Sons, Westside etc. However, the development of organized retail is dependent on the efforts of several agencies and institutions. The first among these is the government. In a country as big as India and with as many states as ours, it is imperative that the Central government and all state governments bring in Value Added Taxation or a unified taxation system to ensure that the tax-regimes are the same across the country. The laws governing retail real estate should also be looked into, so that it is possible to develop retail-estate beyond the city-limits. Apart from providing entertainment and retail opportunities, this will also decongest the city center and facilitate the development of suburbs. The relevant rules should also be amended to allow retail-stores to operate 7 days a week, 12 hours a day. Given the hours most urban consumers keep at work, and keeping in mind the increase in the number of nuclear families, this may, indeed, make sense. This will also help people enjoy their evenings, out at malls. The second group, whose participation is essential in making retail a boom-sector in this millennium, comprises developers. Most properties are developed without considering the end user; thus, we sometimes find high-ceilinged offices and low-ceilinged retail stores. Often, the shopper's convenience is not taken into consideration while the property is constructed.

Another area of concern is the way in which developers sell their space. The only consideration is the price, not the usage pattern or the nature of the product that is to be sold. In contrast, internationally, mall-management is treated as a specialized discipline of retail management. This is what we have to focus on in this millennium. The third constituency that has a role to play in the fortunes of organized retail this century is the education-sector. Retail is a people-intensive business, and there is a huge opportunity for retail institutes in India. For manufacturers, retailing will present an attractive opportunity. Organized retail allows them to expose their products to a large volume of customers in an environment conducive to buying. Already, several transnational retail giants have established their presence in India; others, notably Chinese retailers, have visited India and studied the Indian market. There's a lot at stake here: even so early in the 21st Century, India is too large a market to be ignored by transnational retail giants. From the manufacturing company's perspective, the focus should be on producing good products, and forging relationships with organized retail. Manufacturers need to draw a plan of producing quality products and tie in with retailers. Indeed, the birth of organized retail will also engender the creation of private labels and store-brands. Thus, if a manufacturing company lacks the resources to build a brand, it can supply to a retail-chain that has the resources to create a brand of its own. A glimpse of the last 2 decades of the previous century proves illuminating. Large-format retailing started with outlets like Vivek's and Nalli's in Chennai and Kidskemp in Bangalore, and, at another level, with manufacturer-retail brands

like Bata, Bombay Dyeing, and Titan. The last decade of the millennium witnessed the emergence of lifestyle brands and the plastic culture. Liberalization and increasing awareness of the world around us created the Indian yuppie, who aspired to own everything we saw on TV, or in shops during jaunts abroad. New lifestyle brands offered traditional retail-outlets an opportunity to convert themselves into exclusive stores, franchised or otherwise. And even as these developments were taking place, the Indian consumer became more mature. Customer-expectations zoomed

Thus, at the beginning of the New Millennium, retailers have to deal with a customer who is extremely demanding. Not just in terms of the product-quality, but also in terms of service, and the entire shopping experience. Today, the typical customer who shops in a retail outlet compares the time spent at the check-out counter with that at an efficient petrol station, and the smile of the counter-person to that decorating the face of a Jet Airways' crew member. To cope with the new customer, manufacturers have to focus on product quality and brand building. And retailers, in turn, have to focus on the quality of the shopping experience. Internationally, retailing is a large business; you find at least one retailer amongst the top 10 companies in every country. In the US, it is Wal-Mart with a turnover in excess of $ 120 billion. In the UK, it is Marks and Spencer's with close to 10 billion; and, in Germany, it is Karstadt with a turnover in excess of dm 10 billion. Table 2: Top 10 Retailers Worldwide Rank Retailer No of stores Sales Millions $180,787 $61,047 $49,000 $45,738 $45,729 $44,189 $37,028 $36,823 in US$

owned 1 2 3 4 5 6 7 8 Wall-Mart Stores Inc. (USA) 4178 Carrefour Group (France) The Kroger Co. (USA) 8130 3445

The Home Depot, Inc. (USA) 1134 Royal Ahold (Netherlands) Metro AG (Germany) Kmart Corporation (USA) 7150 2169 2105

Sears, Roebuck and Co. 2231 (USA)

9 10

Albertson's, Inc. (USA) Target Corporation (USA)

2512 1307

$36,726 $36,362

Source: economic times industry report

Studies by consulting firms like A.T. Kearney, KSA Technopak, and McKinsey & Co. in India have indicated a huge potential for retailing in the country. Drawn by the magic number of Rs 1, 60, 000 crore that is expected to be the size of the retail industry by the end of the first decade of this millennium, several companies from the organized sector have also jumped into the fray. In this millennium, like in the last, customers will want to spend time with their family and friends. They may like to visit malls on weekends where everything will be available under one roof. India will benefit from these developments because of increased consumption through retailing and the corresponding increase in employment created by retailing. 2.1 Retail Marketing Retail Marketing includes all the activities involved in selling goods or services directly to final consumes for personal, non-business use. Any organization selling to final consumers -- whether a manufacturer, wholesaler, or retailer is doing retailing. It does not matter how the goods or services are sold (by Person, Mail, Telephone, Vending Machine, or Internet) or where they are sold (in a store, on the street, or in the consumers home). There are many approaches to understanding and defining retail marketing; most emphasize retail marketing as the business activity of selling goods or services to the final consumer, but what we emphasized upon is defined as follows: Any business that directs its marketing efforts towards satisfying the final consumer based upon the organization of selling goods and services as a means of distribution The concept assumed within this definition is quite important. The final consumer within the distribution chain is a key concept here as retailers are at the end of the chain and are involved in a direct interface with the consumer. A retailer or retail store is any business enterprise, whose sales volume comes primarily from retailing. Retail organizations exhibit great variety and new forms keep emerging. There are store retailers, non-store retailers, and retail organizations. Consumers today can shop for goods and services in a wide variety of stores. The best-known type of retailer is the department store. Japanese department stores such as Takashimaya and Mitsukoshi

attract millions of shoppers each year. These stores feature art galleries, cooking classes, and childrens playgrounds. A retailer is at the end of the distributive channel. He provides goods and service to the ultimate consumers. This he does through his small organization, with the help of a few personnel. In an individual retail store there is not much scope for organization except in the sense that the shopkeeper has to organize and apportion his time and resources. The need for organization becomes essential as soon as he hires people and enters into partnership or takes the help of members of his family in running his store. A retailer deals in an assortment of goods to cater to the needs of consumers. His objective is to make maximum profit out of his enterprise. With that end in view he has to pursue a policy to achieve his objective. This policy is called retailing mix. A retailing mix is the package of goods and services that store offers to the customers for sale. It is the combination of all efforts planned by the retailer and embodies the adjustment of the retail store to the market environment. Retailing mix, a communication mix and a distribution mix. The maximum satisfaction to the customers is achieved by a proper blend of all three. The success of the retail stores, therefore, depends on customers reaction to the retailing mix which influences the profits of the store, its volume of turnover, its share of the market, its image and status and finally its survival. There are three main phases in the life of a retailing institution. These are:

Innovation (Entry) Trading Up Vulnerability.

In the entry stage, a new retailer enters with new price appeal, limiting product offerings, Sparton Stores & Limited services. Its monopoly power over the others is its price advantage, which means that it offers products at low prices so as to get a competitive edge over its competitors. In the trading up stage, the retailer starts expanding. It expands in terms of product offering, better services, and improved interiors. With all these, it starts charging a bit higher prices.

In the vulnerability stage, there is a gap in the market leaving some space for the new players to come in. this is due to increase in the prices by the retailer. I have already explained the three stages in life of a retail institution. Normally these stages are there in the life of a retail institution. But all these may not be necessarily there in every retail institution. For instance, any retail institution targeting the upper class may start itself with a large variety & high price. This brings to broadly identify and categorize the types of retail marketing, which are defined as follows: 1. 2. Store Retailing Non store Retailing

2.2 Types OF Retail Marketing Store Retailing Store retailing provides consumers to shop for goods and services in a wide variety of stores and it also help the Consumers to get all the needed goods and services from one shop only. The different types of store retailing are given below: Specialty Stores These stores focus on leisure tastes of different individuals. They have a narrow product line with deep assortment such as apparel stores, sporting goods stores, furniture stores, florists and bookstores. These stores are usually expensive and satisfy the needs of selected consumers who have liking or preference for exclusive things. Departmental Store These stores are usually built in large area and keep variety of goods under one shed. It is usually divided into different sections like clothing, kids section, home furnishings, electronic appliances and other household goods. In a departmental store a consumer can buy variety of goods under one shed.

Supermarket These stores are relatively large, low cost, low margin, high volume, self service operations designed to serve total needs for food, laundry and household maintenance products. Supermarkets earn an operating profit of only 1 percent on sales and 10percent on net worth. Convenience Stores These are relatively small stores located near residential area, open for long hours seven days a week, and carrying a limited line of high turnover convenience products at slightly higher prices than departmental stores. Many such stores also have added takeout sandwiches, coffee and pastries. Off - Price Retailer These stores sell goods at low price with lower margins & higher volumes. These stores sell goods with deteriorated quality. The defects are normally minor. This target at the persons belonging to the lower income group, though some have a collection of imported goods aimed to target the younger generation. The company owned showroom selling the seconds products is a typical example of off - price retailer. Discount Store These stores sell standard merchandise at lower prices by accepting lower margins and selling higher volumes. The use of occasional discounts or specials does not make a discount store. A true discount store regularly sells its merchandise at lower prices, offering mostly national brands, not inferior goods. In recent years, many discount retailers have traded up. They have improved decor, added new lines and services, and opened suburban branchesall of which has led to higher costs and prices and as some department stores have cut their prices to compete with discounters.

Not only that, discount stores have moved beyond general merchandise into specialty merchandise stores, such as discount sporting goods stores, electronics stores, and bookstores. Catalog Showroom Catalog showrooms generally sell a broad selection of high-markup, fast-moving, brandname goods at discount prices. These include jewelry, power tools, cameras, luggage small appliances, toys, and sporting goods. Catalog showrooms make their money by cutting costs and margins to provide low prices that will attract a higher volume of sales. Catalog showrooms have been struggling in recent years to hold their share of the retail market. RETAIL SCENE IN INDIA India has some sometimes been called a nation of shopkeepers. This epithet has its roots in the huge number of retail enterprises in the country totaling 12 million, about 78 percent of these are small family owned businesses utilizing only household labour. even among retail enterprises that hire workers the bulk of them hire less than 3 workers .Indias retail sector appears backwards not only by standards of industrialized countries but also in comparison to several other emerging markets in Asia and elsewhere. There are only 14 companies that run departmental stores and mere two with hypermarket operations. While the number of businesses operating supermarkets is higher ( 425 in 2004 ) most of these had only 1 outlet, the number of companies with supermarket chains was less than 10. 2.3 Major Formats of Retailing Major formats of In-Store Retailing have been listed in Table given below: Table 3: Format Branded Stores Description Exclusive The Value Proposition showrooms either Complete range available a given brand,

owned or franchised out by a for manufacturer. Specialty Stores

Certified product quality.

Focus on a specific consumer Greater choice to the

need; carry most of the brands consumer, available. Department Stores

comparison

between brands possible

Large stores having a wide One stop shop catering variety of products, organized to into different varied consumer

departments, needs.

such as clothing, house wares, furniture, appliances, toys, etc. Supermarkets Extremely large self-services One stop shop catering retail outlets. to varied consumer

needs. Discount Stores Stores offering discounts on Low prices. the retail price through selling high volumes and reaping the economies of scale. Hyper-mart Larger than a Supermarket, Low prices, vast choice sometimes with a warehouse available including

appearance, generally located services as cafeterias. in quieter parts of the city Convenience Stores Small located areas. Shopping Malls self-service in crowded formats Convenient location and urban extended hours. of shops operating

An enclosure having different Variety

formats of in-store retailers, all available close to each under one roof. other.

Source: India info line

Non-store Retailing It is another type of retail marketing. Different types of non-store retailing are given below: Direct Selling Direct selling which started centuries ago with itinerant peddlers has burgeoned into a $9 billion industry, with over 600 companies selling door to door, office to office, or at home sales parties. A variant of direct selling is called multilevel marketing, whereby companies such as Amway recruit independent businesspeople who act as distributors for their products, who in turn recruit and sell to sub distributors, who eventually recruit others to sell their products, usually in customer homes. Direct Marketing Direct marketing has its roots in mail-order marketing but today includes reaching people in other ways than visiting their homes or offices, including telemarketing, television direct response marketing, and electronic shopping. Automatic Vending Automatic vending has been applied to a considerable variety of merchandise, including impulse goods with high convenience value (cigarettes, soft drinks, candy, newspaper, hot beverages) and other products (hosiery, cosmetics, food snacks, hot soups and food, paperbacks, record albums, film, T-shirts, insurance policies, and even fishing worms). 2.4 Organized Retail Formats in India Each of the retail stars has identified and settled into a feasible and sustainable business model of its own.

Shoppers' Stop - Department store format Westside - Emulated the Marks & Spencer model of 100 per cent private

label, very good value for money merchandise for the entire family

Giant and Big Bazaar - Hypermarket/cash & carry store Food World and Nilgiris Supermarket format Pantaloons and The Home Store - Specialty retailing

Tanishq has very successfully pioneered a very high quality organized retail

business in fine jewellery. Structure of the retailing industry according to ownership patterns:

An unaffiliated or independent retailer A chain retailer or corporate retail chain A franchise system A Leased Department (LD) Vertical Marketing System (VMS) Consumer Co-operatives

A new entrant in the retail environment is the 'discounter' format. It is also is known as cash and-carry or hypermarket. These formats usually work on bulk buying and bulk selling. Shopping experience in terms of ambience or the service is not the mainstay here. RPG group has set up the first 'discounter' in Hyderabad called the Giant. Now Pantaloon is following suit. Two categories of customers visit these retail outlets. 1. The small retailer. For example, a customer of Giant could be a dhabawala who needs to buy edible oil in bulk. 2. The regular consumer who spends on big volumes (large pack sizes) because of a price advantage per unit. Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out; the old ones tweaked around or just discarded. Some of these are listed in Table below.

Table 4: Retailer Shoppers' Stop Ebony Crossword Pyramid Pantaloon Subhishka Vitan Foodworld Glob us Bombay Bazaar Efoodmart Metro S Kumar's Current Format Department Store Department Store Large bookstore Department Store Own brand store Supermarket Supermarket Food supermarket Department Store Super market Food super market Departmental store Departmental store New Formats Quasi-mall Quasi-mall, smaller outlets, adding food retail Corner shops Quasi-mall, food retail Hypermarket Considering moving to self service Suburban discount store Hypermarket, Foodworld express Small fashion stores Aggregation of Kiranas Aggregation of Kiranas Cash and carry Discount store

Source: India info line Retailers are also trying out smaller versions of their stores in an attempt to reach a maximum number of consumers. Crossword bookstores are experimenting with Crossword Corner, to increase reach and business from their stores. FoodWorld is experimenting with a format of one-fourth the normal size called FoodWorld Express. 2.5 Trends in Retail Marketing At this point, I can summarize the main development retailers and manufacturers need to take into account as they plan their competitive strategies. In India the trends are mainly in three sectors. These sectors are:

Trends in retail marketing 1. New retail forms and combinations continually emerge. Bank branches and ATM counters have opened in supermarkets. Gas stations include food stores that make more profit than the gas operation. Bookstores feature coffee shops. Even old retail forms are reappearing: In 1992 Shawna and Randy Heniger introduced peddlers carts in the Mall of America. Today three-fourths of the nations major malls have carts selling everything from casual wear to condoms. Successful carts average $ 30,000 to $ 40,000 a month in sales and can easily top $ 70,000 in December. With an average startup cost of only $3,000, push carts help budding entrepreneurs test their retailing dreams without a major cash investment. They provide a way for malls to bring in more mom-andpop retailers, showcase seasonal merchandise, and prospect for permanent tenants. 2. New retail forms are facing a shorter life span. They are rapidly copied and quickly lose their novelty. 3. The electronic age has significantly increased the growth of non store retailing, consumers receive sales offers in the mail and over television, computers, and telephones, to which they can immediately respond by calling a toll-free number or via computer.

4. Competition today is increasingly intertype, or between different types of store outlets. Discount stores, catalog showrooms, and department stores all compete for the same consumers. The competition between chain superstores and smaller independently owned stores has become particularly heated. Because of their bulk buying power, chains get more favorable terms than independents, and the chains large square footage allows them to put in cafes and bathrooms. In many locations, the arrival of a superstore has forced nearby independents out of business. In the book selling business, the arrival of a Barnes & Noble superstore or Borders Books and Music usually puts smaller bookstores out of business. Yet the news is not all bad for smaller companies. Many small independent retailers thrive by knowing their customers better and providing them with more personal service.

