Introduction

The Asia Pacific Rim region offers bright prospects for retailers and manufacturers. The
large population, sound economic growth, investment in infrastructure and rising
incomes all contribute to a positive and improving trading environment. Even in China,
where the accessibility of markets was traditionally limited by the political regime, the
move towards a socialist market economy is under way. This has led to a host of new
retailing opportunities. However, while the prospects for companies seeking to expand
their horizons are encouraging, those seeking to capitalize on these Pacific Rim
opportunities must respect the inherent diversity of the region.
Economically powerful Japan with the region's highest gross domestic product (GDP) is,
to the outside observer, an obvious contrast to China's relatively backward but fast-
growing economy. The distinctions between the newly industrialized economies of Hong
Kong, Singapore, South Korea and Taiwan which have established a powerful trading
presence within the region may appear to be less extreme, but are nonetheless also
important. The newly industrialized economies themselves contrast with Malaysia,
Thailand, Indonesia and the Philippines, where investment in infrastructure and a move
to the cities is fundamentally altering lifestyles. The particular characteristics, both large
and small, of all these countries affect trading conditions and must be taken into
consideration by businesses and retailers wishing to operate in the region.
While the Pacific Rim is characterized by such contrasts, there are also some important
trends which apply more generally to the region. The first of these trends is a gradual
improvement in the standard of living, with consumers having more purchasing power
than before. As incomes rise, so do expectations, leading to increasing demand for a
wide range of consumer items. The second trend relates to a change in family structure,
with more women working, marrying later and having fewer children. Extended families,
which previously may have shared a home, are increasingly splitting into more than one
unit. The third trend is a move towards urbanization, accompanied by a change in the
types of jobs which people do. Put together, these changes are resulting in massive
infrastructure development. With this development come new jobs, better incomes and
greater demands for housing, cars, consumer products, food and clothing. As families
gear up for their new urban lifestyles, even the types of products that they need and
want are changing.
Political changes are also altering the characteristics of the marketplace. For example,
the return of Hong Kong to China in 1997 and China's transition to a socialist market
economy are likely to have far-reaching effects for retailers of all kinds. In order to take
advantage of the region's emerging opportunities, local retailers and manufacturers must
keep a close view on the rapidly changing economic, political and social patterns in the
region. This paper reviews the impact of these aspects of the wider marketing
environment on retailing in the Asia Pacific Rim and uses a series of short case studies to
illustrate the impact of the key economic, demographic, political and sociocultural
factors. Material for the case studies is sourced from a range of academic, business and
statistical publications. (For the purposes of this paper, the Asia Pacific Rim region
includes China, the newly industrialized economies (NIEs) of Singapore, Hong Kong,
South Korea, Taiwan, Japan and the developing countries Indonesia, Malaysia, the
Philippines and Thailand.)
The marketing environment
The marketing environment is a set of forces which either directly or indirectly influences
a business' acquisitions of inputs or generation of outputs. Kotler[1] defines the
marketing environment as "...the actors and forces that affect the company's ability to
develop and maintain successful transactions and relationships with its target customers.
It comprises 'non-controllable' actors and forces that impact on the company's market
and marketing practice." When the marketing environment changes, companies face
uncertainty, threats and opportunities. Retailers wishing to capitalize on such
opportunities must be ready to predict likely outcomes and act quickly. According to Dibb
et al.[2], "Marketing managers who fail to recognize changes in environmental forces
leave their firms unprepared to capitalize on marketing opportunities or to cope with
threats created by changes in the environment". Retailers involved with consumer goods
need to be particularly vigilant as these products are particularly sensitive to
environmental factors[3].
The marketing environment is sometimes broken down into two components: the micro-
and macro-environment. The micro-environment concerns aspects which are close to the
individual business and over which the business has some control. This paper is
concerned with the macro-environment, sometimes also called the wider marketing
environment, consisting of those elements which are external to the business and have a
broader effect on it. These include economic, demographic, political, legal, technological,
social and cultural factors.
Economic factors
Economic conditions in the Asia Pacific region are affected by a range of economic
factors which have an impact on spending power and behaviour. In recent times the
region has enjoyed considerable growth and has remained relatively unaffected by the
1990s global recession. The figures for 1993 indicate a total GDP of almost US$5.8
trillion, with a further 40 per cent growth expected by the end of the century. The full
extent of this growth will be subject to factors such as the effects of Japanese recession
(which is likely to have less of an impact in Asia than in the USA or Europe), the
significant increase in China's economy and a slight slowing of the economies in Hong
Kong, Singapore and Taiwan.
As shown in Table I, not all countries are likely to contribute equally to this growth. Of the
countries reviewed in this paper, the highest growth is expected from Thailand and
Malaysia. This is due to an influx of direct foreign investment as labour-intensive
businesses migrate from Japan and the NIEs to [TABULAR DATA FOR TABLE I OMITTED]
cheaper areas. For such businesses the attractions of Thailand and Malaysia are obvious:
both countries enjoy relatively low levels of inflation, cheap labour, and Malaysia is
particularly rich in natural energy resources.
As reforms take shape, China is also experiencing a rapid increase in its economy, with
predictions suggesting that double figure growth rates will continue. In the run-up to the
hand-over of power in Hong Kong, a three-way economic relationship between China,
Hong Kong and Taiwan has been emerging. The size of the combined populations of
these countries means that this relationship is bound to impact significantly on other
trading conditions in the region. These trends are illustrated by the GDP figures and
trends shown in Table I.
Meanwhile, the Japanese economy has suffered as a result of world recession. Since
1991, Japan has seen a decline in private investment accompanied by a fall in
consumption and profits. However, despite these setbacks, Japan remains the second
biggest global economy, with a GDP per capita of US$33,821 in 1993[4]. Here again, the
diversity of economic outlook is starkly illustrated. Table II gives further details by
summarizing some key economic factors currently affecting …

The Indian retail industry is the fifth largest in the world. Comprising of organized and unorganized sectors, India
retail industry is one of the fastest growing industries in India, especially over the last few years. Though initially,
the retail industry in India was mostly unorganized, however with the change of tastes and preferences of the
consumers, the industry is getting more popular these days and getting organized as well. With growing market
demand, the industry is expected to grow at a pace of 25-30% annually. The India retail industry is expected to
grow from Rs. 35,000 crore in 2004-05 to Rs. 109,000 crore by the year 2010.

