Case Study On Food Retailing in India

By Group-1 Reliance and Motorcycle

What will be the environmental opportunities & threats for existing players in the retail segment ?

Opportunities:
First Mover Advantage- 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. 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). 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. Innovative Format- 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 of wedding product offerings from apparel to jewellery. Such customization to the latent needs of the Indian consumer will provide for some special retail formats.

Threats

Supply Chain - Logistical challenges, constant changes in consumer preferences and patterns, crowded marketplaces, efficient customer responsiveness and swiftly evolving retail formats are the key threats today in retail environment in India. Talented HR-The industry is facing a severe shortage of talented professionals, especially at the middle-management level. Areas gradually becoming critical are technology, supply chain, business development & talented professionals will put increased pressure on wage costs. Therefore, operating margins, especially for mid-sized retailers will shrink. Retail Fraud- Fraud and theft, including employee pilferage, shoplifting, vendor frauds and inaccuracy in supervision and administration costs the Indian retail industry about Rs 550-600 crores(USD 0.12-0.13 billion) every year. The implications and size of this loss will be more significant as retailers continue to scale up and increase product lines. infrastructure and logistics- India is a large and highly fragmented country, with 34 states and 18 official languages bulk of its population, 66.1 %, lives in rural areas. The lack of adequate infrastructure makes it virtually impossible to reach this virtually untapped market. Distribution, or the lack of it, is a major hindrance for retailers in India. The lack of quality infrastructure across the country and a nonexistent distribution sector results in inefficient logistics systems

What will be the environmental opportunities & threats for ne entrants in the retail segment ?

Opportunities

As government is in mood to liberalise the retail sector by gradually increasing the FDI Cap more & more co. are willing to enter into business because there will be no scarcity of capital & also the hussle with the indian partner will reduce if there is a JV.

Unlike past there is already a ready base of metropolitan consumers with ready cash and global tastes so we will have less problems.

The spending power of consumers have increased due to continuous growth in there income in last 7-8 years due to the countries growth so the co. Besides the urban market, Indias rural market has just started to be seen as a viable option and companies who understand what the rural consumer wants will grow to incredible heights. 70% of our population live in rural areas.

Threats

Real estate prices in India is booming so it will be a great challenge for new entrants to find real estate at preferred locations and financing it at the prevailing prices.
The old entrants had the chance to over come there short comings but with the boom in retail biz there are lot of competitors & to compete with them will be a great task. Retailers legendary success at procuring its supplies at extremely competitive prices has no doubt pleased its customers to whom those savings are passed on, but critics have accused it of compelling its suppliers to survive on very thin margins. There should be Win-Win situation for both supplier & Customer One mall gets built, and somebody builds a new and bigger mall nearby, so after some years there will be the problem of oversupply .

Looking at the macro-environment, how would your advise vary for Tesco vis-a-vis Big Bazaar ?

The biggest challenges in retail is in transportation, warehousing and distribution infrastructure they need to make huge investments in gaps against old one who have gradually developed there short comings. India is a very diverse country , we have 6,000 castes and sub-castes in 28 states, and every community has its own tastes; every state has its own nuances so the foreign retailers have to do a good market research. Our consumer behavior is dramatically different from other countries so co. have to make India specific changes in its policy. e.g. McDonalds will not serve beef products in India. Tesco will face perception crisis in India. "In the U.K., when you think of a big warehouse store, you think of lower prices, and small, boutique stores have higher prices," he says. "In India, the perception is exactly the opposite -- the bigger store has higher prices; smaller shops can offer lower prices because their overheads are lower