5. Todays retailers are moving toward one of two poles, operating either as mass merchandisers or as specialty retailers. Superpower retailers are emerging. Through their superior information systems and buying power, these giant retailers are able to offer strong price savings. These retailers are using sophisticated marketing information and logistical systems to deliver good service and immense volumes of product at appealing prices to masses of consumers. In the process, they are crowding out smaller manufacturers, who become dependent on one large retailer and are therefore extremely vulnerable, and smaller retailers, who simply do not have the budget of the buying power to compete. Many retailers are even telling the most powerful manufacturers what to make; how to price and promote; when and how to ship; and even how to reorganize and improve production and management. Manufacturers have little choice: They stand to lose 10 to 30 percent of the market if they refuse.

6.

Marketing

channels

are

increasingly

becoming

professionally

managed

and

programmed. retail organizations are increasingly designing and launching new store formats targeted to different lifestyle groups. They are not sticking to one format, such as department stores, but are moving into a mix of retail formats.

7. Technology is becoming critical as a competitive tool. Retailers are using computers to produce better forecasts, control inventory costs, order electronically from suppliers, send e-mail between stores, and even sell to customers within stores. They are adopting checkout scanning systems, electronic funds transfer, and improved merchandise-handling systems.

8. Retailers with unique formats and strong brand positioning are increasingly moving into other countries. McDonalds, The Limited, Gap, and Toys R Us have become globally prominent as a result of their great marketing prowess. Many more Indian retailers are actively pursuing overseas markets to boost profits.

9. There has been a marked rise in establishments that provide a place for people to congregate, such as coffeehouses, tea shops, juice bars, bookshops, and brew pubs. Denvers two Tattered Covered bookstores host more than 250 events annually, from folk dancing to womens meetings. Brew pubs such as New Yorks Zip City Brewing and Seattles Trolley man Pub offer tasting and a place to pass the time. The Discovery Zone, a chain of childrens play spaces, offers indoor spaces where kids can go wild without breaking anything and stressed-out parents can exchange stories. There are also the nowubiquitous coffeehouses and espresso bars, such as Starbucks, whose numbers have grown from 2,500 in 1989 to a forecasted 13,000 by 2001. And Barnes & Noble turned a once-staid bookstore industry into a fun-filled village green.

Chapter 3 : RETAIL MARKETING IN INDIA Retail marketing is the most important part of the entire logistics chain in a business especially in consumer related products. Without proper retailing the companies can't do their business. Retailing is the process of selling goods in small quantities to the public and is not meant for resale. Retail is derived from the French word retailer, meaning to cut a piece off or to break bulk. There are various ways of making goods available to consumers like:

Company to distributor to wholesaler to retailer to consumer Company to salesperson to consumer Company to consumers (online/ phone/ catalog ordering)

These three are among the most common ways of making the goods available to consumers. But in India the three layered system of distributor, wholesaler and retailer, forms the backbone of the front-end logistics of most of the consumer-good companies. In this system the company operating on all India basis appoints hundreds of distributors across the country that supplies to various retailers and wholesalers. Wholesalers in turn can either directly sell in the market or can supply to retailers. The current retailing system prevalent across the country is highly fragmented and unorganized. Anyone with some money and some real estate can open a small shop and become a retailer catering to the locality in which he opens the shop. There are a number of reasons behind this fragmented retail market. Some of the major reasons being:

Poverty and lower literacy levels. Low per capita income. Savings focused and less indulgence mindset. Poor infrastructure facilities like roads etc. Restrictions on intra-state good movement. High taxes. No exposure to media. High import duties on imported goods.

FDI in retailing is not allowed. Retailing is not considered as a business or industry by the government. Hitherto none of the business schools in India were offering specialized

courses on retailing.

Expensive supply chain.

Besides this there is other reasons too, which led to stifling of growth of organized segment of retailing sector and which instead led to highly fragmented market. Today in India we have more than 12 million retail outlets and most of then are family run and locally owned. There are very few nationally present retail stores. In India the process of buying and selling at these unorganized retail outlets, is highly characterized by bargaining and negotiations. But slowly with increasing influence of media and urbanization the market is shifting towards organized segment. Seeing the huge market size of retail business in the country and the current level of organized segment, many players have jumped into the fray and many are waiting for the right opportunity to enter it. 3.1 Retailing in 1990s On account of the liberalization drive in the 1990s, several structural and demographic changes that are taking place are helping the industry to grow. The GDP has grown by 6.6percent in the last decade resulting in increased income levels and higher purchasing power for the population. Increasing literacy levels, increasing number of working women, increasing urbanization, higher international travel by Indian population and increasing media penetration has raised aspiration levels of the population, resulting in demand for better shopping experience and larger variety of goods. India has close to 54percent of population below the age of 25, which translates into higher prospects for increased consumption levels in the future. Finally, interest rates have also declined in the past few years further propelling the consumption demand. These factors were the key drivers for the retail wave in the country. Notable among the early entrants were players like Shoppers Stop, Pantaloon, Ebony, Foodworld, Subhiksha, etc. Initially, the growth in organized retail was very slow and concentrated mainly in metros, with south India holding its ground as the pioneer in organized retail growth, on account of the low cost of real estate. Due to the high investments required in the early

stages and the fact that real estate was the key deciding factor for success of stores, real estate developers have been the major players in the industry (see Table). Table 5: Sponsors Group Rajan Raheja Real Retail Business Estate Globus Chain of departmental stores

Developer K, Raheja - Real Estate Developer Shoppers Stop Chain of

departmental stores Hiranandani - Real Estate Developer Haiko supermarket, Loft shoe stores and Hakone mall. Tata Diversified Business House DS Group - Real Estate Developer RPG Diversified Business House Westside chain of department stores Ebony - chain of department stores Foodworld supermarkets, Giant

hypermarkets, Health & Glow beauty and health stores. DLF Real Estate Developer ITC - Diversified Business House Source: Fitch In the early 1990s, as the players were lower down on the learning curve many faltered in their models, and growth of the industry remained slow. The second half of 1990s saw several players making losses and exiting from the business. The worst years for the industry were 2000 and 2001, as the stock market downturn, which reduced customer confidence and spending, had a direct impact on the performance of the industry. The industry recovered starting 2002. It now appears the efforts and learnings of the players in the last decade are beginning to pay off; the organized retail industry has established firm roots and is beginning to grow. DLF malls Wills Sport Chain of apparel stored.

3.2 Present Retail Scenario In India

Retail experts find Indian industry promising Retail sales to touch Rs. 30,000 crore by 2005 Mall Mania: The developing mall culture in India Emergence of region-specific formats Emergence of discount formats Entry of international players

Retail experts find Indian industry promising The retail movement in India has acquired the critical mass that is required for rapid acceleration in terms of industry growth as well as geographical spread. The Indian retail industry can no longer be called nascent. The spread of super stores to the northern cities such as Delhi, Chandigarh, Jaipur and Kolkata is evidence of the fact that organized retailing in India has emerged from its southern bastion. The retailing boom is being driven by increased expectations as well as changing shopping behavior of the urban Indian consumer. With the increasing number of nuclear families, working women, greater work pressure and increased commuting time, consumers are looking for convenience. And, convenience is defined as having everything under one roof, longer hours and multiplicity of choice. On the supply side, the current inefficient supply chain in India, particularly for food items has led a few players to consolidate their operations to take advantage of economies of scale and match consumer expectations in terms of delivery as well as space. So, we have a situation where both demand and supply side dynamics are fuelling the growth of organized retailing in India, although improvements in the supply chain are yet to fully match with consumer expectations. The future growth need not necessarily come only from the big metros, where there already exists a good retail network. The fact that big Indian retail chains are moving into places like Indore or Chandigarh is an important indicator of future growth. For the Rs. 5000-crore organized retail industry it is, perhaps, time to tap the relatively smaller cities. The share of

organized sector in total retail sales will grow from one per cent now to six per cent by 2005.While projections can be slippery, hard facts point to exciting growth ahead for this sector. According to KSA, organized retailing is focusing on only SEC-A cities, Indias 23 largest cities. That is where a large portion of the country's urban population exists. Today 82 per cent of organized retailing comes from the top six cities and 12 per cent from the next four. KSA says the top 10 cities provide 94 per cent of organized retail sales in India. By 2005, KSA projects the top six cities will account for 66 per cent of total organized retailing and the next four for 20 per cent. The top 10 cities will account for 86 per cent of organized retail sales. There could be variations in growth patterns in different segments. The second half of the top 10 cities will provide large growth for food and groceries, while the top six would still be the growth centers for consumer durables, believes KSA. The spread of organized retailing is unlikely to be a national phenomenon yet. This appears to be the case so far. South India, particularly Chennai, Hyderabad and Bangalore, have seen the emergence of chain stores or large format stores. While garment stores have been around for sometime, other segments like food and groceries, consumer durables and even books and music have witnessed the emergence of organized players in large cities in South India. The lack of trained manpower or alternatively the tremendous scope the sector has to provide employment is another issue. Mall Mania: The Developing Mall Culture in India Modern malls made their entry into India in the late 1990s, with the establishment of Crossroads in Mumbai and Ansals Plaza in Delhi. By early 2001, several mall projects were announced. According to market estimates, close to 12 million sq. ft. of mall space is being developed across several cities in the country, of which 10 million sq. ft. is expected to be operational by end of 2003 (see Table below). With this, rentals for retail properties have shown a marked decline, which has brought down the break-even levels of the retail projects. Moreover, retailers would now have access to retail-specific properties, which will increase their efficiencies. Table 6:

Mall Development in India Mall Crossroads Ansals Nirmal Lifestyle Runweals Mall Karnavat Mall Raheja Mind space Jogs Mall Cable Corporation Ansals Sahara MGF Malls Metroplitian & Plaza DLF Shipra Forum City Center Rave 3 Inox Forum Spencers Plaza Phase III Indore, Nasik and Jaipur Malls Hyatt, Mumbai & Leela, Phoenix Malls Lower Parel, Mumbai Location Tardeo, Mumbai South Ex, Delhi Mulund, Mumbai Mulund, Mumbai Thane, Mumbai Malad, Mumbai Andheri, Mumbai Borevali, Mumbai East Delhi Gurgaon Gurgaon Gurgaon Noida KolKotta KolKotta Kanpur Baroda Bangalore Chennai Rate / Sq. ft. 225-250 175-200 75-90 75-90 65-85 60-80 55-75 55-75 75 50-70 65-85* 65-85 80-180 100 55 45-55 75 70-90 70 45-55 175-300 100-125

*average for the metropolitian is Rs. 60 per sq. ft.. source: Chesterten Meghraj. Industry Reports Till some time back, there were only few international style shopping malls in India -Spencer in Chennai, Crossroads in Mumbai, Ansals Plaza in New Delhi and Srirams Arcade in Kolkata. By the end of 2004, that number jumped to many.

It looks like a virtual stampede, major players with a cumulative investment of Rs 375 crore are set to change cityscapes across India. In the next one year, close to 40 lakh square feet of retail space will be developed. In three years, this will rise to 70-lakh sq ft. As the retail industry evolves, consumers want more variety before making their purchase decision. A study on consumer outlook suggests that over 80 percent of consumers want a wide range of products at hand while shopping. This signifies that people are finally ready for multi-option complexes. Many old-time corporates are seriously considering using their idle assets. It makes sense for landowners to develop it and keep the returns rather than sell it outright or even lease it, especially when there is opportunity here. It is perhaps the best way to use an idle real estate asset. The limited kitty of brands has yet another significant knock on effect on the typical size of Indian malls. In the US and South-East Asia, malls are as large as 50 lakh sq ft. Spencer is by far the largest mall in India - it occupies 7 lakh sq ft and even that is dwarfed by Asia's largest mall, the 4-million sq ft mega mall in Malaysia. Even the 26 malls that are being planned are likely to measure between 50,000 sq ft and 2 lakh sq ft. The Indian mall cannot offer too many choices in terms of brands. So, developing a very large mall can never be sustainable. There's a flip side though -malls even as small as 80,000 sq ft, like Shopper's City in Kolkata or the Esplanade Mall at Kochi, can be sustained. Emergence of Region-Specific Formats For the first time in 10 years, the industry is witnessing the development of region-specific formats. With organized retail penetrating into B class towns, retailers have started differentiating in the sizes and formats of stores. For example, in departmental store format, while most A class cities and metros have larger stores of 50,000 plus sq. ft. sizes, stores in B class towns have stabilized in the 25,000-35,000 sq. ft. range. Most players have started operating these two formats across various cities, which has helped them to standardize the merchandise offering across the chain.

Emergence of Discount Formats Larger discount formats, popularly known as hypermarkets, are now emerging as major competitors to both unorganized and organized retailers. Penetration of organized retail into the lower strata of income groups and consumer demand for increased value-for-money has improved the prospects of these formats. These formats span across the entire range of merchandise categories. Big Bazaar, promoted by Pantaloon and Giant, promoted by the RPG Group, are examples of this format. Entry of International Players A large number of international retailers have evinced interest in India, despite the absence of favorable government policy for foreign players (see Table below). A number of the major brands have entered the country through licensing agreements with Indian players to capitalize on the opportunities available in the sector. Table 7: International players International Players Landmarc Group, Dubai Metro, Germany Shoprite, South Africa Nanz, Germany Marks & Spencer, UK Mango, Spain McDonalds, USA Dominos USA Tricon Restaurant, USA Source: Industry Reports Retail Ventures In India Lifestyle Chain of Departmental Stores Hypermarket Supermarket, Hypermarket Supermarket Apparel Retailer Apparel Retailer Food Retailer Food Retailer Food Retailer

Chapter 4 : INFORMATION TECHNOLOGY IN RETAIL Over the years as the consumer demand increased and the retailers geared up to meet this increase, technology evolved rapidly to support this growth. The hardware and software tools that have now become almost essential for retailing can be divided into 3 broad categories: Customer interfacing systems Bar coding and scanners Point of sale systems use scanners and bar coding to identify an item, use pre-stored data to calculate the cost and generate the total bill for a client. Tunnel Scanning is a new concept where the consumer pushes the full shopping cart through an electronic gate to the point of sale. In a matter of seconds, the items in the cart are hit with laser beams and scanned. All that the consumer has to do is to pay for the goods. Payment Payment through credit cards has become quite widespread and this enables a fast and easy payment process. Electronic cheque conversion, a recent development in this area, processes a cheque electronically by transmitting transaction information to the retailer and consumer's bank. Rather than manually process a cheque, the retailer voids it and hands it back to the consumer along with a receipt, having digitally captured and stored and image of the cheque, which makes the process very fast. Internet Internet is also rapidly evolving as a customer interface, removing the need of a consumer physically visiting the store. Operation support systems ERP System Various ERP vendors have developed retail-specific systems which help in integrating all the functions from warehousing to distribution, front and back office store systems and

merchandising. An integrated supply chain helps the retailer in maintaining his stocks, getting his supplies on time, preventing stock-outs and thus reducing his costs, while servicing the customer better.

CRM Systems The rise of loyalty programs, mail order and the Internet has provided retailers with real access to consumer data. Data warehousing & mining technologies offers retailers the tools they need to make sense of their consumer data and apply it to business. This, along with the various available CRM (Customer Relationship Management) Systems, allows the retailers to study the purchase behavior of consumers in detail and grow the value of individual consumers to their businesses.

Advanced Planning and Scheduling Systems APS systems can provide improved control across the supply chain, all the way from raw material suppliers right through to the retail shelf. These APS packages complement existing (but often limited) ERP packages. They enable consolidation of activities such as long term budgeting, monthly forecasting, weekly factory scheduling and daily distribution scheduling into one overall planning process using a single set of data. Leading manufactures, distributors and retailers and considering APS packages such as those from i2, Manugistics, Bann, Mercial incs and Sterling-Douglas.

Strategic decision support systems

Store Site Location
Demographics and buying patterns of residents of an area can be used to compare various possible sites for opening new stores. Today, software packages are helping retailers not only in their locational decisions but in decisions regarding store sizing and floor-spaces as well.

Visual Merchandising The decision on how to place & stack items in a store is no more taken on the gut feel of the store manager. A larger number of visual merchandising tools are available to him to evaluate the impact of his stacking options. The SPACEMAN Store Suit from AC Nielsen and Modacad are example of products helping in modeling a retail store design.