Growth of Indian Retail

According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India retail industry is the
most promising emerging market for investment. In 2007, the retail trade in India had a share of 8-10% in the
GDP (Gross Domestic Product) of the country. In 2009, it rose to 12%. It is also expected to reach 22% by 2010.

According to a report by Northbride Capita, the India retail industry is expected to grow to US$ 700 billion by
2010. By the same time, the organized sector will be 20% of the total market share. It can be mentioned here
that, the share of organized sector in 2007 was 7.5% of the total retail market.

Major Retailers in India

Pantaloon:
Pantaloon is one of the biggest retailers in India with more than 450 stores across the country. Headquartered in
Mumbai, it has more than 5 million sq. ft retail space located across the country. It's growing at an enviable pace
and is expected to reach 30 million sq. ft by the year 2010. In 2001, Pantaloon launched country's first
hypermarket ‘Big Bazaar’. It has the following retail segments:

• Food & Grocery: Big Bazaar, Food Bazaar

• Home Solutions: Hometown, Furniture Bazaar, Collection-i
• Consumer Electronics: e-zone
• Shoes: Shoe Factory
• Books, Music & Gifts: Depot
• Health & Beauty Care: Star, Sitara
• E-tailing: Futurebazaar.com
• Entertainment: Bowling Co.
Tata Group
Tata group is another major player in Indian retail industry with its subsidiary Trent, which operates Westside and
Star India Bazaar. Established in 1998, it also acquired the largest book and music retailer in India ‘Landmark’ in
2005. Trent owns over 4 lakh sq. ft retail space across the country.

RPG Group
RPG Group is one of the earlier entrants in the Indian retail market, when it came into food & grocery retailing in
1996 with its retail Foodworld stores. Later it also opened the pharmacy and beauty care outlets ‘Health & Glow’.

Reliance
Reliance is one of the biggest players in Indian retail industry. More than 300 Reliance Fresh stores and Reliance
Mart are quite popular in the Indian retail market. It's expecting its sales to reach Rs. 90,000 crores by 2010.

AV Birla Group
AV Birla Group has a strong presence in Indian apparel retailing. The brands like Louis Phillipe, Allen Solly, Van
Heusen, Peter England are quite popular. It's also investing in other segments of retail. It will invest Rs. 8000-
9000 crores by 2010.

Retail formats in India

Hypermarts/supermarkets: large self-servicing outlets offering products from a variety of categories.

• Mom-and-pop stores: they are family owned business catering to small sections; they are individually
handled retail outlets and have a personal touch.
• Departmental stores: are general retail merchandisers offering quality products and services.
• Convenience stores: are located in residential areas with slightly higher prices goods due to the
convenience offered.
• Shopping malls: the biggest form of retail in India, malls offers customers a mix of all types of products
and services including entertainment and food under a single roof.
• E-trailers: are retailers providing online buying and selling of products and services.
• Discount stores: these are factory outlets that give discount on the MRP.
• Vending: it is a relatively new entry, in the retail sector. Here beverages, snacks and other small items
can be bought via vending machine.
• Category killers: small specialty stores that offer a variety of categories. They are known as category
killers as they focus on specific categories, such as electronics and sporting goods. This is also known as
Multi Brand Outlets or MBO's.
• Specialty stores: are retail chains dealing in specific categories and provide deep assortment. Mumbai's
Crossword Book Store and RPG's Music World are a couple of examples.
Challenges facing Indian retail industry

• The tax structure in India favors small retail business

• Lack of adequate infrastructure facilities
• High cost of real estate
• Dissimilarity in consumer groups
• Restrictions in Foreign Direct Investment
• Shortage of retail study options
• Shortage of trained manpower
• Low retail management skill
The Future

The retail industry in India is currently growing at a great pace and is expected to go up to US$ 833 billion by the
year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%. As the country has
got a high growth rates, the consumer spending has also gone up and is also expected to go up further in the
future. In the last four year, the consumer spending in India climbed up to 75%. As a result, the India retail
industry is expected to grow further in the future days. By the year 2013, the organized sector is also expected to
grow at a CAGR of 40%.

India Organised Retail Market 2010

A report by Knight Frank India.
By Retailer | May 26, 2010

Retail-Business-Practice
 Knight Frank India, the country’s leading independent global property consultants, announced the
release of their in-depth research study on the Indian retail market entitled “India Organized Retail
Market 2010.” The study provides a unique and insightful documentation towards providing a concrete
understanding of the current market trends, evolution of the organized retail space and real estate
retail supply. However, the key highlight of the report is the observation and analysis that provides a
view on the demand-supply situation and prevailing rentals in each of the 7 major metros in the
country. In relation, it provides a micro view of the Mumbai retail market as well as details the factors
influencing its growth.

Highlights
• ORS 95 million sq ft by 2012 from 41 million sq ft currently
• Estimated 21 million sq ft oversupply in 7 cities by 2012

Organised retail space in Mumbai is expected to grow by around 130 per cent, from 8.72 million sq ft
at present to 20 million sq ft by 2012, according to Knight Frank India report. The report, India
Organised Retail Market 2010, forecasts that during 2010-12, around 55 million sq ft of retail space
will be ready in Mumbai, NCR, Bangalore, Kolkata, Chennai, Hyderabad and Pune. Besides, between
2010 and 2012, the organized retail real estate stock will grow from the existing 41 million sq ft to 95
million sq ft.
The report reveals an in-depth analysis of the dynamics of Organized Retail Market and the Real
Estate Retail Potential (RERP) to identify the oversupply or undersupply situation in the retail space.
Knight Frank further estimates that by 2012, higher pace of real estate developments in comparison to
the pace of organized retail market growth will create an oversupply situation of 21 million sq ft in 7
cities. Its examination of the state of affairs of the retail market implies that the frenetic rental hikes
witnessed during the boom will not haunt retailers until 2012.
Dr Samantak Das, National Head—Research Knight Frank India said: Our research has undertaken
an extensive survey of all major operational and upcoming malls and 2 prominent high streets in each
of these 7 cities. The report determines the performance of the operational malls in terms of
occupancy, rentals; retail formats and also foresees the demand-supply dynamics till 2012.”
• Knight Frank India estimates Mumbai’s Organized Retail Stock (ORS) to touch 20 million sq .ft. by 2012 while
country’s ORS estimated to reach 95 million sq ft
• 6.4 million sq ft retail space to be available in Mumbai by end of 2010
• 4.7 million sq ft to be completed over the next two years
• 1.76 million sq ft of retail space currently vacant in the city.

Mumbai currently has 8.72 mn sq ft organized retail stock which will estimated to reach 20.00 mn.sq ft
by 2012. Besides, presently the city has faced a situation of oversupply since there is 20% vacancy of
retail space in the market.
The demand-supply forecast model indicate that the Organized Retail Market (ORM) to grow from Rs
74 billion in 2009 to Rs 203 billion in 2012, whereas, the Real Estate Retail Potential (RERP) will
increase from Rs.79 billion to Rs.216 billion. The model also predicts that in 2012, Mumbai will
continue to face the situation of oversupply by 1.31 million sq. ft. which accounts to 6 per cent of the
total retail stock. But, the Western Suburbs and Island city both will have undersupply of retail space.
However, Navi Mumbai and Central Suburbs will have oversupply.
 Area Current Distribution Current Mall Upcoming Mall Supply
of Retail Stock Vacancy till 2012
Island City 15% 4% 6%
Western Suburbs 43% 21% 20%
Central Suburbs 27% 29% 62%
Navi Mumbai 15% 19% 13%

In Mumbai, 6.4 million sq ft of retail space will be available by the end of 2010 and about 4.7 million sq
ft will be completed over the next two years. For Chennai market, approximately 7.49 million sq ft of
organized retail space is expected to come up during the next three years,” said Das.

Retail Industry

By

Tamoghna DasSharma
Student
Globsyn Business School
Executive Summary
Retailing is emerging as a sunrise industry in India and is presently the largest employer after
agriculture. In the year 2004, the size of Indian organized retail industry was Rs 28,000 Crore, which
was only 3% of the total retailing market. Retailing in its present form started in the latter half of
20thCentury in USA and Europe and today constitutes 20% of US GDP. It is the 3rd largest employer
segment in USA. Organized retailing in India is projected to grow at the rate of 25%-30% p.a. and is
estimated to reach an astounding Rs 1,00,000 Crore by 2010. The contribution of organized retail is
expected to rise from 3% to 9% by the end of the decade. The projection for the current year ie 2005
is Rs 35,000 Crore. In India it has been found out that the top 6 cities contribute for 66% of total
organized retailing. With the metros already been exploited, the focus has now been shifted towards
the tier-II cities**. The 'retail boom', 85% of which has so far been concentrated in the metros is
beginning to percolate down to these smaller cities and towns. The contribution of these tier-II cities to
total organized retailing sales is expected to grow to 20-25%. In the year 2004, Rs 28,000 Crore
organized retail industry had Clothing, Textiles & fashion accessories as the highest contributor (39%),
where as health & beauty had a contribution of 2%. Food & Grocery contributed to 18% whereas
Pharma had a contribution of 2%.

** Tier-II cities: Surat, Lucknow, Dehradun, Vijaywada, Bhopal, Indore, Bhubasehwar, Varanasi to name a few.

Introduction
Retailing includes all activities involved in selling goods or services directly to final consumers for
personal, non-business use. A retailer or retail store is any business enterprise whose sales volume
comes primarily from retailing.
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 store, on the street, or in consumer's home).
There are 3 types of retailers:
1. Store retailer
2. Non Store retailer
3. Retail Organization
From the assortment point of view, Store retailers* are of 5 types:
1. Specialty Store
2. Departmental Store
3. Super market
4. Convenience Store
5. Discount Store
* = Definition of the store retailer types is provided in the glossary.
From customers service point of view:
1. Self-service retailing: Many customers are willing to carry out their own locate-compare-select
process to save money.

2. Self-selection retailing : Customers find their own goods, although they can ask for assistance.

3. Limited service retailing: These retailers carry more shopping goods, and customers need more
information and assistance. The stores also offers services such as credit & merchandise-return
privileges.

4. Full service retailing: Salespeople are ready to assist in every phase of the locate-compare-select
process.
Although majority of goods & services is sold through stores, non-store retailing has been growing
much faster than store retailing.
Major non-store retailer types:

1. Direct Selling: It deals with door-to-door or at home sale parties i.e. it involves one-to-one or one-
to-many selling.
Example > Eureka Forbes, Amway, Mary Kay Cosmetics.

2. Automatic Vending: Example > ATM

3. Buying services: Is a store less retailer serving a specific clientele-usually employees of large
organizations-who are entitled to buy from a list of retailers who have agreed to give them discounts in
return for membership.
Example > Amazon.com

4. Direct marketing: It involves direct response marketing. The different forms of direct marketing
are: Direct mail, catalog marketing, telemarketing, television direct response marketing and electronic
shopping.
Example: Dell Computers
Retail Organization mainly falls into 4 major categories:
1. Corporate chains: Example > Pantaloons, Westside
2. Retail Co-operative: Example > Amul, Samavaika, Khadi Gram Yudog
3. Consumer Co-operative: Example > Apna Bazar
4. Franchise Organization: Example > Monginis, Café Coffee day.

Global Scenario

Retail stores constitute 20% of US GDP & is the 3 rd largest employer segment in USA. China on the
other hand has attracted several global retailers in recent times. Retail sector employs 7% of the
population in China. Major retailers like Wal-Mart & Carrefour have already entered the Chinese
market. In the year 2003, Wal-Mart & Carrefour had sales of US $ 70.4 Crore & US $ 160 Crore
respectively.

The global retail industry has traveled a long way from a small beginning to an industry where the
world wide retail sales is valued at $ 7 x 10 5 Crore. The top 200 retailers alone accounts for 30 % of
the worldwide demand. Retail turnover in the EU is approximately Euros 2,00,000 Crore and the sector
average growth is showing an upward pattern. The Asian economies (excluding Japan) are expected to
grow at 6% consistently till 2005-06.