Chapter 5 : FOREIGN TOUCH IN INDIAN RETAIL The chief of Marks & Spencer has been making trips to India over the past year. Global investment bank Warburg Pincus is awaiting the Indian government's clearance to pick up a 25.1 per cent stake, worth $13 million, in Shoppers Stop. Dairy Farm International and Jardine Matheson are present here, through tie-ups with the RPG Group. Fast food major McDonalds have already made a dent in the marketplace and in Indian palates. The Dubai-based Landmark group is making its presence felt in Chennai through its Lifestyle mega store of over 30,000 sq ft. Landmark is owned by Mukesh Jagtiani, a nonresident Indian. Lifestyle International Private Limited, formed in India recently, is a whollyowned subsidiary of the Mauritius-based Lifestyle International which, in turn, is whollyowned by the Landmark group. In India, according to Lifestyle International's marketing manager, Roshan Mathew, the target is to "have 12 to 16 stores by 2005." These stores will sell all lifestyle products, barring furniture, under one roof. Immediate plans include opening a 46,000 sq ft store in Hyderabad, which Mathew terms "The Millennium Store". The Hyderabad store will have additional sections for books and music, unlike the Chennai store. Besides, as soon as Lifestyle gets a keenly awaited Foreign Investment Promotion Board clearance for a Rs 100 crore investment, it will create outlets in Bangalore, Pune, Mumbai, Delhi and Ahmedabad. The Hong Kong-based Dairy Farm International, a 125 year old retail major with around 1,300 outlets across nine countries, recently converted its technical tie-up (since 1996) with the RPG group's Spencer & Company for Foodworld into a 49:51 joint venture. The new venture is called Foodworld Supermarkets Limited. DFI also has a 50:50 joint venture with the Indian group in RPG Guardian. DFI is the retail arm of Jardine Matheson. In Western markets, a familiar sight is the McDonalds golden arch. In India too McDonalds has maintained its unique selling proposition -- providing the same quality of food and the same ambience as anywhere in the world. Its raw material requirements are totally outsourced. But what it has taken care of is world class quality in all its raw material sourcing, with specifications ensured strictly. The chain has been smart enough to tailor its products

to the Indian environment, adding fare for the large number of vegetarians who love fast food, and avoiding certain beef and pork in deference to social sensitivities. In a market place where Kentucky Fried Chicken failed to make an impact, McDonalds seems to be finding its place slowly but surel

The Indian retail industry is now beginning to evolve in the line with the transformation that has swept other large economies. It witnesses tremendous growth with the changing demographics and an improvement in the quality of life of urban people. The growing affluence of Indias consuming class, the emergence of the new breed of entrepreneurs and a flood of imported products in the food and grocery space, has driven the current retail boom in the domestic market. The concept retail which includes the shopkeeper to customer interaction, has taken many forms and dimensions, from the traditional retail outlet and street local market shops to upscale multi brand outlets, especially stores or departmental stores. Though at this moment, it is still premature to say that the Indian retail market will replicate the success stories of names such as Wal-Mart stores, Sainsbury and Tesco but at least the winds are blowing in the direction of growth. Hence, focusing on two aspects of retail marketing i.e. Store Retailing and Non-store Retailing. Store Retailing as the departmental store, which is a store or multi brand outlet, offering an array of products in various categories under one roof, trying to cater to not one or two but many segments of the society and Nonstore Retailing as the direct selling, direct marketing, automatic vending. Therefore, this concept of retail marketing through departmental stores, which is coming up in a big way in India was decided to be studied in detail, through an exploratory and conclusive research. The objective being to assess the various parameters that influences a buyer to visit or shop at departmental store thereby contributing to its turnover (in terms of sales and profits) hence leading to its overall success.

The extensive research brought me to conclude that departmental stores are soon emerging on the top priority lists, amongst the shopping spree in Delhi, as they seem to derive immense pleasure of convenience and exposure to variety under one roof, in their extremely busy lives, when they dont have time for things. Though some of the customers perceive departmental stores to be expensive and only high income categorys cup of tea, the stores make constant efforts to induce them to at least visit the store at once during the sale period, or discount offers. Most of these stores believe in creating not just a marketing activity with its customers, but rather favor relationship building with him so as to convert first time customers into a client. Hence this document entails me through these aspects in great detail, helping me to understand the concept of retail marketing through departmental stores in Delhi.

1.1 Introduction to the Project Report : The word retail means to sell or be sold directly to individuals. Retail is Indias largest industry, and arguably the one with the most impact on the population. It is the countrys largest source of employment after agriculture, has the deepest penetration to rural India, and generates more than 10percent of Indias GDP. However, retailing in India has so far, been mostly in the hand of small disorganized entrepreneurs. It is also Indias least evolved industries. In fact, it is not even considered a real industry. The industry suffers from lack of management talent, poor access to capital, unfavorable regulation and denial of access to best practices. The Indian retail industry is only now beginning to evolve in line with the transformation that has swept other large economies. Fifty years of restricting the consumer goods industry, a national mindset which favored denial over indulgence, and a fractured supply chain for agricultural products have all contributed to prevent the development of modern tenants based on scale advancements and consumer preferences. India has some 12 million retail outlets, but many of these act merely as subsistence providers for their owners and survive on a cost structure where labor and land is assumed to be free and taxes nil. Compare this with the global retail industry, which is one of the

worlds largest organized employers, is at the cutting edge of technology, and which leverages scale and scope to offer value-added services to its customers. However, only recently has there been an awakening in this sector, with more organized retailers starting to make an impact. The liberalization of the consumer goods industry, initiated in the mid-80s and accelerated through the 90s has begun to impact the structure and conduct of the retail industry. Backed by changing consumer trends and metrics, liberalization in mindsets driven by media, new opportunities and increasing wealth, retailing in India, presents a vast opportunity for a variety of businesses - real estate, store design & operations, visual merchandising logistics and communications, B2C service providers, and FMCG companies who can add to their offers by partnering this revolution. The Indian Retailing Industry stands poised to take off into the 21st century. It is one of the fastest growing sectors in the nation that caters to the world's second largest consumer market. Retail boom is unabating. India has five million retailers with a business volume of $180 million growing at 5 to 7 per cent a year. The middle class drives retailing anywhere in the world and this segment should have reasonable income. The next driver is availability of variety of goods, products and brands. The third one is sense of awareness. In other developing economies, this transformation has already begun. In many of these countries, organized retail already has a 40 percent share of the market, compared to Indias current levels of 2 percent. As India goes through this transformation, new businesses with sales of 1billion 2 billion US $ will be created in grocery and of 250million - 500million US $ in apparel. Smaller but still interesting opportunities will be created in other sectors like books, electronics, and music. This transformation will also impact the supply chain in agriculture, the tax collections from trade and the way people shop. In the last 10 years, all Southeast Asian countries like Indonesia, Malaysia, Taiwan and Korea have gone through similar phases. China, with a per capita income of $650-700 per annum, is going through the same phase what India is also facing now. Europe went through this phase of retail revolution about 40-50 years ago. It is believed that when a countrys per capita income reaches the level of $1,200 per annum, organized retailing begins to takeover. Though India has a per capital income of $ 400, on the basis of purchasing power parity (PPP) it has already hit the $1200 level. This does strengthen the belief that probably, the right time for organized retailing to click in India has come.

This report aims at providing an insight into the emerging trends in the industry and the barriers to change and a perspective on what this industry could become, using the global industry as the backdrop.

Retail: world largest industry Retail, with total sales of $ 6.6 trillion, is the worlds largest private industry ahead of financial industries $ 5.1 trillion. It is also home to a number of the worlds largest enterprises. Over 50 of the Fortune 500 companies, and around 25 of the Asian top 500 companies, are retailers. The industry accounts for over 8 percent of the GDP in western economies. Retail: Largest private industry in the world economy A Study by Mc Kinsey states that organized retail accounts for just around 2 percent (out of which modern retail formats account for 7 percent of trade) presently is set to grow at exponential exceeding 35 percent. Fitch estimates the current share of organized retail to grow from 2percent presently to around 15 to 20 percent by 2010. Table 1: Retail Consumption areas US $ billion Existing Companies in the organized sector Food Retailing 130 Food Bazaar (Pantaloon) Food World Subhishka. Clothing & Apparel Jewelry, Watches Home Furnishing Foot wear Beauty Care 12 7 5 1.7 3.6 Pantaloon Westside, Shoppers Stop Tanishq, Titan, Gold Bazaar (Pantaloon) Home Store, Arcus (Pantaloon) Bata, Woodland VLCC, Health & Glow

Source: economic times industry report

Traditionally, most retailers have had very localized operations. This localized nature of the industry is changing as retailers face low rates of growth and threatened profitability at home. New geographies will help them sustain top-line growth as well as permit global sourcing. Profits in retail have steadily been rising and have generated 18 percent shareholder returns between 1994 and 1999. Significantly, retail is also one of the worlds largest employers, accounting for instance 16 percent of the US workforce, Poland 12 percent, China 8percent, India 10 percent and Brazil 6percent. Factors such as scale in sourcing, merchandising, operational effectiveness and ambience have driven the spread of organized retail. Grocery, electronics are examples of categories that compete on the strength of better pricing, which in turn is driven by superior sourcing and merchandising and cost-efficient operations. Wal-Mart, Home Depot and Kingfisher are benchmark retailers in these fields. In apparel, home furnishings and furniture, the advantage is driven by the marketers ability to provide better products in a comfortable ambience at affordable prices. In these cases sourcing capability has to be backed by strong design capability and store management. IKEA and GAP are good examples of this model of retailing. Over the last few decades, retail formats have changed radically. The basic department stores and co-operatives of the early 20th Century have given way to mass merchandisers, hypermarkets, warehouse clubs, category killers, discounters and convenience stores. Each of these formats has been driven by marketers need to offer relevant, distinctive and economic propositions to an evolving consumer base. Global retailers have also reached a position of strength that enables their brand to be leveraged across a wide range of services. Many of them have expanded their offering, over the years to include fuel retail, car retail, convenience services and personal financial services. This has put them in a position where they are not only beginning to capture growth from geographical expansion, but are also entering large new areas of business. The recent evolution of the Internet has helped further broaden the scope of operations of large retailers. Further, a large number of retailers are pursuing innovative aggregation and supply chain-streamlining initiatives using B2B technology.

By 2010, the list of India's top 10 retailers will have at least 5 Indian corporate. Retail Marketing will go through a tremendous change in India this millennium. It will change India's cities, its people, and its households. The Indian consumer is reportedly the largest spender in Singapore and London. It is, therefore, strange that there have, so far, been few efforts to present the product in the right kind of environment in India. Indeed, the right shopping experience does induce Indian consumers to spend more. This is evident from the experiences of retail-outlets like Shoppers' Stop, Music World, Food World, Crosswords, The Home Store, Ebony, Bigjos, Saboos, Standard, Vijay Store and Janaki Das & Sons, Westside etc. However, the development of organized retail is dependent on the efforts of several agencies and institutions. The first among these is the government. In a country as big as India and with as many states as ours, it is imperative that the Central government and all state governments bring in Value Added Taxation or a unified taxation system to ensure that the tax-regimes are the same across the country. The laws governing retail real estate should also be looked into, so that it is possible to develop retail-estate beyond the city-limits. Apart from providing entertainment and retail opportunities, this will also decongest the city center and facilitate the development of suburbs. The relevant rules should also be amended to allow retail-stores to operate 7 days a week, 12 hours a day. Given the hours most urban consumers keep at work, and keeping in mind the increase in the number of nuclear families, this may, indeed, make sense. This will also help people enjoy their evenings, out at malls. The second group, whose participation is essential in making retail a boom-sector in this millennium, comprises developers. Most properties are developed without considering the end user; thus, we sometimes find high-ceilinged offices and low-ceilinged retail stores. Often, the shopper's convenience is not taken into consideration while the property is constructed.

Another area of concern is the way in which developers sell their space. The only consideration is the price, not the usage pattern or the nature of the product that is to be sold. In contrast, internationally, mall-management is treated as a specialized discipline of retail management. This is what we have to focus on in this millennium. The third constituency that has a role to play in the fortunes of organized retail this century is the education-sector. Retail is a people-intensive business, and there is a huge opportunity for retail institutes in India. For manufacturers, retailing will present an attractive opportunity. Organized retail allows them to expose their products to a large volume of customers in an environment conducive to buying. Already, several transnational retail giants have established their presence in India; others, notably Chinese retailers, have visited India and studied the Indian market. There's a lot at stake here: even so early in the 21st Century, India is too large a market to be ignored by transnational retail giants. From the manufacturing company's perspective, the focus should be on producing good products, and forging relationships with organized retail. Manufacturers need to draw a plan of producing quality products and tie in with retailers. Indeed, the birth of organized retail will also engender the creation of private labels and store-brands. Thus, if a manufacturing company lacks the resources to build a brand, it can supply to a retail-chain that has the resources to create a brand of its own. A glimpse of the last 2 decades of the previous century proves illuminating. Large-format retailing started with outlets like Vivek's and Nalli's in Chennai and Kidskemp in Bangalore, and, at another level, with manufacturer-retail brands

like Bata, Bombay Dyeing, and Titan. The last decade of the millennium witnessed the emergence of lifestyle brands and the plastic culture. Liberalization and increasing awareness of the world around us created the Indian yuppie, who aspired to own everything we saw on TV, or in shops during jaunts abroad. New lifestyle brands offered traditional retail-outlets an opportunity to convert themselves into exclusive stores, franchised or otherwise. And even as these developments were taking place, the Indian consumer became more mature. Customer-expectations zoomed

Thus, at the beginning of the New Millennium, retailers have to deal with a customer who is extremely demanding. Not just in terms of the product-quality, but also in terms of service, and the entire shopping experience. Today, the typical customer who shops in a retail outlet compares the time spent at the check-out counter with that at an efficient petrol station, and the smile of the counter-person to that decorating the face of a Jet Airways' crew member. To cope with the new customer, manufacturers have to focus on product quality and brand building. And retailers, in turn, have to focus on the quality of the shopping experience. Internationally, retailing is a large business; you find at least one retailer amongst the top 10 companies in every country. In the US, it is Wal-Mart with a turnover in excess of $ 120 billion. In the UK, it is Marks and Spencer's with close to 10 billion; and, in Germany, it is Karstadt with a turnover in excess of dm 10 billion. Table 2: Top 10 Retailers Worldwide Rank Retailer No of stores Sales Millions $180,787 $61,047 $49,000 $45,738 $45,729 $44,189 $37,028 $36,823 in US$

owned 1 2 3 4 5 6 7 8 Wall-Mart Stores Inc. (USA) 4178 Carrefour Group (France) The Kroger Co. (USA) 8130 3445

The Home Depot, Inc. (USA) 1134 Royal Ahold (Netherlands) Metro AG (Germany) Kmart Corporation (USA) 7150 2169 2105

Sears, Roebuck and Co. 2231 (USA)

9 10

Albertson's, Inc. (USA) Target Corporation (USA)

2512 1307

$36,726 $36,362

Source: economic times industry report

Studies by consulting firms like A.T. Kearney, KSA Technopak, and McKinsey & Co. in India have indicated a huge potential for retailing in the country. Drawn by the magic number of Rs 1, 60, 000 crore that is expected to be the size of the retail industry by the end of the first decade of this millennium, several companies from the organized sector have also jumped into the fray. In this millennium, like in the last, customers will want to spend time with their family and friends. They may like to visit malls on weekends where everything will be available under one roof. India will benefit from these developments because of increased consumption through retailing and the corresponding increase in employment created by retailing. 2.1 Retail Marketing Retail Marketing includes all the activities involved in selling goods or services directly to final consumes for personal, non-business use. Any organization selling to final consumers -- whether a manufacturer, wholesaler, or retailer is doing retailing. It does not matter how the goods or services are sold (by Person, Mail, Telephone, Vending Machine, or Internet) or where they are sold (in a store, on the street, or in the consumers home). There are many approaches to understanding and defining retail marketing; most emphasize retail marketing as the business activity of selling goods or services to the final consumer, but what we emphasized upon is defined as follows: Any business that directs its marketing efforts towards satisfying the final consumer based upon the organization of selling goods and services as a means of distribution The concept assumed within this definition is quite important. The final consumer within the distribution chain is a key concept here as retailers are at the end of the chain and are involved in a direct interface with the consumer. A retailer or retail store is any business enterprise, whose sales volume comes primarily from retailing. Retail organizations exhibit great variety and new forms keep emerging. There are store retailers, non-store retailers, and retail organizations. Consumers today can shop for goods and services in a wide variety of stores. The best-known type of retailer is the department store. Japanese department stores such as Takashimaya and Mitsukoshi

attract millions of shoppers each year. These stores feature art galleries, cooking classes, and childrens playgrounds. A retailer is at the end of the distributive channel. He provides goods and service to the ultimate consumers. This he does through his small organization, with the help of a few personnel. In an individual retail store there is not much scope for organization except in the sense that the shopkeeper has to organize and apportion his time and resources. The need for organization becomes essential as soon as he hires people and enters into partnership or takes the help of members of his family in running his store. A retailer deals in an assortment of goods to cater to the needs of consumers. His objective is to make maximum profit out of his enterprise. With that end in view he has to pursue a policy to achieve his objective. This policy is called retailing mix. A retailing mix is the package of goods and services that store offers to the customers for sale. It is the combination of all efforts planned by the retailer and embodies the adjustment of the retail store to the market environment. Retailing mix, a communication mix and a distribution mix. The maximum satisfaction to the customers is achieved by a proper blend of all three. The success of the retail stores, therefore, depends on customers reaction to the retailing mix which influences the profits of the store, its volume of turnover, its share of the market, its image and status and finally its survival. There are three main phases in the life of a retailing institution. These are:

Innovation (Entry) Trading Up Vulnerability.