On the global Retail stage, little has remained same over the last decade. One of the few similarities
with today is that Wal-Mart was ranked the top retailer in the world then & it still holds that distinction.
Other than Wal-Mart's dominance, there's a little about today's environment that looks like the mid-
1990s. The global economy has changed, consumer demand has shifted & retailers' operating systems
today are infused with far more technology than was the case six years ago.
Given below a list of World's top 15 retailers:

DT Rank Country of Company name Formats 2003 retail

04 Origin sales (US $
Crore)

1 US Wal-Mart Discount, Hypermarket, 25,632.9

Supermarket,
Superstore, Warehouse

2 France Carrefour Discount, Hypermarket, 7,979.6

Supermarket, Specialty,
Convenience, Cash &
Carry
 3 US Home Depot DIY 6,481.6

4 Germany Metro Hypermarket, 6,050.3

Superstore, Specialty,
Convenience, Cash &
Carry, Departmental,
DIY, Food Service

5 US Kroger Discount, Convenience, 5,379.1

Supermarket, Super
center, Warehouse,
Specialty

6 UK Tesco Department, 5,153.5

Hypermarket,
Supermarket,
Superstore, Convenience

7 US Target Department, Discount, 4,678.1

Super center

8 Netherlands Ahold Discount, Hypermarket, 4,458.4

Supermarket, Specialty,
Convenience, Cash &
Carry, Drug

9 US Costco Warehouse 4,169.3

10 Germany Aldi Einkauf Discount, Supermarket 4,006.0 e

11 Germany Rewe Hypermarket, 3,893.1e

Superstore, Super
market, Specialty,
Convenience, Cash &
Carry, Departmental,
DIY, Food Service,
Discount, Drug

12 France Intermarche Superstore, Super 3,747.2e

market, Specialty,
Convenience, Cash &
Carry, DIY, Food Service,
Discount

13 US Sears Department, mail order, 3,637.2

Specialty

14 US Safeway, Inc. Supermarket 3,555.3

15 US Albertsons Convenience, Drug, 3,543.6

Supermarket

e= estimate.

Indian Scenario
Retailing in India is the largest employer after agriculture. It employs almost 7% of the total work force
in India and has a contribution of 14% to the national GDP. In the year 2004 , the size of Indian
organized retail industry was Rs 28000 Crore, which was only 3% of the total retailing market.
Organized retailing is projected to grow at the rate of 25%-30% p.a. and is estimated to reach an
astounding Rs 1,00,000 Crore by 2010. The contribution of organized retail is expected to rise from 3%
to 9% by the end of the decade. The projection for the year 2005 is Rs 35000 Crore.
Though with a population of a billion and a middle class of 300 million (upper middle class= 40, Middle
class =150 & lower middle class = 110), organized retailing is still at its infancy in India. The great
Indian middle class is estimated to grow to over 60 Crore by 2010 making India one of the largest
consumer markets of the world. It is projected that by the year 2010, 65% of the Indian population will
be in the age group of 10-49 years, which makes the scenario even more attractive. India has the
largest retail network with 1.2 Crore outlets but only 4% of them are larger than 500 sq. feet in size.
USA on the other hand has 9 Lakh outlets catering to more than 13 times the total retail market size of
India. Thus India has the highest number of outlets per capita in the world with a widely spread retail
network but with the lowest per capita retail space (@ 2 sq.ft. per person). AT Kearney has ranked
India as the 2nd most attractive retail market after Russia, in its Global Retail Development Index
2004 report.
Retailing, one of the largest sectors in the global economy, is going through a transition phase in India.
For a long time, the corner grocery store was the only choice available to the consumer, especially in
the urban areas. This is slowly giving way to international formats of retailing.
Let us look at the evolution process:

Detailing reasons why Indian organized retail is at the brink of revolution, the IMAGES-KSA report says
that the last few years have seen rapid transformation in many areas and the setting of scalable and
profitable retail models across categories. Indian consumers are rapidly evolving and accepting modern
formats overwhelmingly. Retail Space is no more a constraint for growth. India is on the radar of
Global Retailers and suppliers / brands worldwide are willing to partner with retailers here. Further,
large Indian corporate groups like Tata, Reliance, Raheja, ITC, Bombay Dyeing, Murugappa & Piramal
Groups etc and also foreign investors and private equity players are firming up plans to identify
investment opportunities in the Indian retail sector. The quantum of investments is likely to skyrocket
as the inherent attractiveness of the segment lures more and more investors to earn large profits.
Investments into the sector are estimated at INR 2000 - 2500 Crore in the next 2-3 years, and over
INR 20,000 Crore by end of 2010.
Few of India's top retailers are:
1. Big Bazaar-Pantaloons: Big Bazaar, a division of Pantaloon Retail (India) Ltd is already India's
biggest retailer. In the year 2003-04, it had revenue of Rs 658.31 crores & by 2010; it is targeting
revenue of Rs 8,800 Crore.

2. Food World : Food World in India is an alliance between the RPG group in India with Dairy Farm
International of the Jardine Matheson Group.

3. Trinethra : It is a supermarket chain that has predominant presence in the southern state of
Andhra Pradesh. Their turnover was Rs 78.8 Crore for the year 2002-03.

4. Apna Bazaar : It is a Rs 140-crore consumer co-operative society with a customer base of over 12
lakh, plans to cater to an upwardly mobile urban population.

5. Margin Free : It is a Kerala based discount store, which is uniformly spread across 240 Margin Free
franchisees in Kerala, Tamil Nadu and Karnataka.
Wholesale trading is another area, which has potential for rapid growth. German giant Metro
AG and South African Shoprite Holdings have already made headway in this segment by setting up
stores selling merchandise on a wholesale basis in Bangalore and Mumbai respectively. These new-
format cash-and-carry stores attract large volumes from a sizeable number of retailers who do not
have to maintain relationships with multiple suppliers for all their needs.
SWOT Analysis

A SWOT analysis of the Indian organized retail industry is presented below:

Strength:
1. Retailing is a " technology-intensive" industry. It is technology that will help the organized
retailers to score over the unorganized retailers. Successful organized retailers today work closely with
their vendors to predict consumer demand, shorten lead times, reduce inventory holding and ultimately
save cost. Example: Wal-Mart pioneered the concept of building competitive advantage
through distribution & information systems in the retailing industry. They introduced two
innovative logistics techniques – cross-docking and EDI (electronic data interchange).

2. On an average a super market stocks up to 5000 SKU's against a few hundreds stocked with an
average unorganized retailer.

Weakness
1. Less Conversion level : Despite high footfalls, the conversion ratio has been very low in the retail
outlets in a mall as compared to the standalone counter parts. It is seen that actual conversions of
footfall into sales for a mall outlet is approximately 20-25%. On the other hand, a high street store of
retail chain has an average conversion of about 50-60%. As a result, a stand-alone store has a ROI
(return on investment) of 25-30%; in contrast the retail majors are experiencing a ROI of 8-10%.

2. Customer Loyalty: Retail chains are yet to settle down with the proper merchandise mix for the
mall outlets. Since the stand-alone outlets were established long time back, so they have stabilized in
terms of footfalls & merchandise mix and thus have a higher customer loyalty base.

Opportunity

1. The Indian middle class is already 30 Crore & is projected to grow to over 60 Crore by 2010
making India one of the largest consumer markets of the world. The IMAGES-KSA projections indicate
that by 2015, India will have over 55 Crore people under the age of 20 - reflecting the enormous
opportunities possible in the kids and teens retailing segment.

2. Organized retail is only 3% of the total retailing market in India. It is estimated to grow at the rate
of 25-30% p.a. and reach INR 1,00,000 Crore by 2010.

3. Percolating down : In India it has been found out that the top 6 cities contribute for 66% of total
organized retailing. While the metros have already been exploited, the focus has now been shifted
towards the tier-II cities. The 'retail boom', 85% of which has so far been concentrated in the metros is
beginning to percolate down to these smaller cities and towns. The contribution of these tier-II cities to
total organized retailing sales is expected to grow to 20-25%.

4. Rural Retailing: India's huge rural population has caught the eye of the retailers looking for new
areas of growth. ITC launched India's first rural mall "Chaupal Saga" offering a diverse range of
products from FMCG to electronic goods to automobiles, attempting to provide farmers a one-stop
destination for all their needs." Hariyali Bazar" is started by DCM Sriram group which provides farm
related inputs & services. The Godrej group has launched the concept of 'agri-stores' named "Adhaar"
which offers agricultural products such as fertilizers & animal feed along with the required knowledge
for effective use of the same to the farmers. Pepsi on the other hand is experimenting with the farmers
of Punjab for growing the right quality of tomato for its tomato purees & pastes.
Threat

1. If the unorganized retailers are put together, they are parallel to a large supermarket with no or
little overheads, high degree of flexibility in merchandise, display, prices and turnover.

2. Shopping Culture: Shopping culture has not developed in India as yet. Even now malls are just a
place to hang around with family and friends and largely confined to window-shopping.

Conclusion
To conclude, it can be said that though the global retail industry has reached its maturity, the Indian
retail industry is still at its infancy. But with the huge potentiality existing in the Indian market, it is
expected to grow in leaps and bounds in the near future.
Instead of comparing the total global retail industry with the Indian retail industry, lets compare Wal-
Mart alone with the Indian retail industry & put forward few interesting facts:
1. Retail Sales of Wal-Mart for the year 2003 was US $ 25,632.9 Crore; higher than the size of Indian
retail industry.

2. The size of any Wal-Mart store is much higher than the size of any existing shopping mall in India.

3. Wal-Mart has over 4,800 stores, which is unparallel to any of the India's large format store.

4. New stores opened annually by Wal-Mart are about 420, much higher than all organized Indian
retailers put together.

5. The sales per hour of $2.2 Crore are incomparable to any retailer in the world.

6. Wal-Mart has around 30,000 suppliers throughout the world and more than 600,000 SKU's on its
web site, a number that cannot be compared.

7. Daily customers are about 1.57 Crore (almost equivalent to Mumbai's entire population).

8. Time between each Barbie Sale at Wal-Mart is just two seconds (same rate at which babies are
produced in India!)
Overall, it can be said that " Retail Industry" in India will emerge as one of the best 5 Business sectors
in this decade.
Glossary
Specialty Store: Narrow product line with deep assortment, viz apparel stores, book stores etc. A
clothing store would be a single line store, men's clothing store would be limited line store & men's
custom-shirt store would be a super specialty store.
Example: The limited, The Body Shop.
Departmental Store: Several product lines-typically clothing, household goods, home furnishings-
with each line operated as a separate department managed by specialist buyers or merchandisers.
Example: Sears, Bloomingdale's.
Supermarkets: Relatively large, low-cost, low-margin, high volume, self-service operation designed to
serve total needs for food, laundry & household maintenance products.
Example: Kroger, Safeway.
Convenience Stores: Relatively small store located near residential area, open long hours, seven
days a week and carrying a limited line of high-turnover convenience products at slightly higher prices.
Example: 7-Eleven, Circle K.
Discount Store: Standard merchandise sold at lower prices with lower margins and higher volumes.
True discount stores regularly sell merchandise at lower prices and offer mostly national brands.
Example: Wal-Mart, Kmart.
Off-price retailer: Merchandise bought at less than regular wholesale prices & sold at less than retail;
often-leftover goods, overruns and irregulars obtained at reduced prices from manufacturers or other
retailers.
Factory outlets are owned and operated by manufacturers and normally carry the manufacturer's
surplus, discontinued or irregular goods.
Example: Mikasa(dinnerware), Dexter (shoes)
Independent off-price retailers are owned & run by entrepreneurs or by divisions of larger retail
corporations.
Example: T.J.Maxx, Filene's Basement.
Warehouse clubs (or wholesale clubs) sell a limited selection of brand name grocery items, appliances,
clothing and other goods sold at deep discounts to members who pay an annual membership fees.
Warehouse clubs serve small businesses & group members from government agencies, nonprofit
organizations and some large corporations. They operate in huge, low-overhead, warehouse like
facilities & offer few frills.They offer rock bottom prices- typically 20% to 40% below super market and
discount stores prices but make no home deliveries and accept no credit cards.
Example: Sam's Clubs, Max Clubs.
Superstore: Averages 35,000 square feet of selling space traditionally aimed at meeting consumers'
total needs for routinely purchased food and non food items. Usually offer services such as laundry, dry
cleaning, shoe repair, check cashing & bill paying.
A new group called "category killers" carries a deep assortment in a particular category & a
knowledgeable staff.
Example: Borders books & Music, IKEA.
Combination stores are a diversification of the supermarket store into the growing drug-and-
prescription field. Combination food & drug stores average 55,000 square feet of selling space.
Example: Jewel & Osco stores.
Hypermarkets range between 80,000 and 220,000 square feet and combine supermarket, discount &
warehouse retailing principles. Product assortment goes beyond routinely purchased goods & includes
furniture, large & small appliances, clothing items and many other items. Bulk display & minimum
handling by store personnel with discounts offered to customers who are willing to carry heavy
appliances and furniture out of the store. Hypermarkets originated in France.
Example: Carrefour and Casino (France), Pyrca, Continente and Alcampo (Spain), Meijer's
(Netherlands).