In the entry stage, a new retailer enters with new price appeal, limiting product offerings, Sparton Stores & Limited services. Its monopoly power over the others is its price advantage, which means that it offers products at low prices so as to get a competitive edge over its competitors. In the trading up stage, the retailer starts expanding. It expands in terms of product offering, better services, and improved interiors. With all these, it starts charging a bit higher prices.

In the vulnerability stage, there is a gap in the market leaving some space for the new players to come in. this is due to increase in the prices by the retailer. I have already explained the three stages in life of a retail institution. Normally these stages are there in the life of a retail institution. But all these may not be necessarily there in every retail institution. For instance, any retail institution targeting the upper class may start itself with a large variety & high price. This brings to broadly identify and categorize the types of retail marketing, which are defined as follows: 1. 2. Store Retailing Non store Retailing

2.2 Types OF Retail Marketing Store Retailing Store retailing provides consumers to shop for goods and services in a wide variety of stores and it also help the Consumers to get all the needed goods and services from one shop only. The different types of store retailing are given below: Specialty Stores These stores focus on leisure tastes of different individuals. They have a narrow product line with deep assortment such as apparel stores, sporting goods stores, furniture stores, florists and bookstores. These stores are usually expensive and satisfy the needs of selected consumers who have liking or preference for exclusive things. Departmental Store These stores are usually built in large area and keep variety of goods under one shed. It is usually divided into different sections like clothing, kids section, home furnishings, electronic appliances and other household goods. In a departmental store a consumer can buy variety of goods under one shed.

Supermarket These stores are relatively large, low cost, low margin, high volume, self service operations designed to serve total needs for food, laundry and household maintenance products. Supermarkets earn an operating profit of only 1 percent on sales and 10percent on net worth. Convenience Stores These are relatively small stores located near residential area, open for long hours seven days a week, and carrying a limited line of high turnover convenience products at slightly higher prices than departmental stores. Many such stores also have added takeout sandwiches, coffee and pastries. Off - Price Retailer These stores sell goods at low price with lower margins & higher volumes. These stores sell goods with deteriorated quality. The defects are normally minor. This target at the persons belonging to the lower income group, though some have a collection of imported goods aimed to target the younger generation. The company owned showroom selling the seconds products is a typical example of off - price retailer. Discount Store These stores sell standard merchandise at lower prices by accepting lower margins and selling higher volumes. The use of occasional discounts or specials does not make a discount store. A true discount store regularly sells its merchandise at lower prices, offering mostly national brands, not inferior goods. In recent years, many discount retailers have traded up. They have improved decor, added new lines and services, and opened suburban branchesall of which has led to higher costs and prices and as some department stores have cut their prices to compete with discounters.

Not only that, discount stores have moved beyond general merchandise into specialty merchandise stores, such as discount sporting goods stores, electronics stores, and bookstores. Catalog Showroom Catalog showrooms generally sell a broad selection of high-markup, fast-moving, brandname goods at discount prices. These include jewelry, power tools, cameras, luggage small appliances, toys, and sporting goods. Catalog showrooms make their money by cutting costs and margins to provide low prices that will attract a higher volume of sales. Catalog showrooms have been struggling in recent years to hold their share of the retail market. RETAIL SCENE IN INDIA India has some sometimes been called a nation of shopkeepers. This epithet has its roots in the huge number of retail enterprises in the country totaling 12 million, about 78 percent of these are small family owned businesses utilizing only household labour. even among retail enterprises that hire workers the bulk of them hire less than 3 workers .Indias retail sector appears backwards not only by standards of industrialized countries but also in comparison to several other emerging markets in Asia and elsewhere. There are only 14 companies that run departmental stores and mere two with hypermarket operations. While the number of businesses operating supermarkets is higher ( 425 in 2004 ) most of these had only 1 outlet, the number of companies with supermarket chains was less than 10. 2.3 Major Formats of Retailing Major formats of In-Store Retailing have been listed in Table given below: Table 3: Format Branded Stores Description Exclusive The Value Proposition showrooms either Complete range available a given brand,

owned or franchised out by a for manufacturer. Specialty Stores

Certified product quality.

Focus on a specific consumer Greater choice to the

need; carry most of the brands consumer, available. Department Stores

comparison

between brands possible

Large stores having a wide One stop shop catering variety of products, organized to into different varied consumer

departments, needs.

such as clothing, house wares, furniture, appliances, toys, etc. Supermarkets Extremely large self-services One stop shop catering retail outlets. to varied consumer

needs. Discount Stores Stores offering discounts on Low prices. the retail price through selling high volumes and reaping the economies of scale. Hyper-mart Larger than a Supermarket, Low prices, vast choice sometimes with a warehouse available including

appearance, generally located services as cafeterias. in quieter parts of the city Convenience Stores Small located areas. Shopping Malls self-service in crowded formats Convenient location and urban extended hours. of shops operating

An enclosure having different Variety

formats of in-store retailers, all available close to each under one roof. other.

Source: India info line

Non-store Retailing It is another type of retail marketing. Different types of non-store retailing are given below:

Direct Selling Direct selling which started centuries ago with itinerant peddlers has burgeoned into a $9 billion industry, with over 600 companies selling door to door, office to office, or at home sales parties. A variant of direct selling is called multilevel marketing, whereby companies such as Amway recruit independent businesspeople who act as distributors for their products, who in turn recruit and sell to sub distributors, who eventually recruit others to sell their products, usually in customer homes. Direct Marketing Direct marketing has its roots in mail-order marketing but today includes reaching people in other ways than visiting their homes or offices, including telemarketing, television direct response marketing, and electronic shopping. Automatic Vending Automatic vending has been applied to a considerable variety of merchandise, including impulse goods with high convenience value (cigarettes, soft drinks, candy, newspaper, hot beverages) and other products (hosiery, cosmetics, food snacks, hot soups and food, paperbacks, record albums, film, T-shirts, insurance policies, and even fishing worms). 2.4 Organized Retail Formats in India Each of the retail stars has identified and settled into a feasible and sustainable business model of its own.

Shoppers' Stop - Department store format Westside - Emulated the Marks & Spencer model of 100 per cent private

label, very good value for money merchandise for the entire family

Giant and Big Bazaar - Hypermarket/cash & carry store Food World and Nilgiris Supermarket format Pantaloons and The Home Store - Specialty retailing Tanishq has very successfully pioneered a very high quality organized retail

business in fine jewellery.

Structure of the retailing industry according to ownership patterns:

An unaffiliated or independent retailer A chain retailer or corporate retail chain A franchise system A Leased Department (LD) Vertical Marketing System (VMS) Consumer Co-operatives

A new entrant in the retail environment is the 'discounter' format. It is also is known as cash and-carry or hypermarket. These formats usually work on bulk buying and bulk selling. Shopping experience in terms of ambience or the service is not the mainstay here. RPG group has set up the first 'discounter' in Hyderabad called the Giant. Now Pantaloon is following suit. Two categories of customers visit these retail outlets. 1. The small retailer. For example, a customer of Giant could be a dhabawala who needs to buy edible oil in bulk. 2. The regular consumer who spends on big volumes (large pack sizes) because of a price advantage per unit. Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out; the old ones tweaked around or just discarded. Some of these are listed in Table below. Table 4: Retailer Shoppers' Stop Ebony Crossword Pyramid Pantaloon Current Format Department Store Department Store Large bookstore Department Store Own brand store New Formats Quasi-mall Quasi-mall, smaller outlets, adding food retail Corner shops Quasi-mall, food retail Hypermarket

Subhishka Vitan Foodworld Glob us Bombay Bazaar Efoodmart Metro S Kumar's

Supermarket Supermarket Food supermarket Department Store Super market Food super market Departmental store Departmental store

Considering moving to self service Suburban discount store Hypermarket, Foodworld express Small fashion stores Aggregation of Kiranas Aggregation of Kiranas Cash and carry Discount store

Source: India info line Retailers are also trying out smaller versions of their stores in an attempt to reach a maximum number of consumers. Crossword bookstores are experimenting with Crossword Corner, to increase reach and business from their stores. FoodWorld is experimenting with a format of one-fourth the normal size called FoodWorld Express. 2.5 Trends in Retail Marketing At this point, I can summarize the main development retailers and manufacturers need to take into account as they plan their competitive strategies. In India the trends are mainly in three sectors. These sectors are: Trends in retail marketing 1. New retail forms and combinations continually emerge. Bank branches and ATM counters have opened in supermarkets. Gas stations include food stores that make more profit than the gas operation. Bookstores feature coffee shops. Even old retail forms are reappearing: In 1992 Shawna and Randy Heniger introduced peddlers carts in the Mall of America. Today three-fourths of the nations major malls have carts selling everything from casual wear to condoms. Successful carts average $ 30,000 to $ 40,000 a month in sales and can easily top $ 70,000 in December. With an average startup cost of only $3,000, push carts help budding entrepreneurs test their retailing dreams

without a major cash investment. They provide a way for malls to bring in more mom-andpop retailers, showcase seasonal merchandise, and prospect for permanent tenants. 2. New retail forms are facing a shorter life span. They are rapidly copied and quickly lose their novelty. 3. The electronic age has significantly increased the growth of non store retailing, consumers receive sales offers in the mail and over television, computers, and telephones, to which they can immediately respond by calling a toll-free number or via computer. 4. Competition today is increasingly intertype, or between different types of store outlets. Discount stores, catalog showrooms, and department stores all compete for the same consumers. The competition between chain superstores and smaller independently owned stores has become particularly heated. Because of their bulk buying power, chains get more favorable terms than independents, and the chains large square footage allows them to put in cafes and bathrooms. In many locations, the arrival of a superstore has forced nearby independents out of business. In the book selling business, the arrival of a Barnes & Noble superstore or Borders Books and Music usually puts smaller bookstores out of business. Yet the news is not all bad for smaller companies. Many small independent retailers thrive by knowing their customers better and providing them with more personal service. 5. Todays retailers are moving toward one of two poles, operating either as mass merchandisers or as specialty retailers. Superpower retailers are emerging. Through their superior information systems and buying power, these giant retailers are able to offer strong price savings. These retailers are using sophisticated marketing information and logistical systems to deliver good service and immense volumes of product at appealing prices to masses of consumers. In the process, they are crowding out smaller manufacturers, who become dependent on one large retailer and are therefore extremely vulnerable, and smaller retailers, who simply do not have the budget of the buying power to compete. Many retailers are even telling the most powerful manufacturers what to make; how to price and promote; when and how to ship; and even how to reorganize and improve production and management. Manufacturers have little choice: They stand to lose 10 to 30 percent of the market if they refuse.

6.

Marketing

channels

are

increasingly

becoming

professionally

managed

and

programmed. retail organizations are increasingly designing and launching new store formats targeted to different lifestyle groups. They are not sticking to one format, such as department stores, but are moving into a mix of retail formats. 7. Technology is becoming critical as a competitive tool. Retailers are using computers to produce better forecasts, control inventory costs, order electronically from suppliers, send e-mail between stores, and even sell to customers within stores. They are adopting checkout scanning systems, electronic funds transfer, and improved merchandise-handling systems. 8. Retailers with unique formats and strong brand positioning are increasingly moving into other countries. McDonalds, The Limited, Gap, and Toys R Us have become globally prominent as a result of their great marketing prowess. Many more Indian retailers are actively pursuing overseas markets to boost profits. 9. There has been a marked rise in establishments that provide a place for people to congregate, such as coffeehouses, tea shops, juice bars, bookshops, and brew pubs. Denvers two Tattered Covered bookstores host more than 250 events annually, from folk dancing to womens meetings. Brew pubs such as New Yorks Zip City Brewing and Seattles Trolley man Pub offer tasting and a place to pass the time. The Discovery Zone, a chain of childrens play spaces, offers indoor spaces where kids can go wild without breaking anything and stressed-out parents can exchange stories. There are also the nowubiquitous coffeehouses and espresso bars, such as Starbucks, whose numbers have grown from 2,500 in 1989 to a forecasted 13,000 by 2001. And Barnes & Noble turned a once-staid bookstore industry into a fun-filled village green.

Chapter 3 : RETAIL MARKETING IN INDIA Retail marketing is the most important part of the entire logistics chain in a business especially in consumer related products. Without proper retailing the companies can't do their business. Retailing is the process of selling goods in small quantities to the public and

is not meant for resale. Retail is derived from the French word retailer, meaning to cut a piece off or to break bulk. There are various ways of making goods available to consumers like:

Company to distributor to wholesaler to retailer to consumer Company to salesperson to consumer Company to consumers (online/ phone/ catalog ordering)

These three are among the most common ways of making the goods available to consumers. But in India the three layered system of distributor, wholesaler and retailer, forms the backbone of the front-end logistics of most of the consumer-good companies. In this system the company operating on all India basis appoints hundreds of distributors across the country that supplies to various retailers and wholesalers. Wholesalers in turn can either directly sell in the market or can supply to retailers. The current retailing system prevalent across the country is highly fragmented and unorganized. Anyone with some money and some real estate can open a small shop and become a retailer catering to the locality in which he opens the shop. There are a number of reasons behind this fragmented retail market. Some of the major reasons being:

Poverty and lower literacy levels. Low per capita income. Savings focused and less indulgence mindset. Poor infrastructure facilities like roads etc. Restrictions on intra-state good movement. High taxes. No exposure to media. High import duties on imported goods. FDI in retailing is not allowed. Retailing is not considered as a business or industry by the government. Hitherto none of the business schools in India were offering specialized

courses on retailing.

Expensive supply chain.

Besides this there is other reasons too, which led to stifling of growth of organized segment of retailing sector and which instead led to highly fragmented market. Today in India we have more than 12 million retail outlets and most of then are family run and locally owned. There are very few nationally present retail stores. In India the process of buying and selling at these unorganized retail outlets, is highly characterized by bargaining and negotiations. But slowly with increasing influence of media and urbanization the market is shifting towards organized segment. Seeing the huge market size of retail business in the country and the current level of organized segment, many players have jumped into the fray and many are waiting for the right opportunity to enter it. 3.1 Retailing in 1990s On account of the liberalization drive in the 1990s, several structural and demographic changes that are taking place are helping the industry to grow. The GDP has grown by 6.6percent in the last decade resulting in increased income levels and higher purchasing power for the population. Increasing literacy levels, increasing number of working women, increasing urbanization, higher international travel by Indian population and increasing media penetration has raised aspiration levels of the population, resulting in demand for better shopping experience and larger variety of goods. India has close to 54percent of population below the age of 25, which translates into higher prospects for increased consumption levels in the future. Finally, interest rates have also declined in the past few years further propelling the consumption demand. These factors were the key drivers for the retail wave in the country. Notable among the early entrants were players like Shoppers Stop, Pantaloon, Ebony, Foodworld, Subhiksha, etc. Initially, the growth in organized retail was very slow and concentrated mainly in metros, with south India holding its ground as the pioneer in organized retail growth, on account of the low cost of real estate. Due to the high investments required in the early stages and the fact that real estate was the key deciding factor for success of stores, real estate developers have been the major players in the industry (see Table). Table 5:

Sponsors Group Rajan Raheja Real Retail Business Estate Globus Chain of departmental stores

Developer K, Raheja - Real Estate Developer Shoppers Stop Chain of

departmental stores Hiranandani - Real Estate Developer Haiko supermarket, Loft shoe stores and Hakone mall. Tata Diversified Business House DS Group - Real Estate Developer RPG Diversified Business House Westside chain of department stores Ebony - chain of department stores Foodworld supermarkets, Giant

hypermarkets, Health & Glow beauty and health stores. DLF Real Estate Developer ITC - Diversified Business House Source: Fitch In the early 1990s, as the players were lower down on the learning curve many faltered in their models, and growth of the industry remained slow. The second half of 1990s saw several players making losses and exiting from the business. The worst years for the industry were 2000 and 2001, as the stock market downturn, which reduced customer confidence and spending, had a direct impact on the performance of the industry. The industry recovered starting 2002. It now appears the efforts and learnings of the players in the last decade are beginning to pay off; the organized retail industry has established firm roots and is beginning to grow. 3.2 Present Retail Scenario In India

DLF malls Wills Sport Chain of apparel stored.