Tamoghna DasSharma
Student
Globsyn Business School

Source : E-mail October 10, 2006

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 Overview of Indian Retail Sector
Retail Sector is the most booming sector in the Indian economy. Some of the biggest players of the
world are going to enter the industry soon. It is on the threshold of bringing the next big revolution
after the IT sector. Although organized retail market is not so strong as of now, it is expected to grow
manifolds by the year 2010. The sector contributes 10% of the GDP, and is estimated to show 20%
annual growth rate by the end of the decade as against the current growth rate of 8.5%. A CRISIL
report says that the Indian retail market is the most fragmented in the world and that only 2% of the
entire retailing business is in the organized sector. This suggests that the potential for growth is
immense. There are about 300 new malls, 1500 supermarkets and 325 departmental stores currently
being built in the cities across India.

Estimates and predictions for retail sector:

• At present, the industry is estimated to be at more than US$ 400 billion by a study of
McKinsey.

• The Economist Intelligence Unit (EIU) estimates the retail market in India will increase to
US$608.9 billion in 2009 from US$394 billion in 2005.

• KPMG Report says that the organized retail would grow at a higher rate than the GDP in the
next five years.

• The retail sector would generate employment for more than 2.5 million people by the year
2010, predicts an analysis by Ma Foi Management Consultants Ltd.

Some of the players present in the industry:

Archies, Bata India Ltd, Big Bazaar, Crossword, Ebony Retail Holdings Ltd., Fabmall, Food Bazaar,
Globus Stores Pvt. Ltd., Health and Glow, Liberty Shoes Ltd., MTR Foods Ltd., Music World
Entertainment Ltd., Pantaloon Retail India Ltd., Shoppers Stop, Style SPA Furniture Ltd, Subhiksha,
Titan Industries, Lifestyle, etc.

New entrants entering the market soon will be Reliance Retail Ltd, Wal-Mart Stores, Carrefour, Tesco,
Boots Group, etc.

Evolution of the Sector

Weekly Markets, Village and Rural Melas

 Source of entertainment
 Rural and historic reach

Convenience stores, Mom-and-pop / Kirana shops

 Neighborhood stores/convenience
 Traditional and pervasive reach
PDS outlets, Khadi stores, Cooperatives

 Government supported
 Availability/low costs/distribution

Exclusive Brand outlets, Hypermarkets and Supermarkets, Department stores and

Shopping malls.

 Shopping experience/ efficiency

 Modern formats/ international

Modern Format retailers

Supermarkets
Hypermarkets
Department Stores
Specialty Chains
Company Owned Company Operated

Traditional Format Retailers

Kiranas: Traditional Mom and Pop Stores

Kiosks
Street Markets
Exclusive /Multiple Brand Outlets

Traditional vis a vis Modern Format Retailers

The retail boom will face a strong competition from the 12 million mom-and-pop stores. These are
easily accessible and provide services like free home delivery and goods at credit, which is not possible
with hypermarkets and supermarkets. Buying from Malls, Supermarkets and Department stores like
Subhiksha, Marks & Spencers, etc. provide a different environment where one can pick and choose
from a variety of products. Owing to the entry of such big players, the small shopkeepers fear losing
their business. Reliance Retail Ltd. has been inviting such people to join in its Dairy business as
franchisees.

Challenges
The Indian Retail sector is constantly shakened with cut throat competition. It is also facing challenges
in the form of shortages for management professionals, cash flow, supply chain management and
frauds.

International retailers
There has been greater influence of brands like Walmart, Tommy Hilfiger, Carrefour, Marks & Spencer,
Nike, etc in the big cities of India for long

Booming Retail Sector in India

“Booming Retail Sector in India” helps the client to analyze the opportunities and factors that will
make the Indian retail industry a success.

New Delhi, New Delhi, October 31, 2009 /India PRwire/ -- India is one of the most attractive
destinations for retailers from all across the globe. Thanks to the entry of corporate, changing
consumer behavior & lifestyle, increasing influence of western culture and rising income, the Indian
retail industry has seen phenomenal growth in the last five years (2001-2006) and organized retailing
has finally emerged from the shadows of unorganized retailing and is contributing significantly to the
growth of the overall retail sector, according to "Booming Retail Sector in India”, a new market
research report by RNCOS. The research report helps the client to analyze the opportunities and
factors that will make the Indian retail industry a success.

Key Findings

- Organized retail market in India is expected to reach US$ 50 Billion mark by 2011.

- Number of shopping malls is expected to increase at a CAGR of more than 18.9% from 2007 to
2015.

- Rural market is projected to dominate the retail industry landscape in India by 2012 with total market
share of above 50%.

- Organized retailing of mobile handset and accessories is expected to reach close to Rs. 5000 Crore
by 2010.

- Driven by the expanding retail market, third party logistic market is forecasted to reach US$ 20
Billion by 2011.

- Apparel, along with food and grocery, will lead the organized retailing in India.
Key Issues Analyzed

- What is the market size and scope of the retail industry in India?

- What are the current market trends?

- What are the growth prospects and issues related to the industry?

- What is the segment-wise size of the organized market and what are the growth prospects of the
market?

- What are the opportunities and challenges faced by the industry?

- Who are the major players in the Indian retail industry and what are the latest developments?

Key Players Analyzed

This section covers the key players currently operating in the Indian retail industry, including
Subhiksha, Reliance Retail Ltd, Pantaloon Retail (India) Ltd., etc.

Research Methodology Used

Information Sources

Information has been sourced from books, newspapers, trade journals, and white papers, industry
portals, government agencies, trade associations, monitoring industry news and developments, and
through access to more than 3000 paid databases.

Analysis Method

The analysis methods include ratio analysis, historical trend analysis, linear regression analysis using
software tools, judgmental forecasting and cause and effect analysis.

For FREE SAMPLE of this report visit: http://www.rncos.com/Report/IM112.htm

Notes to Editor

About RNCOS:

RNCOS, incorporated in the year 2002, is an industry research firm. We are a team of industry
experts who analyze data collected from credible sources. We provide industry insights and analysis
that helps corporations to take timely and accurate business decision in today's globally competitive
environment.
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An analysis of the Indian Retail sector

Tarannum M Sarwar
October 11, 2006
Nifty and S
1. An Overview of the Retail sector:
The Indian retail sector is highly fragmented with 97% of its business being run by the
unorganized retailers like the traditional family run stores and corner stores. The organized retail Bulls &
however is at a very nascent stage though attempts are being made to increase its proportion to Honey
9-10% by the year 2010 bringing in a huge opportunity for prospective new players 1. The sector Money
is the largest source of employment after agriculture, and has deep penetration into rural India
generating more than 10% of India's GDP 2.

Fe

Send us a M
Tell Your Fr

Source: Ernst &Young, The Great Indian Retail Story, 2006.

A look at the statistics shows that the retail sector in India is worth USD 394 billion and is
growing at the rate of 30% annually. An ICRIER study has found that retailing ($180 billion)
contributes to 10 per cent of GDP and employs 7 per cent (21 million) of the workforce 3.
According to AT Kearney, India is given the top ranking as the next foreign investment
destination, as markets like China become increasingly saturated 4. India is the 4th largest
economy as regards GDP (in PPP terms) and is expected to rank 3rd by 2010 just behind US and
China1. Over the past few years, the retail sales in India are hovering around 33-35% of GDP as
compared to around 20% in the US. The table gives the picture of India's retail trade as
compared to the US and China.

Source: Economist, Let gradualism guide FDI in retail, 2006.

The last few years witnessed immense growth by this sector, the key drivers being changing
consumer profile and demographics, increase in the number of international brands available in
the Indian market, economic implications of the government increasing urbanization, credit
availability, improvement in the infrastructure, increasing investments in technology and real
estate building a world class shopping environment for the consumers 4. In order to keep pace
with the increasing demand, there has been a hectic activity in terms of entry of international
labels, expansion plans, and focus on technology, operations and processes. This has lead to
more complex relationships involving suppliers, third party distributors and retailers, which can be
dealt with the help of an efficient supply chain. A proper supply chain will help meet the
competition head-on, manage stock availability; supplier relations, new value-added services,
cost cutting and most importantly reduce the wastage levels in fresh produce 5.
Large Indian players like Reliance, Ambanis, K Rahejas, Bharti AirTel, ITC and many others are
making significant investments in this sector leading to emergence of big retailers who can
bargain with suppliers to reap economies of scale. Hence, discounting is becoming an accepted
practice. Proper infrastructure is a pre-requisite in retailing, which would help to modernize India
and facilitate rapid economic growth. This would help in efficient delivery of goods and value-
added services to the consumer making a higher contribution to the GDP.
International retailers see India as the last retailing frontier left as the China's retail sector is
becoming saturated. However, the Indian Government restrictions on the FDI are creating ripples
among the international players like Walmart, Tesco and many other retail giants struggling to
enter Indian markets. As of now the government has allowed only 51% FDI in the sector to `one-
brand' shops like Nike, Reebok etc. However, other international players are taking alternative
routes to enter the Indian retail market indirectly via strategic licensing agreement, franchisee
agreement and cash and carry wholesale trading (since 100% FDI is allowed in wholesale
trading).
2. How has the Indian consumer changed over the years?
In the past few years the whole concept of shopping has been altered in terms of format and
consumer buying behavior. With the increasing urbanization, the Indian consumer is emerging as
more trend-conscious. There has also been a shift from price considerations to designs and
quality as there is a greater focus on looking and feeling good (apparel as well as fitness). At the
same time, the Indian consumer is not beguiled by retail products which are high on price but
commensurately low on value or functionality. However, it can be said that the Indian consumer
is a paradox, where the discount shopper loyalty takes a backseat over price discounts 6.
Indians have grown richer and thus spending more on vehicles, phones and eating out in
restaurants. The spending is focused more outside the homes, unlike in other Asian countries
where consumers have tended to spend more on personal items as they grow richer 7. Spending
on luxury goods have increased twice as fast with 2/3 of India's population is under 35, consumer
demand is clearly growing. The mall mania has bought in a whole new breed of modern retail
formats across the country catering to every need of the value-seeking Indian consumer. An
average Indian would see a mall as a perfect weekend getaway with family offering them
entertainment, leisure, food, shopping all under one roof.