Retail experts find Indian industry promising Retail sales to touch Rs. 30,000 crore by 2005 Mall Mania: The developing mall culture in India Emergence of region-specific formats

Emergence of discount formats Entry of international players

Retail experts find Indian industry promising The retail movement in India has acquired the critical mass that is required for rapid acceleration in terms of industry growth as well as geographical spread. The Indian retail industry can no longer be called nascent. The spread of super stores to the northern cities such as Delhi, Chandigarh, Jaipur and Kolkata is evidence of the fact that organized retailing in India has emerged from its southern bastion. The retailing boom is being driven by increased expectations as well as changing shopping behavior of the urban Indian consumer. With the increasing number of nuclear families, working women, greater work pressure and increased commuting time, consumers are looking for convenience. And, convenience is defined as having everything under one roof, longer hours and multiplicity of choice. On the supply side, the current inefficient supply chain in India, particularly for food items has led a few players to consolidate their operations to take advantage of economies of scale and match consumer expectations in terms of delivery as well as space. So, we have a situation where both demand and supply side dynamics are fuelling the growth of organized retailing in India, although improvements in the supply chain are yet to fully match with consumer expectations. The future growth need not necessarily come only from the big metros, where there already exists a good retail network. The fact that big Indian retail chains are moving into places like Indore or Chandigarh is an important indicator of future growth. For the Rs. 5000-crore organized retail industry it is, perhaps, time to tap the relatively smaller cities. The share of organized sector in total retail sales will grow from one per cent now to six per cent by 2005.While projections can be slippery, hard facts point to exciting growth ahead for this sector. According to KSA, organized retailing is focusing on only SEC-A cities, Indias 23 largest cities. That is where a large portion of the country's urban population exists. Today 82 per

cent of organized retailing comes from the top six cities and 12 per cent from the next four. KSA says the top 10 cities provide 94 per cent of organized retail sales in India. By 2005, KSA projects the top six cities will account for 66 per cent of total organized retailing and the next four for 20 per cent. The top 10 cities will account for 86 per cent of organized retail sales. There could be variations in growth patterns in different segments. The second half of the top 10 cities will provide large growth for food and groceries, while the top six would still be the growth centers for consumer durables, believes KSA. The spread of organized retailing is unlikely to be a national phenomenon yet. This appears to be the case so far. South India, particularly Chennai, Hyderabad and Bangalore, have seen the emergence of chain stores or large format stores. While garment stores have been around for sometime, other segments like food and groceries, consumer durables and even books and music have witnessed the emergence of organized players in large cities in South India. The lack of trained manpower or alternatively the tremendous scope the sector has to provide employment is another issue. Mall Mania: The Developing Mall Culture in India Modern malls made their entry into India in the late 1990s, with the establishment of Crossroads in Mumbai and Ansals Plaza in Delhi. By early 2001, several mall projects were announced. According to market estimates, close to 12 million sq. ft. of mall space is being developed across several cities in the country, of which 10 million sq. ft. is expected to be operational by end of 2003 (see Table below). With this, rentals for retail properties have shown a marked decline, which has brought down the break-even levels of the retail projects. Moreover, retailers would now have access to retail-specific properties, which will increase their efficiencies. Table 6: Mall Development in India Mall Crossroads Ansals Location Tardeo, Mumbai South Ex, Delhi Rate / Sq. ft. 225-250 175-200

Nirmal Lifestyle Runweals Mall Karnavat Mall Raheja Mind space Jogs Mall Cable Corporation Ansals Sahara MGF Malls Metroplitian & Plaza DLF Shipra Forum City Center Rave 3 Inox Forum Spencers Plaza Phase III Indore, Nasik and Jaipur Malls Hyatt, Mumbai & Leela, Phoenix Malls

Mulund, Mumbai Mulund, Mumbai Thane, Mumbai Malad, Mumbai Andheri, Mumbai Borevali, Mumbai East Delhi Gurgaon Gurgaon Gurgaon Noida KolKotta KolKotta Kanpur Baroda Bangalore Chennai

75-90 75-90 65-85 60-80 55-75 55-75 75 50-70 65-85* 65-85 80-180 100 55 45-55 75 70-90 70 45-55 175-300

Lower Parel, Mumbai

100-125

*average for the metropolitian is Rs. 60 per sq. ft.. source: Chesterten Meghraj. Industry Reports Till some time back, there were only few international style shopping malls in India -Spencer in Chennai, Crossroads in Mumbai, Ansals Plaza in New Delhi and Srirams Arcade in Kolkata. By the end of 2004, that number jumped to many. It looks like a virtual stampede, major players with a cumulative investment of Rs 375 crore are set to change cityscapes across India. In the next one year, close to 40 lakh square feet of retail space will be developed. In three years, this will rise to 70-lakh sq ft.

As the retail industry evolves, consumers want more variety before making their purchase decision. A study on consumer outlook suggests that over 80 percent of consumers want a wide range of products at hand while shopping. This signifies that people are finally ready for multi-option complexes. Many old-time corporates are seriously considering using their idle assets. It makes sense for landowners to develop it and keep the returns rather than sell it outright or even lease it, especially when there is opportunity here. It is perhaps the best way to use an idle real estate asset. The limited kitty of brands has yet another significant knock on effect on the typical size of Indian malls. In the US and South-East Asia, malls are as large as 50 lakh sq ft. Spencer is by far the largest mall in India - it occupies 7 lakh sq ft and even that is dwarfed by Asia's largest mall, the 4-million sq ft mega mall in Malaysia. Even the 26 malls that are being planned are likely to measure between 50,000 sq ft and 2 lakh sq ft. The Indian mall cannot offer too many choices in terms of brands. So, developing a very large mall can never be sustainable. There's a flip side though -malls even as small as 80,000 sq ft, like Shopper's City in Kolkata or the Esplanade Mall at Kochi, can be sustained. Emergence of Region-Specific Formats For the first time in 10 years, the industry is witnessing the development of region-specific formats. With organized retail penetrating into B class towns, retailers have started differentiating in the sizes and formats of stores. For example, in departmental store format, while most A class cities and metros have larger stores of 50,000 plus sq. ft. sizes, stores in B class towns have stabilized in the 25,000-35,000 sq. ft. range. Most players have started operating these two formats across various cities, which has helped them to standardize the merchandise offering across the chain. Emergence of Discount Formats Larger discount formats, popularly known as hypermarkets, are now emerging as major competitors to both unorganized and organized retailers. Penetration of organized retail into the lower strata of income groups and consumer demand for increased value-for-money

has improved the prospects of these formats. These formats span across the entire range of merchandise categories. Big Bazaar, promoted by Pantaloon and Giant, promoted by the RPG Group, are examples of this format. Entry of International Players A large number of international retailers have evinced interest in India, despite the absence of favorable government policy for foreign players (see Table below). A number of the major brands have entered the country through licensing agreements with Indian players to capitalize on the opportunities available in the sector. Table 7: International players International Players Landmarc Group, Dubai Metro, Germany Shoprite, South Africa Nanz, Germany Marks & Spencer, UK Mango, Spain McDonalds, USA Dominos USA Tricon Restaurant, USA Source: Industry Reports Chapter 4 : INFORMATION TECHNOLOGY IN RETAIL Over the years as the consumer demand increased and the retailers geared up to meet this increase, technology evolved rapidly to support this growth. The hardware and software tools that have now become almost essential for retailing can be divided into 3 broad categories: Retail Ventures In India Lifestyle Chain of Departmental Stores Hypermarket Supermarket, Hypermarket Supermarket Apparel Retailer Apparel Retailer Food Retailer Food Retailer Food Retailer

Customer interfacing systems Bar coding and scanners Point of sale systems use scanners and bar coding to identify an item, use pre-stored data to calculate the cost and generate the total bill for a client. Tunnel Scanning is a new concept where the consumer pushes the full shopping cart through an electronic gate to the point of sale. In a matter of seconds, the items in the cart are hit with laser beams and scanned. All that the consumer has to do is to pay for the goods. Payment Payment through credit cards has become quite widespread and this enables a fast and easy payment process. Electronic cheque conversion, a recent development in this area, processes a cheque electronically by transmitting transaction information to the retailer and consumer's bank. Rather than manually process a cheque, the retailer voids it and hands it back to the consumer along with a receipt, having digitally captured and stored and image of the cheque, which makes the process very fast. Internet Internet is also rapidly evolving as a customer interface, removing the need of a consumer physically visiting the store. Operation support systems ERP System Various ERP vendors have developed retail-specific systems which help in integrating all the functions from warehousing to distribution, front and back office store systems and merchandising. An integrated supply chain helps the retailer in maintaining his stocks, getting his supplies on time, preventing stock-outs and thus reducing his costs, while servicing the customer better. CRM Systems

The rise of loyalty programs, mail order and the Internet has provided retailers with real access to consumer data. Data warehousing & mining technologies offers retailers the tools they need to make sense of their consumer data and apply it to business. This, along with the various available CRM (Customer Relationship Management) Systems, allows the retailers to study the purchase behavior of consumers in detail and grow the value of individual consumers to their businesses. Advanced Planning and Scheduling Systems APS systems can provide improved control across the supply chain, all the way from raw material suppliers right through to the retail shelf. These APS packages complement existing (but often limited) ERP packages. They enable consolidation of activities such as long term budgeting, monthly forecasting, weekly factory scheduling and daily distribution scheduling into one overall planning process using a single set of data. Leading manufactures, distributors and retailers and considering APS packages such as those from i2, Manugistics, Bann, Mercial incs and Sterling-Douglas. Strategic decision support systems Store Site Location Demographics and buying patterns of residents of an area can be used to compare various possible sites for opening new stores. Today, software packages are helping retailers not only in their locational decisions but in decisions regarding store sizing and floor-spaces as well. Visual Merchandising The decision on how to place & stack items in a store is no more taken on the gut feel of the store manager. A larger number of visual merchandising tools are available to him to evaluate the impact of his stacking options. The SPACEMAN Store Suit from AC Nielsen and Modacad are example of products helping in modeling a retail store design. Chapter 5 : FOREIGN TOUCH IN INDIAN RETAIL

The chief of Marks & Spencer has been making trips to India over the past year. Global investment bank Warburg Pincus is awaiting the Indian government's clearance to pick up a 25.1 per cent stake, worth $13 million, in Shoppers Stop. Dairy Farm International and Jardine Matheson are present here, through tie-ups with the RPG Group. Fast food major McDonalds have already made a dent in the marketplace and in Indian palates. The Dubai-based Landmark group is making its presence felt in Chennai through its Lifestyle mega store of over 30,000 sq ft. Landmark is owned by Mukesh Jagtiani, a nonresident Indian. Lifestyle International Private Limited, formed in India recently, is a whollyowned subsidiary of the Mauritius-based Lifestyle International which, in turn, is whollyowned by the Landmark group. In India, according to Lifestyle International's marketing manager, Roshan Mathew, the target is to "have 12 to 16 stores by 2005." These stores will sell all lifestyle products, barring furniture, under one roof. Immediate plans include opening a 46,000 sq ft store in Hyderabad, which Mathew terms "The Millennium Store". The Hyderabad store will have additional sections for books and music, unlike the Chennai store. Besides, as soon as Lifestyle gets a keenly awaited Foreign Investment Promotion Board clearance for a Rs 100 crore investment, it will create outlets in Bangalore, Pune, Mumbai, Delhi and Ahmedabad. The Hong Kong-based Dairy Farm International, a 125 year old retail major with around 1,300 outlets across nine countries, recently converted its technical tie-up (since 1996) with the RPG group's Spencer & Company for Foodworld into a 49:51 joint venture. The new venture is called Foodworld Supermarkets Limited. DFI also has a 50:50 joint venture with the Indian group in RPG Guardian. DFI is the retail arm of Jardine Matheson. In Western markets, a familiar sight is the McDonalds golden arch. In India too McDonalds has maintained its unique selling proposition -- providing the same quality of food and the same ambience as anywhere in the world. Its raw material requirements are totally outsourced. But what it has taken care of is world class quality in all its raw material sourcing, with specifications ensured strictly. The chain has been smart enough to tailor its products to the Indian environment, adding fare for the large number of vegetarians who love fast food, and avoiding certain beef and pork in deference to social sensitivities. In a market

place where Kentucky Fried Chicken failed to make an impact, McDonalds seems to be finding its place slowly but surely. Reta il MARKET & OPPORTUNITIES

CONTENTS Indian Retail Sector on the Fast - Track 2 Advantage India 6 Policy and Regulatory Environment 9 Key Trends and Drivers 11 Key Players 17 Key Opportunities 22 A report by Ernst & Young for IBEF Retail MARKET & OPPORTUNITIES MARKET & OPPORTUNITIES The Indian retai l re volution Retailing in India is evolving rapidly, with consumer spending growing by unprecedented rates and with increasing number of global players investing in this sector. Organised retail in India is undergoing a metamorphosis and is expected to scale up to meet global standards over the next five years. Indias retail market has experienced enormous growth over the past decade, more than doubling in size to US$ 311.7 billion in 2005-06. The market was estimated at US$ 1.1 trillion (in PPP terms) in 2005-06. The most significant period of growth for the sector was between years 2000 and 2006, when the sector revenues increased by about 93.5 per cent translating to an average annual growth of 13.3 per cent. The sectors growth was partly a reflection of the impressive Indian economic growth and overall rise in income levels of consumers.

Even the introduction of Value Added Tax (VAT) in April 2005 has not severely impacted consumer demand for retail goods. Greater exposure to western products and lifestyles has helped drive consumerism. The sector also benefited considerably by the rising popularity of satellite television since the early 1990s, which provided a highly Indian Retail Sector on the Fast Track Indias GDP growth of 9.4 per cent in 2006-07 is the highest posted for over 18 years, reflecting the booming economy of the country. Growing in tandem with the economy is the Indian retail sector. The sector is on a high growth trajectory and is expected to grow by more than 27 per cent over the next 5 to 6 years. Retail is one of Indias largest industries, contributing to about 10 per cent of the GDP and providing employment to 8 per cent of the nations workforce. Indian retail business promises to be one of the core sectors of the Indian economy, with organised retail sector estimated to grow by 400 per cent of its current size by 2007-08. The growth and potential of the sector is being widely acknowledged both in the domestic as well as international forums. India topped AT Kearneys Global Retail Development Index 2007 for the third consecutive year, retaining its position in the global market as the most preferred retail destination amongst emerging markets. For the fifth time, India also topped the Global Consumer Confidence Index June 2007 conducted twice a year by The Nielsen Company. Indians were judged the worlds most optimistic consumers, with large sections of the population considering now a good time to spend. Indian consumers were also found to be bullish about their personal finances over the next 12 months. The economics of Indian consumerism is buoyant, with India ranking as the fourth largest economy in terms of

Purchasing Power Parity (PPP), next only to United States, Japan and China. India is expected to outpace Japan by the year 2010 to become worlds third largest economy. With 54 per cent of the Indians aged below 25, the young Indian consumer is buying big to look good and feel good. Total Retail Sales Source: Datamonitor 311.7 261.8 230.3 205.4 2001-02 186.3 2002-03 2003-04 2004-05 2005-06 0 50 100 150 200 250 300 350 Exchange Rate: US$ 1 = INR 41 (Valid through the report) RETAIL effective mass marketing route, reaching out to the large Indian consumer base. Tra ditiona l an d mo dern retai lin g: The India stor y Traditional retailing continues to be the backbone of the Indian retail industry, with traditional/unorganised retailing contributing to over 95 per cent of total retail revenues. The quintessential mom-and-pop retailing outlets or the cornerstore formats constitute a major part of Indian retail store formats. Over 12 million small and medium retail outlets exist in India, the highest in any country. More than 80 per cent of these are run as small family businesses. Prevalence of traditional retailing is highly pronounced in small towns and cities with primary presence of neighborhood kirana stores, push-cart vendors, melas

and mandis. Organised formats are only in the initial stages of adoption in these regions. Leading retail players in the industry are beginning to explore these markets and the rural consumers are slowly beginning to embrace the newer organised retail formats. Modern/Organised retailing is growing at an aggressive pace in urban India, fuelled by bourgeoning economic activity. Organised retail revenues are expected to increase from an estimated US$ 12.9 billion per annum in 2005-06 to more than US$ 43 billion by 2009-10. The sector is predicted to grow by 400 per cent, in value terms, by 2007-08. A large number of domestic and international players are setting up base and expanding their business with newer organised retail formats and intense competition driving innovation in formats. Gro wth across se gments Retail sector in India is primarily categorised by the type of products retailed, as opposed to the different retail formats in operation. The Food and Beverages vertical accounts for the largest share of revenues at 74 per cent of the total retail market. This category has the highest consumer demand across all income levels and various retail formats. The Indian consumer behavior of preferring proximity to retail formats is highly pronounced in this sector, with food, grocery and allied products largely sourced from the local stores or push-cart vendors. Apparels and consumer durables are the fastest growing verticals in the retail sector. Mobile phone as a product category has witnessed the highest growth in consumer demand amongst all retail product offerings, with increasing penetration of telecommunications in towns and villages. The Telecommunications sector has been adding on an average 5 million new users every month. The other product categories are gaining traction

predominantly in the urban areas and emerging cities, with increasing average income and spending power of young urban India. Organise d retai l in India Organised retail clocked revenues of US$ 12,927 million, compared to total retail sales estimated at US$ 311,731 million in 2005-06. The apparel industry contributed to the largest share of the organised retail pie, with revenues of US$ 4,756 million, owing to the rapidly rising number of malls and introduction of several domestic and international apparel brands in the country. The Food and Beverages segment recorded the highest growth over 2004-05, with the proliferation of Projected Retail Growth Source: Crisil Research n Total Retail n Organised Retail 43.8 16.5 337.3 2005-06E 311.7 2006-07P 2010-11P 460.6 12.9 0 50 100 150 200 250 300 350 400 450 500 Source: Crisil Research Revenue and Share of Verticals Food and beverages US$ 231,951 million: 74.41% Clothing and Textile US$ 29,024 million: 9.31% Consumers Durables US$ 15,171 million: 4.87% Jewellery and Watches US$ 13,390 million: 4.30% Home Decor US$ 9,463 million: 3.04% Beauty Care US$ 6,854 million: 2.20%

Footwear US$ 3,268 million: 1.05% Books, Music and Gifts US$ 2,610 million: 0.84% MARKET & OPPORTUNITIES supermarkets, hypermarkets and the entry of major players like Reliance Fresh (promoted by Reliance Retail Ltd). This segment is poised to gain traction, with several new players planning their entry and the existing players expanding their business in this segment at a rapid pace. The Home Dcor segment followed suit growing at 18 per cent, with a boom in the real estate and housing sector. Penetration of organised retail was at 4.15 per cent in 2005-06, an increase from the 3 per cent estimated for 2004-05, and is projected to increase to 9.52 per cent in 2009-10, with revenues from organised retail expected to touch US$ 43,829 million in 2009-10. Footwear segment recorded the highest penetration of 32.84 per cent, primarily due to the presence of well established players like Bata, Liberty and Paragon. These players have been in the market for over three decades, have good brand recall and a well established distribution network penetrating both rural and urban areas. Consumer durables segment and the books and music segment also witnessed continued growth. Entry of players like Crossword and Music world has given the segment strong impetus. Apparel is one of the fastest growing verticals, with the highest number of domestic and foreign brands mushrooming in the market, and increasing consumer willingness to pay for brand and quality of products. Future out look Retail sector revenues is pegged to reach US$ 460.6 billion by 2010-11, with the organised retail sector projected to grow to US$ 43.8 billion in the said year. It is envisaged that modern retail will adapt and absorb some of the traditional

formats in the course of its expansion. Unorganised retail formats are expected to converge and combine in formats such as mushrooming village malls and rural retailing ventures. With the rural retail revenues forming the largest share of total retail revenues, increasing number of players are in the fray to explore opportunities in the rural areas. The rural retail revenues are estimated to increase by 60 per cent by 2012, with larger share of increase in demand for consumer and household products . Retail giants are set to embrace newer and innovative formats, by giving modern retail a traditional look in line with consumer needs and expectations. Pilot test concepts are already being rolled out by players like Indian Tobacco Company (ITC) and DCM Shriram Consolidated Ltd. (DSCL) with their rural initiatives of Choupal Saagar and Hariyali Kisan Bazaar, and are exploring options to increase their customer outreach. Established players like Unilever, Dabur and Godrej have strengthened their distribution channels and are increasing their penetration to leverage the higher consumer demand in these markets. Reliance Retail Ltd, a wholly owned subsidiary of Reliance Industries Ltd, is set to embark on the establishment of 1,600-odd rural retail hubs by 2010, with the aim to make these hubs the nodal institutions for retailing activity, ushering in a new era of organised-rural retail. With modest store formats being pursued to attract the average rural customer, as opposed to the plush and vibrant formats adopted for the urban retailing, rural retailing is set to provide a new dimension to the Indian retail scenario. Indian Retail (US$ million) Organised

Retail (US$ million) Penetration of organised retail (%) Food and Beverages 231,951 2,268 0.98 Clothing and Textile 29,024 4,756 16.39 Consumer Durables 15,171 2,585 17.04 Home Dcor and Furnishing 9,463 829 8.76 Jewelry and Watches 13,390 829 6.19 Beauty Care 6,854 244 3.56 Footwear 3,268 1,073 32.84 Books, Music and Gifts 2,610 341 13.08 Total 311,731 12,925 4.15 Source: Crisil Research Source: Crisil Research Organised Retail: Revenue by Verticals (US$ million) Footwear 32.84 Consumer Durables 17.04 Clothing and Textile 16.39 Food and Beverages 13.08 Home Decor and Furnish 8.76

Jewellery and Watches 6.19 Beauty Care 3.56 Footwear 0.98 RETAIL Changing Paradigm: The Confidence of Modern and Traditional Retail 1st Phase 2nd Phase 3rd Phase 4th Phase 2000 2005 2008 2011 Growth Entry, Growth, Expansion, Top Line Focus for Organised Retail Range, Portfolio, Format Options, Beginning of the Rural-Urban Retail Merge Technology Adoption, Leveraging Traditional Formats for Modern Retail M&A, Consolidation, High Investments, Confluence of Indian Retail Per Capita Retail Space MARKET & OPPORTUNITIES Advantage India Against the backdrop of an accelerating modern retail revolution, India offers to be an attractive destination for global corporations and leading retailers seeking emerging markets overseas. India presents a significant market, with its young population just beginning to embrace significant

lifestyle changes. Rapi d economi c gro wth The fast and furious pace of growth of the Indian economy is the driving force for Indian consumerism; with the Indian consumers confident about their earnings and are spending a large portion of their high disposable incomes. Projections by analysts suggest that India has the potential to be labeled the fastest-growing economy and outpace the developed economies by 2050. Analysts predict India to sustain an average GDP growth rate of 5 per cent till the mid of this century, with India projected to outpace the other developed economy markets by 2050. The average annual growth rate for 1994-2004 was pegged at 6.1 per cent, second only to China. The more recent growth rates of over 9 per cent posted for India, promise a continued robust growth story. Private consumption accounted for 62 per cent of Indias GDP in 2004-05, comparable to most of the leading economies around the world. The youn g India Against the backdrop of an ageing world, India possesses the advantage of having a largely young population. 35 per cent of Indias population is under 14 years of age and more than 60 per cent of the population is estimated to constitute the working age group (15-60) till 2050. Two-thirds of Indian population is under 35, with the median age of 23 years, as opposed to the world median age of 33. India is home to 20 per cent of the global population under 25 years of age. This trend is projected to continue for the next decade, with the share set to reach its maximum in 2010. The large proportion of the working-age population translates to a lucrative consumer base vis--vis other economies of the world, placing India on the radar as one of the most promising retail destinations of the world.

Gross Domestic Product Source: Reserve Bank of India 2002-03 2003-04 2004-05 2005-06 2006-07 0 200 400 600 800 1000 US$ billion Growth Rate (per cent) Source: Reserve Bank of India 2002-03 2003-04 2004-05 2005-06 2006-07 0 2 4 6 8 10 US$ billion RETAIL Potentia l untappe d market India ranks first, ahead of Russia, in terms of emerging market potential and is deemed a Priority 1 market for international retail. Organised retail penetration is on the rise and offers an attractive proposition for entry of new players as well as scope for expansion for existing players. India is home to a large base of consumers with annual incomes ranging from US$ 1,000 US$ 4,700, comprising of over 75 million households. A steadily rising percentage of rich and super rich population and impressive disposable incomes offers a spectrum of opportunities, spanning from rural retailing to luxury retailing. The impressive retail space availability and growing trend of consumerism in the emerging cities and small towns add to the market attractiveness.

Pantaloon Retail India Limited, one of Indias retail giants captures a mere 0.3 per cent of total market; compared to Tesco Plc, which captures 14.3per cent of Englands market and Walmart which captures 20 per cent of USAs market; giving an insight into the large untapped market potential. Abun dant avai labilit y of ski lled La bour India has a vast resource base of talent and skilled labour. Over 37,000,000 students were enrolled in about 150,000 pre-college institutes and over 11,700,000 in 14,000 higher education institutions in 2005-06 . With English being the language for business in India, the language skills of the Indian workforce score higher than that of emerging economies. Retail Management is a sought after education stream amongst students, with over 15 premier institutes offering specialised courses in Retail Management. Post-graduate institutes offering specialised courses in Retail Management Birla Institute of Management Technology, New Delhi Ebony Retail Academy, New Delhi Foreign Trade Development Centre Centre for Retail Management, Delhi & Jaipur Global Retail School, Multiple centres across India Indian School of Business, Hyderabad Indian Institute of Jewelry, Mumbai Indian Institute of Retail, New Delhi Indian Retail School, New Delhi Institute of Management Studies, Mumbai Institute of Technology and Management, Mumbai International Institute of Retail Management, New Delhi K J Somaiya Institute of Management Studies & Research, Mumbai Mudra Institute of Communications, Ahmedabad National Institute of Fashion Technology (NIFT), New

Delhi Pearl Academy of Fashion, New Delhi Retail Academy of India, Distance Learning programmes offered Growing Young Population Source: India Census n Under 15 n 15-64 n Over 65 2000 2005 2010E 2015E 2020E 0 100 200 300 400 500 600 700 800 900 1000 US$ million Share of Organised and Traditional Retail * 2004-05 figures. 0 20 40 60 80 100 Malaysia Thailand Indonesia China India Talwan US 3 97 20 80 30 70 40 60 55 45 81 19 85 15 Source: Ernst & Young Retail Report n Organised retail n Traditional retail MARKET & OPPORTUNITIES

 PG Institute of Retail Management, Mumbai & Chennai SP Jain Institute of Management and Research, Mumbai The Retail Academy, Ahmedabad Welingkar Institute of Management, Mumbai Source: Ernst & Young Research Lo w cost of operations The most attractive component of Indias value proposition is its cost attractiveness. Existing players are increasingly turning to Tier II and Tier III cities for retail establishments and for manpower sourcing. These cities offer significant cost advantage in the form of availability of low-cost skilled human resources. With well-educated small town graduates turning to the urban cities for employment, these graduates are ideal candidates for sales and marketing executive roles in modern organised retail formats. Labour Cost per Worker across Asian Countries Source: Department of Industrial Policy & Promotion China India 1,192 729 Indonesia 1,000 Phillipines 2,450 Thailand 2,705 Malaysia 3,429 Korea 10,743 Singapore 21,317 0 5,000 1,0000 15,000 20,000 25,000 US$ per annum RETAIL Policy and Regulatory Environment The Government is progressively undertaking reforms and liberalising the retail sector; thereby attracting significant

foreign investments. The regulatory and supervisory policies are being reshaped and reoriented to meet the new challenges and opportunities in this sector. To facilitate easier flow of Foreign Direct Investments (FDI) inflow, instead of having to seek Foreign Investment Promotion Board (FIPB) approval, FDI up to 100 per cent is allowed under the automatic route for cash and carry wholesale trading and export trading. FDI up to 51 per cent is allowed, with prior Government approval for retail trade in Single Brand products with the objective of attracting investment, technology and global best practices and catering to the demand for such branded goods in India. This implies that foreign companies can now sell goods sold globally under a single brand, such as in the case of Reebok, Nokia and Adidas. However, retailing of multiple brands, even if the goods are produced by the same manufacturer, is presently not allowed. Relaxation of FDI restrictions are being vigorously pursued by the business and trade coalitions and are expected to fall in place over the next 3-5 years. The most common channels for entry of foreign retailers are the strategic licence agreements, franchising, distribution, manufacturing, joint ventures and cash and carry wholesale trading. Strate gic licen ce agreements This route involves the foreign company entering into a licencing agreement with a domestic retailer or partnering with Indian promoter owned companies in the Middle East (UAE) or South East Asian countries (Singapore, Malaysia, Thailand, Indonesia). Fran chisin g This is a widely taken entry route, with many international brands setting up shop via this provision. The franchising routes operable in India are:

 Unit franchisee: Franchisee is granted rights to operate a single business unit Multiple franchisee: Individual unit franchises are given to multiple outlets, a route primarily used by domestic brands Master franchisee: Rights are granted for an entire territory to the master franchisee and the master franchisee can in turn grant unit and multiple franchisees in that territory Regional franchisee: This route is similar to that of the master franchisee, but applicable on a larger scale The master and regional franchisee routes are the most preferred and the oft-adopted routes of entry into India by the international retailers. Cas h-an d-carr y wholesa le tra din g 100 per cent FDI is allowed in wholesale trading which involves building a large distribution infrastructure to assist local retailers and manufacturers. Joint ventures International firms can enter into agreements with domestic players, and set up base in India. The share of the multinational is restricted to 49 per cent in this route. MARKET 10 & OPPORTUNITIES Manufa cturin g International retailers can set-up manufacturing units for their products in India. Entry through this route entails the company the rights to retail the products in India through individual retailing outlets. Distri bution An international company can set up distribution offices in India and supply products to the local retailers. franchisee outlets can also be set up in this route. The labour laws in India are under the scanner for higher liberalisation, with the Government permitting flexibilities in the rules in emerging retail hubs like

Bangalore and Hyderabad. Instituted laws like restriction on working hours, mandatory closure of the store once a week are being modified to suit the modern retailing demands and necessities, without adversely impacting the labour benefits. Efforts are also being undertaken by the Government to remove impediments being posed by licensing and clearance mechanisms in India; with the aim of introducing a single-window clearance mechanism. This would reduce the entry and establishment timelines for new players in the market and facilitate easy procedures in issuance of necessary approvals. The Government is expected to take a calibrated approach in land and rent reforms to improve the real estate regulatory environment and facilitate easy access to retail space for international investors. The Government is releasing large tracts of unused land for retail development in the Mumbai and NCR regions. This is soon to be followed by other state governments, with the Governments benefiting from the access to impressive revenues from land sales and tax collection from retail developments. Solutions to problems related to the lease rentals and pro-tenancy laws, which significantly deter international investors, are being pursued by the Government, with initiatives like Special Economic Zones (SEZs), allotment of Government controlled land etc. Value Added Tax (VAT) has been introduced and implemented in most states and territories, and many industry verticals to resolve the multiple taxation issue and maintain uniform prices across regions. The Agricultural Produce Marketing Committee Act (APMC), which curtails direct sourcing of agriculture produce (grocery, food grains) is proposed to be amended soon, with a Draft Model Act being legislated by the

government. The new act promotes direct marketing to corporate investors, setting up of farmers/consumers market and contract farming. Contract farming is already being pursued in certain states with players like Reliance and Pepsi Co. forging alliances with local farmers for direct procurement of raw materials. The Government is encouraging the contract farming practice, as it benefits both the farmers and the corporate retailers, with the former gaining access to better prices and the latter to a steady supply source. The Government is currently considering modernising and developing eight strategically located Mandis with cold storage, sorting and grading facilities made available as a part of the infrastructure services. Indicative list of foreign players entry path to India Franchisee Pizza Hut Dominos Pizza Marks & Spencer Nike, Tommy Hilfiger Subway Cash & Carry wholesale trading Metro ShopRite Joint Ventures Mc Donalds Reebok Manufacturing Bata United Colors of Benetton Distribution Hugo Boss, Mango swarovski RETAIL 11 Maturin g Metros National Capital Region (NCR) NCR comprises of National Capital Territory (NCT), Faridabad and Gurgaon of Haryana and Noida and Ghaziabad of Uttar

Pradesh. NCR contributed to US$ 16,342 million of retail revenues in 2005-06, and is projected to open doors to markets worth US$ 19,522 million by 2010-11. Delhi, the fashion capital of India and home to the highest number of rich and super-rich households, contributes US$ 12,683 million to the retail revenues. The total number of households in Delhi stood at 2.8 million in 2005-06, with more than 7,000 households belonging to the rich and super-rich category, with incomes higher than US$ 243,902 per annum. This is the highest for any city across the country. Mumbai A potpourri of consumers, this city contributes to US$ 10,195 million of total retail revenue. The hub of Indian cinema and home to diverse income categories; the middle class and the rich account for 47 per cent and 30 per cent of retail revenues of the city. Each category of population has a significant share in the retail pie, with the city offering opportunities for a spectrum of retail formats, from value segment to the lifestyle segment. Mumbai is home to a large percentage of the rich and super-rich households, with businessmen, politicians and bollywood personalities, having their base in the city. This city is projected to offer a retail potential of US$ 14,927 million by 2010-11. The regions of NCR and Mumbai dominate the organised retail scenario in India. The combined contribution of these metros is estimated to reach 40 per cent by 2007-08. These Key Trends and Drivers cities which are also referred to as the Maturing Metros, have been projected to achieve worlds 2nd and 3rd largest city status by 2015 and have the highest number of malls and modern retail format stores in operation and many more in the pipeline. Most pan-India retailers have multiple

retail outlets present in these cities. These cities also act as launch pads for the new entrants. Lastly, these maturing metros are the hub of the luxury-retailing in India. Metros on the Growth Path Metros of Bangalore, Hyderabad, Chennai and Kolkatta are growing at an exceptional rate, with the retail buzz in these cities becoming more pronounced by the day. These cities contributed to US$ 15,511 million worth retail revenues in 2005-06, projected to touch US$ 25,610 million by 2010-11. With the growth in the IT/ITeS sector and other sunrise sectors like biotechnology, hospitality etc. concentrated in these cities, the metros have experienced exponential growth over the past few years, and are expected to demonstrate robust economic performance in the coming years. Bangalore and Hyderabad have low penetration of underprivileged households, with the consuming middle class forming the largest share of population. Luxury retailing has found entry and tremendous response in these markets, with increasing number of rich and super rich households in these cities. The middle class households contribute to almost half the retail activity in these metros, with lifestyle formats beginning to mushroom. These cities are expected to witness a radical transition in the migration of households belonging to the lower income strata to the higher income category, owing to the success of the technology sector and other sunrise sectors such as biotechnology and hospitality MARKET 12 & OPPORTUNITIES industries. These cities have considerable latent demand for branded products and offer suitable opportunities for a variety of retail offerings. Most of the retail sector giants have a footprint in these

cities, with aggressive future plans for expansion. Metros-in-the-making The emerging cities of Ahmedabad, Pune, Kanpur, Nagpur, Surat, Ludhiana, Coimbatore, Chandigarh, Lucknow, Kochi, Jaipur, Vadodara, Vizag, Indore, Vijayawada, Trivandrum, Bhopal, Nashik and Madurai contribute to US$ 15,619 million worth total retail activity. Organised retail penetration is lower than in any of the metros, with traditional retail ruling the market across these geographies. These cities are less saturated than the metros, but have greater spending power. Middle class and lower middle class form majority of the households, with more than half the population falling in this category. The combined retail potential of these cities is expected to increase to US$ 23,563 million. Underprivileged population is expected to decrease by more than 30 per cent in cities of Pune and Ahmedabad by 2010-11, with the other smaller cities also following a similar trend. Pune and Ahmedabad are the fastest growing cities with thriving industry activity. Investors from the IT/ITeS sector and the other emerging sectors are eyeing these cities for expansion. These two cities contributed to US$ 3,854 million worth retail revenues in 2005-06, projected to increase to US$ 5,976 million by 2010-11. Pune has witnessed an explosive increase in the mall space availability in the recent years, with the organised retail penetration substantially increasing. The cities, along with the other potential cities as listed below, are set to take centre stage as the future retailing hotspots, with significant improvement in their infrastructure and purchasing power. The ma ll phenomenon From the setting up of Indias first mall in 1999, there has been a steady proliferation of malls, a trend specially

pronounced in the urban cities. Total number of malls was estimated at 200 for 2005-06, projected to increase to 600 by 2010-11. With increasing number of malls, there is increasing retailing space availability for players, with malls further providing incentives like lower rentals for anchor tenants and greater consumer exposure. The activity in the retail sector is further being supported by the allowance of FDI in real estate by the Government. The total mall space across seven cities (NCR, Mumbai, Bangalore, Kolkatta Hyderabad, Pune and Chennai), was spread over 40 million square feet in 2006-07. Mall space is projected to increase to over 60 million square feet in 2007-08. High Growth Cities Pune Ahmedabad Chandigarh Ludhiana Kochi Vadodara Jaipur Lucknow Emerging Cities Indore Amritsar Jalandhar Mangalore Nashik Bhubaneshwar Agra Vishakhapatnam Coimbatore Kanpur Nagpur Goa Surat Mysore Jamshedpur Thiruvananthpuram Potential Cities Jodhpur Patna Varanasi Meerut Rajkot Aurangabad Bhopal Sonepat Vijayawada Madurai Ranchi Guwahati Jamnagar Srinagar Allahabad Indicative List of Emerging Destinations for Retail Activity Total Mall Space Availability Source: Jones Lang LaSalle Meghraj Retail Report 2003-04 2004-05 2005-06 2006-07 2007-08P 2002-03 0 10 20 30 40 50 60 70 in million sq. ft. RETAIL 13

With impressive ratio of transactions to customer footfalls ratio (conversion ratio) across malls, the market trend promises a positive outlook for the future. Mall development activity is being pursued aggressively across all the metros and the high-growth cities, with significant investments in the pipeline. The evolving cosmopolitan population with rising aspirations and growing incomes across the country is the driving force increasing domestic and international investments. Chan gin g fa ce of Indian consumerism Favorable demographics, combined with increasing disposable incomes, are progressively changing the face of Indian consumerism. With the economy opening new vistas of employment and with employers offering attractive compensation packages and perks, the pool of Indian skilled professionals are boasting of higher disposable incomes. From frugal spending to frenzied shopping, Indias swelling middle class is redefining lifestyle patterns with adoption of western values and growing brand consciousness. The average household disposable income has doubled since 1985, with analysts predicting a similar trend for the next two decades. The thriving services sector growth has handed young India a bulging wallet and a penchant for luxury products. The new found freedom to shop at plush malls and stores for expensive gadgets like mobile phones and laptops has fuelled the growth of organised retail in India. The Indian consumer is gradually moving from the local kirana shopping to Mall Hopping. With a number of domestic and international brands available in stores in metros and smaller cities and with a wide range of product offerings from food and grocery to furniture and fixtures, the Indian consumer is fast embracing modern retail. With the countrys income pyramid changing

dramatically, there has been a definite shift from the saving tendency to the spending attitude. Increased consumer exposure to the latest trends and brands driven by the mass media is contributing to the soaring retail revenues. There has been a marked increase in the number of new entrants in the retail sector with player revenues increasing across all the retail segments. Hi gher disposa ble in comes Disposable incomes are on the rise with the economy providing new avenues of employment in IT/ITeS and other sunrise sectors like biotechnology. The increase of per capita income has been more pronounced in the metros and the emerging cities, with a progressive growth in the standard of living with employers offering attractive compensation packages and perquisites to the pool of skilled Indian professionals. National per capita income (NNP at factor cost) stood at US$ 717 in 2006-07, an increase of 11 per cent over 2005-06. Delhi, the seat of Indian Government and the centre of thriving economic activity has the highest per capita income, mirroring the higher standard of living. Mail Space Distribution in Top 7 Cities (in million sq. ft.) NCR 19.25 Mumbai 9.94 Pune 4.1 Kolkatta 3.5 Hyderabad 1.07 Bengaluru 1.8 Chennai 1 Source: Jones Lang LaSalle Meghraj Retail Report Source: Reserve Bank of India Personal Disposable Income 2000-01 2001-02

2002-03 2003-04 2004-05 0 100 200 300 400 500 600 700 US$ billion Source: Reserve Bank of India Y-o-Y Percentage Growth 2000-01 2001-02 2002-03 2003-04 2004-05 0 2 4 6 8 10 12 14 US$ billion MARKET 14 & OPPORTUNITIES Urban Indias disposable incomes are ricocheting with favorable and conducive economy and employment trends. Increasin g ur banisation Indias urban population is estimated at 286 million, constituting 27.8 per cent of the total population of 1,029 million as on 2001. The urban population is projected to increase to 468 million, constituting 33.4 per cent of the total projected population of 1,400 million by 2010. With over 34 cities having a population of over 1 million, this number is projected to grow rapidly. Urban population has grown over five times over the past five decades, with Indias urban population being second largest in the world, in numerical terms, next only to China. Delhi is the most urbanised city in India, with about 93 per cent of the population concentrated in urban areas. Class I cities (cities with population greater than 1,00,000) have an average concentration of 73.7 per cent urban population, with the share increasing rapidly. An increase in the number of young employed

executives and the increasing population of working women is stimulating growth of modern retailing in urban areas. Eas y avai labilit y of cre dit Higher penetration and availability of credit facilities and increasing credit card and debit card subscriptions have further fuelled the growth of retail sector. Most of the banks and financial institutions have increased their range and amount of retail credit and loans service offerings. The average exposure of banks to retail loans was at 25.5 per cent of total loans in 2005-06. * Advance Estimates for 2006-07 Increase of Per Capita Income Source: Reserve Bank of India 0 100 200 300 400 500 600 700 800 2002-03 2003-04 2004-05 2005-06 2006-07 2001-02 (US$) * Advance Estimates for 2006-07 Y-o-Y Percentage Growth Source: Reserve Bank of India 0 100 200 300 400 500 600 700 800 2002-03 2003-04 2004-05 2005-06 2006-07 2001-02 (US$) 1981 1991 2001

Urban population ( per cent to total) 23.3% 25.7% 27.8% Urban population in Class I cities (%) 60.4% 65.2% 73.7% Source: Census India Source: Crisil Research 0 2 4 6 8 10 12 14 16 18 number of cards (in millions) Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Credit Card Growth Source: Crisil Research 0 10 15 20 25 30 35 40 45 50 number of cards (in millions) Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Y-o-Y Percentage Growth RETAIL 15 Increased subscription of credit cards in the last 3-4 years indicates a definitive change in the consumer habits of the Indian population. The number of credit cards issued was at 16.6 million in 2005-06, growing at a compound annual

growth rate of 28 per cent in the last 6 years. The number of debit cards have increased manifold and touched 53.7 million by 2005-06. The growing acceptance of plastic money across small and medium sized stores and retail outlets has stimulated the rapid growth in issuance of credit cards. Increasin g in vestment acti vit y International retail giants are increasingly choosing India as the target market, with most of the global retail power-houses exploring entry options into the countrys retail market. Wal-Mart has entered into a 50:50 Joint Venture and Franchisee agreement with Bharti Retail Ltd. and plans to set up its first cash-n-carry outlet by 2007-08. It is anticipated that the Starbucks Pepsi Co. joint venture would provide Indian market access to the worlds largest coffee chain. Carrefour, Frances retail major is set to finalize its entry route to Indian retail sector. Source: Crisil Research number of cards (in millions) Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06E 0 10 20 30 40 50 60 Debit Card Growth Source: Crisil Research number of cards (in millions) Mar-01 Mar-02 Mar-03 Mar-04 Mar-05

Mar-06E -50 25 100 175 250 325 400 Y-o-Y Percentage Growth Breakup of VC /PE investments in 2006(Volume) IT-BPO 20% BFSI 13% Manufacturing 13% F&B and Retail 9% Healthcare & Life Sciences 8% Engg. & Construction 7% Real Estate 3% Media 2% Others 25% Source: NASSCOM Breakup of VC /PE investments in 2006(Volume) IT-BPO 28% BFSI 18% Manufacturing 10% Engg. and Construction 10% Healthcare & Life Sciences 8% F&B and Retail 6% Real Estate 5% Media 4% Others 11% Source: NASSCOM Recent VC /PE Deals (January - March 2007) Target Acquirer/Investor Value in US$ million Provogue (India) Fidelity, New Vernon, Blackstone, Genesis Capital, Artis Capital and Liberty International 33.24 Mudra Lifestyle SIDBI Venture Capital and State Bank 3.27 Flemingo Duty Free Shops Citygroup Venture Capital 22.73 Home Solutions Retail India Kotak Private Equity 12.00 S Kumars Nationwide ADM Capital 82.00 Brandhouse Retail ADM Capital 25.00

Source: Ernst & Young Research MARKET 16 & OPPORTUNITIES Increasin g te chno logy adoption With modern retail store formats growing players are increasingly deploying advanced Information Technology tools for managing their supply chain, warehousing and logistics requirements. Retail sector constituted 8 per cent of the IT export revenues in 2005-06. Apart from the industry giants, the small scale retailers are also embracing IT solutions to optimise their operational efficiencies. Big league IT firms like IBM India, Oracle and SAP are developing solutions for smaller retailers requirements. RETAIL 17 Panta loon Retai l (India ) Limite d Pantaloon Retail, a Future Group venture started its operations with Pantaloon Shoppe in 1993 and has since emerged the retailing giant of India with over 5 million square feet of retail space spread over 450 stores across 40 cities in India. Pantaloon Retail operates in over twenty diverse store formats, with a spectrum of offerings ranging from food and grocery to carpentry services. It operates some of the immensely popular retail outlets of India, including the Central chain of malls, Big Bazaar and Brand Factory. The aggressive expansion rate, combined with the aim of capturing both the value segment and the lifestyle segment of the market has resulted in Pantaloons capturing a large part of the organised retail pie. The company clocked revenues worth US$ 869 million in 2006-07, an 84 per cent increase over 2005-06. The operating income stood at US$ 43.9 million, 5 per cent of total revenues. It employed over 13,000 people in 2005-06 in its various retail activities. The attrition rate stood at 8.36 per cent as

against a sector average of 20-25 per cent, attracting and Key Players retaining skilled workforce through various management and academic initiatives. The company offers post-graduate programme in Retail Management in association with premier institutes across the country. Pantaloon Retail has many firsts to its name in the Indian market, with discounted store formats like Brand Factory setting benchmarks for new players entering the market. Innovative store formats like Hometown- a one stop shop for all the home requirements; Sports Bar- a sports theme restaurant complete with game courts and screens for match viewing; Health City - a value segment targeted spa and beauty care venture, etc., are hitting the market, consolidating the market position of PRIL. The unique selling proposition of Pantaloon Retail is the dual approach to tap both the Value segment and Lifestyle and Luxury segment consumers, by establishing retail formats in each segment like Big Bazaar, Fashion Station etc. aimed at value retailing while Central, Pantaloons captures the lifestyle segment consumers. Shopper s Stop Limite d Shoppers Stop, established in 1991 with its flagship storeShoppers Stop by the K. Raheja Group, has now expanded to Navaras Food Bazaar Central All Big Bazaar Pantaloons Depot Top 10 Blue Sky Star Sitara

 Fashion Station Tulsi BF 95.6 33.2 472 264 Source: Pantaloons Retail (India) Ltd. n Retail Turnover n Operating Income 846 21.1 0 100 200 300 400 500 600 700 800 900 161 11.2 2004-05 2005-06 2006-07 2003-04 US$ million MARKET 18 & OPPORTUNITIES over 100 retail outlets spread across 1.1 million square feet of built-up area, spanning a spectrum of retailing verticals and formats. The group offers formats in the lifestyle and luxury segment, with the growing affluent middle class population as their target consumer base. The company clocked revenues of US$ 202 million in 2006-07, a 30 per cent increase from revenues of US$ 155 million in 2005-06. The operating income stood at US$ 16.7 million for 2006-07, 8 per cent of total revenues. Private labels account for more than 21 per cent of their retail revenues, with Shoppers Stop clocking impressive total number of transactions to customer footfalls ratio (conversion ratio) of 27 per cent. The firm employed 3,157 customer care associates in 2006-07.

Strategic partnerships with international retailing players like Mothercare Plc of Britain and Leisure & Allied Industries of Australia, are aiding Shoppers Stop in catering to the niche markets. Aggressive expansion plans are being developed for formats like Timezone, a leisure and entertainment format venture and Brio the coffee bar located strategically in their Crossword bookstores. The Company signed the Memorandum of Understanding and Shareholders Agreement with The Nuance Group AG of Switzerland. The 50:50 joint venture has been incorporated as the Nuance Group (India) Pvt. Ltd. for undertaking the operation and management of retail shops & food and beverage outlets in the duty free zones of Indian airports. Shoppers Stop and Hypercity Retail (India) Ltd. have jointly entered into an agreement with Home Retail Group Plc, United Kingdom, to develop the format of catalogue retailing in India under an exclusive franchise. The firm has forayed into the entertainment industry by acquiring 45 per cent stake in Timezone Entertainment Private Ltd. which has 5 outlets spread across 35,606 square feet at Mumbai, Ahmedabad, Kolkata and Hyderabad. Other Key Players Tata Trent Ltd. Established in 1998 Revenues: US$ 53 million Retail sector activity: Apparel, Specialty books and music Current store format: Hypermarket, Supermarkets Future plan: New venture-Infiniti Retail Ltd. Manufacture private labels in apparels Principal fascia: Westside, Landmark, Star India Bazaar RPG Enterprises Established retail in 1996

 Revenues: US$ 182 million Retail sector activity: Food & grocery, Beauty products, Specialty- music Current store format: Convenience stores, supermarkets, hypermarkets Current outlets: 279 outlets Music world has tie ups with 350 affiliates across the country. Future plan: by 2009 set-up 2000 stores in India Principal fascia: Spencers, Music World Landmark Group Present in India since 1999 Retail sector activity: Apparel, Home dcor & Furnishing Current store format: Department stores, Hypermarkets Current outlets: Lifestyle-10 outlets, Max Retail-4 outlets Future plan: Presence in mini metros and Tier-II cities Principal fascia: Lifestyle, Home Centre, Max Retail Home Stop Mothercare Brio Desicaffe Shoppers Stop Crossword 16.7 11.9 155 109 Source: Shoppers Stop n Operating Income n Retail Turnover 202 8.4 0 50 100 150 200 250 84 3.8

2004-05 2005-06 2006-07 2003-04 US$ million RETAIL 19 Madura Garments Established in 1988 Part of the Aditya Birla Nuvo Group Retail sector activity: Apparel Principal fascia: Louis Philippe, Van Heusen, Allen Solly, SF jeans, Peter England Joint Venture with international brands: Esprit Current outlets: Planet Fashion-50 outlets, Trouser town-9 outlets Future plan: Projected to increase to 300 outlets by 2009 and diversify into the womens wear segment Vivek Group Established in 1965 Revenues: US$ 91.5 million Retail sector activity: Food & Grocery, Beauty, SpecialtyElectronics & Home appliances Current store format: Supermarkets, Hypermarkets Current outlets: Vivek-23 outlets, Jaisons-26 outlets, Premier-3 outlets Future plan: Set up 60 stores in South India Principal fascia: Viveks, Jaisons, Premier Globus Established in 1998 Retail sector activity: Apparel Current store format: Stand alone stores Current outlets: 21 Future plan: To set up 100 stores by 2008 Manufacture private labels under Globus and F21

 Principal fascia: Globus Subhiksha Trading Services Established in 1997 Turn over of US$ 75.6 million Retail sector activity: Food, Medicines Current store format: Supermarkets Current outlets: 150 outlets Future plan: To set up 600 stores with 145 stores in NCR region Principal fascia: Subhiksha Nilgiris Ltd. Established in 1904 Revenues: US$ 30.5 million Retail sector activity: Food & grocery, Specialty- Bakery products Current store format: Supermarkets Future plan: To increase stores to 100 Principal fascia: Nilgiris Trinethra Super Retail Ltd. Established in 1986 (Taken over by Aditya Birla Nuvo Group in 2006) Revenues: US$ 58.5 million Retail sector activity: Food & Grocery, Beauty products Current store format: Convenience stores, Supermarkets, Hypermarkets Current outlets: 150 outlets Future plan: To enter into Pharmacies, Apparel, Footwear Principal fascia: Trinethra Super Retail LTD., Trinethra Quick Shop Provogue Ltd. Established in 1997 Revenues: US$ 38.1 million Retail sector activity: Apparel, Footwear Current store format: Stand alone stores

 Current outlets: 139 outlets Future plan: To manage and develop malls Principal fascia: Provogue, Prozone Bata India Ltd. Present since 1931 Revenues: US$ 179.8 million Retail sector activity: Footwear and Accessories Current store format: stand alone stores Current outlets: 1100 outlets Future plan: To remodel 150 stores and open 40 more stores Principal fascia: Bata MARKET 20 & OPPORTUNITIES Archies Ltd Present since 1979 Revenues: US$ 20.8 million Retail sector activity: Specialty-cards & gifts Current store format: Stand alone stores Future plan: To increase from 73 stores to 200 by 2008 Principal fascia: Archies, Stupid Cupid Players across verti cals Food and Grocery Hindustan Unilever Limited BJN Group Magna Caf Coffee Day Barista Apna Bazaar Spar ITC Aditya Birla Group NF FabMall Godrej

 Mc Donalds Clothing and Textiles FabIndia Biba Pyramid Lee Levis Ebony Pepe Jeans Raymonds Kappa Mango Lee Cooper Nalli Peter England Jewellery and Watches Tissot Gili Tanishq Kiah Carbon JBL Footwear Reebok Liberty New Balance UMBRO Adidas Woodland Paragon Home Decor and Furnishings Raymond Lifestyle Durian

 Bombay Dyeing Nilkamal Gautier Pantaloon Carmicheal house Electronics Croma Onida Videocon Whirlpool LG BPL Philips Next Samsung Electronics Godrej RETAIL 21 Beauty Care Lorreal Amway Revlon Health Glow Biotiue Maybelline Lakme Himalaya Books and Music Depot Music World Crossword Hallmark Planet M Internationa l retai lers International retailers are fast expanding their business in

India to tap the large consumer base. Reebok has set up its largest store in the world in Hyderabad, Tommy Hilfiger and Levis have over 20,000 square feet of retail space and standalone stores across major metros. The fast-food giants like Pizza Hut, McDonalds, Subway etc. are expanding at a fast pace, with these emerging Tier II and Tier III cities International retailing brands in India Nine West United Colors of Benetton Adidas Mango Pizza Marcoricci Italy Red Earth Nike TGI Fridays Mc Donalds Samsonite Promod Lasenza KFC Reebok Marrybrown Movenopick Giordan Levis Arrow Lacoste Subway Ruby Tuesday Pepe Jeans Tissot Wrangler Marks & Spencer

 Landmark Group Metro Debenhams Planet Sports Royal Sporting House Shoprite Dollarstore 22 MARKET & OPPORTUNITIES Opportunities across Geo grap hies Maturing Metros Delhi and Mumbai offer an attractive market for luxury and lifestyle retailing with these cities being home to the highest number of households belonging to the affluent category (with income greater than US$ 24,000 per annum). Retail revenues contributed by the affluent category accounted for over 30 per cent of total revenues in 2005-06. The number of affluent households is expected to double by 2010-11, projected to trigger high growth in the luxury retailing segment. The luxury-retail segment is presently concentrated in the five-star hotels and is slowly drifting into the specialty malls and one-stop outlets. With the steady rise predicted in the percentage of middle class households and their affordability, the scope for the neighborhood malls and hypermarkets will be pronounced in the residential suburbs. However, the lack of space and the strict bringing down of law on illegal constructions will reinforce the migration towards organised retailing. Metros on the growth lane The growing disposable incomes, the consuming class and the increasing standard of living across these cities translate to opportunities across all the retailing formats and verticals. The mushrooming lifestyle formats in these cities is stimulated by the increasing exposure of consumer

base to international brands and willingness to spend for quality. These cities most often also serve as the test beds for any innovative store formats. Key Opportunities Metros-in-the-making Many metro retailers are expected to open outlets in these cities to benefit from the First-Mover advantage, and gain a foothold in these cities. These cities provide ample opportunities, especially for the food and grocery formats, with lower lease rentals and high availability of retail space, access to farms and agricultural produce. Consuming class accounts for over 60 per cent of the total households, offering potential in the food and grocery, consumer goods and apparel verticals. The First -Mover advanta ge More than 72 per cent of Indias population resides in small towns and rural areas with agri-produce retailing forming the largest share of total retail pie in these regions, offering immense potential for the food and grocery vertical with customer preference tuned towards value retailing. Players like Reliance Retail, Aditya Birla Nuvo Groups Trinethra Supermarket etc. have aggressive plans to tap opportunities in these emerging cities in suitable formats. Players who have already established their presence in the top metros of the nation are already planning their establishments in these emerging cities and regions to gain the first-mover advantage over other entrants. Inno vati ve formats Formats like Wedding Malls, which are unheard of in the far west are found to be very successful in the Indian market. The Wedding Malls for instance, stock the complete range RETAIL 23 of wedding product offerings from apparel to jewellery. The retail industry players are successfully blending knowledge

from the experiences of the global retail industry with the unique requirements and preferences of the Indian consumer. Such customisation to the latent needs of the Indian consumer has brought about a great deal of innovation in the product offerings as well the retail formats in which they are being sold. Khadi & Village Industries Commission is set to roll out a string of swanky Khadi Plazas, which would showcase the traditional handloom textiles in a completely new form. Over 7,000 existing outlets are to be beefed up to cater to the changing tastes of the young Indian consumer and thereby provide a boost to the presently stagnant sales of the khadi textiles. The latest addition to the list of diverse retail formats are the Village Malls, with the fair price shops being revamped to cater to larger needs of local populations. The Government of Gujarat has spearheaded one such initiative with 512 Village malls launched in the state with further plans for 508 such malls. Emer gen ce of India as the retai l sour cin g hub Riding on the back of a strong manufacturing industry, India is fast emerging as an important global sourcing hub for top international brands India has had a continued presence in the global scenario as one of the leading exporters of apparels and textiles. The expiry of the Multi Fiber Arrangement has further widened the global markets for apparel. Many international brands have identified India as one of the important supply centres for procurement of textiles and apparels. Wal-Marts sourcing operations was estimated at US$ 1 billion, Tescos around US$ 100 million and Marks & Spencer around US$ 145 million from India for the year 200506. Unilever sources major portion of their fast moving

consumer goods from its wholly owned Indian subsidiary, Hindustan Unilever Limited. Adidas, Next and Calvin Klein are expected to follow suit, with Adidas opening its first office in Bangalore. Online retai lin g The Click-to-buy phenomenon is fast catching up in India, with increase in number of broadband and dial-up internet connections, limited personal time for shopping, increased use of plastic money and large base of young population that spends a considerable time online. The stated factors are facilitating rapid growth of online shopping with the industry players scaling up to meet the consumer requirements. Most retailers are developing and maintaining their own online sale portals for easy consumer access, facilitating online purchase of merchandise. Tata Indicoms i-choose.in and G&Bs godrejlifespace.com are good examples of this trend. Players like Rediff.com, eBay.in, Indiatimes.com were some of the early entrants in the Indian online retail space, clocking impressive revenues through online transactions. Some of the more recent players to enter this niche market include Pantaloons Retail India Ltd., through its Futurebazaar.com venture. Many smaller retail portals are also thriving on the internet, meeting the niche Indian consumer requirements such as ethnic apparel, handicrafts and jewellery. Demand for these portals, which has been primarily driven by the non-resident Indians, is gaining popularity on the Indian soil as well, with the young urban Indian consumers increasing exposure to the virtual world of internet. With value-added services like cash-on-delivery to facilitate online transactions by consumers without credit/ debit card, unique bidding schemes etc, e-commerce is fast gaining acceptance in India.

Rura l retai lin g Rural retailing constitutes more than 95 per cent of total retail revenues, with more than 70 per cent of Indias population concentrated in the rural areas. Rural hypermarkets are growing at a blistering pace meeting the unique requirements of the rural consumer. The range of services provided by the rural retailers extends from creating a platform to buy and sell Rediff.com Ebay.in Indiatimes Futurebazaar.com Lifespace i-choose MARKET 24 & OPPORTUNITIES farm produce, to banking services, to restaurants etc. One of the key players in the rural retail segment is ITC with its Choupal Saagar initiative. ITC has 14 outlets in operation presently and plans to increase the number to 700 over the next 7-10 years. ITCs Choupal Saagar retails products and also acts as a procurement hub for ITCs e-choupals where farmers are offered better rates for their agriculture produce, compared with the prevalent market rates for the same. Other examples of players and their services in the rural retail segment are DSCLs Hariyali Kisan Bazaar and Indian Oil Corporations Kisan Seva Kendra. DSCLs Hariyali Kisan Bazaar has over 70 outlets presently and the company proposes to operate a total of 200 outlets over the next 12 months. The outlets provide a spectrum of offerings including agronomist-consultations, agri-inputs, and financial services, apart from the conventional retailing services. Indian Oil Corporations Kisan Seva Kendra offerings extend over fuel, agri-produce, fast moving consumer

goods and other value added services. The company has a network of over 1400 outlets presently. Reliance Retail and Pantaloon Retail India Ltd. are expected to undertake more ventures to capture the vast untapped potential in the rural retail segment. The Resp len dent Lu xur y Market Affluent households in India account for just about 4.5 per cent of the national population. However, the affluent households segment contributes to more than 22 per cent of the total retail sales, translating to US$ 62,340 million of retail revenues. The number of affluent households is estimated to increase by 8.5 per cent by 2010-11. The contribution of affluent households to retail revenues is also estimated to increase to 33 per cent by the said year. Thereby in 201011, affluent households are expected to generate retail revenues worth US$ 152,000 million. The luxury retail segment is hence a substantial opportunity for retail industry players. Many international investors are actively pursuing an entry route into India for opportunities in the luxury segment. Delhi and Mumbai are the prime contributors to the luxury retail revenues and have the highest density of luxury brand outlets in the country. However, currently the location of these outlets is primarily limited to five-star hotel mall spaces, with limited footfalls and consumer exposure. Industry players have aggressive expansion plans in the pipeline, with investor confidence reinforced by the booming sales in the luxury segment. The two Louis Vuitton stores in Mumbai and Delhi averaged monthly sales of US$ 13 million in 2005-06. Hugo Boss is expanding to other metros in the country, encouraged by 30 per cent increase in its India sales in the past year. Internationa l luxur y retai lin g bran ds

in in dia BVLGARI UBL GUCCI Cerruti Swarovski Omega Mont Blanc Hugo Boss Chanel Vacheron Constantin SA Dior Vertu harman kardon Florsheim John Balliano Versace Rado Louis Vuitton Dolce & Gabbana Denon Do Daks Donna Karan Morgan Longines Tiffany & Co. Canali Bose Kisan Sewa Kendra E-Chaupal Hariyali RETAIL 25 Cartier

 Fendi Tommy Hilfiger Prada Chopard The Samile Row Er Manegildo Zegna Leisure an d entertainment market Entertainment retail is redefining Indian lifestyles with the rate of growth in the number of multiplexes and gaming zones matching the growth story of malls and retail space. The immense potential in the entertainment and leisure segment is reflected by fact that there exist 10 screens per million of population in India as compared to 40 screens in the European market and 117 in the US. The total leisure and entertainment revenues were pegged at US$ 8 billion in 2005-06, a 14 per cent increase over 2004-05. The organised entertainment retail revenues grew at an average rate of 30 per cent over 2004-05, and are expected to maintain the same pace in the coming years, with Indian players investing heavily in this market. Reliance Infotechs Adlabs, Shoppers Stops Timezone have aggressive expansion plans in the pipeline, with retailers exploring the joint venture option with international giants in the sector having a global presence.

Cas hin g in on the transit Channe ls

Infrastructure sector in India is booming with several capacity building measures being undertaken aggressively by the central and state governments. Construction of new airports and development of metro rail systems equaling premium global standards is opening a new realm of retailing opportunities in these transit points. Airports Authority of India has commenced the upgradation of 9 metro airports and 15 non-metro airports, with emphasis

also on development of retail space in the airports. The joint venture between Shoppers Stop and The Nuance Group AG has won the contract for setting up duty-free and duty-paid retailing outlets at the upcoming Bangalore and Hyderabad International Airports. The Mass Rapid Transit System, currently in operation in Delhi, and under construction at other metro cities like Bangalore and Hyderabad is also expected to offer immense retail potential. With the Delhi Metro Rail Corporation (DMRC) inviting tenders for retail development in the 53 metro stations in operation and 79 stations proposed to come up by 2010 in Delhi, retailers are in the fray to exploit the commercial potential of the retail space. SEZ syner gies Special Economic Zones are government driven initiatives attracting higher investment into India, with about 154 Special Economic Zones notified as on Oct 3, 2007 spread over states and union territories of India . SEZs offer ample retail opportunities, with a percentage of the SEZ area earmarked for retailing in the nonprocessing zone. The size of the area in the retailing space is calculated considering various parameters like the type of SEZ, projected size of the residential population in SEZ, and population in the catchment area. IT/ITeS based SEZs offer impressive retailing opportunities; the target segment for such SEZs would be the urban population with high-disposable incomes. Tourism re late d opportunities With tourists inflow increasing impressively with each passing year, tourism holds the key to a large retailing Leading Players in Multiplexes Market Operator Multiplexes Screens in 2005-06

Screens projected for 2010-11

Project Description : Category : MBA Project Report Title : Retail Marketing in India

Pages : 100

Project Description : Category : MBA Project Report Title : Retail Marketing in India

Pages : 100