Source: Ernst & Young, The Great Indian Retail Story, 2006.
Indian consumer is also witnessing some changes in its demographics with a large working
population being under the age group of 24-35, there has been an increasing number of nuclear
families, increase in working women population and emerging opportunities in the service sector
during the past few years which has been the key growth driver of the organized retail sector in
India. The emergence of a larger middle and upper middle classes and the substantial increase in
their disposable income has changed the nature of shopping in India from need based to lifestyle
dictated. The self-employed segment has replaced the employed salaried segment as the
mainstream market, thus resulting in an increasing consumption of productivity goods, especially
mobile phones and 2 - 4 wheeler vehicles. There is also an easier acceptance of luxury and an
increased willingness to experiment with the mainstream fashion, reuslting in an increased
willingness towards disposability and casting out from apparels to cars to mobile phones to
consumer durables. Indians spend over USD 30,000 a year (in PPP terms) on conspicuous
consumption that represents 2.8% of the entire population (which is approx 30 million people)
making it the 4th largest economy in PPP terms next only to USA, Japan and China 1.
With reference to the map of India's income class, it can be noticed that the real driver of the
Indian retail sector is the bottom 80% of the first layer and the upper half of the second layer of
the income map. This segment of about 40 million households earns USD 4,000-10,000 per
household and comprises salaried employees and self-employed professionals and is expected to
grow to 65 million households by 2010 1. In addition to this, facilities like credit friendliness,
availability of cheap finance and a drop in interest rates have changed consumer markets. Capital
expenditure (jewelry, homes, and cars) has shifted to becoming redefined as consumer revenue
expenditure, in addition to consumer durables and loan credit purchases.
3. FDI in retail:
Global retailers have already been sourcing from India; the opening up of the retail sector to the
FDI has been fraught with political challenges. With politicians arguing that the global retailers will
put thousands of small local players and fledging domestic chains out of business.
The only opening in the retail sector so far has been to allow 51% foreign stakes in single brand
consumer stores, private labels, high tech items/ items requiring specialized after sales service,
medical and diagnostic items and items sourced from Indian small sector (manufactured with
technology provided by the foreign collaborations). Parties supporting the FDI suggest that the
FDI in retail should be opened in a gradual/ phased manner, such that it can promote competition
and contribute to the growth of the Indian economy. The impact of the FDI would benefit the end
user of the consumer to a great extent and will help to generate a decent amount of employment
as more and more entrepreneurs would be coming forward to invest and taste the new generation
in retail marketing. The opening of FDI should be designed in such a way that many sectors -
including agriculture, food processing, manufacturing, packaging and logistics would reap
benefits. The table below lists the pros and cons of allowing FDI into retail.

Benefits of FDI in retail Drawbacks of FDI in retail

Inflow of investment and funds. Would give rise to cut-throat competition rather than
promoting incremental business.
Improvement in the quality of employment.
Promoting cartels and creating monopoly.
Generating more employment.
Increase in the real estate prices.
Increased local sourcing.
Marginalize domestic entrepreneurs.
Provide better value to end consumers.
The financial strength of foreign players would displace the
Investments and improvement in the supply chains and
unorganized players.
warehousing.
Absence of proper regulatory guidelines would induce
Franchising opportunities for local entrepreneurs.
unfair trade practices like Predatory pricing.
Growth of infrastructure.
Increased efficiency.
Cost reduction.
Implementation of IT in retail.
Stimulate infant industries and other supporting
industries.
Thus it can be said that this investment boom could change the face of Indian retail by offering
quality goods at lower prices to the consumers. In addition to this, the presence of global retailers
will further enhance exports from India as they would also source Indian goods for their
international outlets in a big way leading to a remarkable increase in Indian exports.
4. Segment analysis:
The structure of Indian retail is developing rapidly with shopping malls becoming increasingly
common in the large cities and development plans being projected at 150 new shopping malls by
2008. However, the traditional formats like hawkers, grocers and tobacconist shops continue to
co-exist with the modern formats of retailing. Modern retailing has helped the companies to
increase the consumption of their products for example: Indian consumers would normally
consume the rice sold at the nearby kiranas viz. Kolam for daily use. With the introduction of
organized retail, it has been noticed that the sale of Basmati rice has gone up by four times than
it was a few years back; as a superior quality rice (Basmati) is now available at almost the same
price as the normal rice at a local kirana. Thus, the way a product is displayed and promoted
influences its sales. If the consumption continues to grow this way it can be said that the local
market would go through a metamorphoses of a change and the local stores would soon become
the things of the past or restricted to last minute unplanned buying.
4.1 Food and grocery retail:
The food business in India is largely unorganized adding up to barely Rs. 40,000 crore, with other
large players adding another 50% to that. The All India food consumption is close to Rs. 900,000
crore, with the total urban consumption being around Rs.330,000 crore. This means that
aggregate revenues of large food players is currently only 5% of the total Indian market, and
around 15-20% of total urban food consumption. Most food is sold in the local `wet' market,
vendors, roadside push cart sellers or tiny kirana stores. According to McKinsey report, the share
of an Indian household's spending on food is one of the highest in the world, with 48% of income
being spent on food and beverages.
4.2 Apparel retail:
The ready-mades and western outfits are growing at 40-45% annually, as the market teems up
with international brands and new entrants entering this segment creating an Rs.500 crore
market for the premium grooming segment. The past few years has seen the sector aligning itself
with global trends with retailing companies like Shoppers' stop and Crossroads entering the fray
to entice the middle class. However, it is estimated that this segment would grow to Rs. 300 crore
in the next three years.
4.3 Gems and Jewellery retail:
The gems and jewellery market is the key emerging area, accounting for a high proportion of
retail spends. India is the largest consumer of gold in the world with an estimated annual
consumption of 1000 tonnes, considering actual imports and recycled gold. The market for
jewellery is estimated as upwards of Rs. 65,000 crores 9.
4.4 Pharma retail:
The pharma retailing is estimated at about Rs. 30,000 crore, with 15% of the 51 lakh retail stores
in India being chemists. According to Vikas Bali, Principal, A.T. Kearney (India) Ltd, "Pharma
retailing will follow the trend of becoming more organised and corporatised as is seen in other
retailing formats (food, apparel etc)". A few corporates who have already forayed into this
segment include Dr Morepen (with Lifespring and soon to be launched Tango), Medicine Shoppe,
Apollo pharmacies, 98.4 from Global Healthline Pvt Ltd, and the recently launched CRS Health
from SAK Industries. In the south, RPG group's Health & Glow is already in this category, though
it is not a pure play pharma retailer but more in the health and beauty care business 10.
4.5 Music Retail:
The size of the Indian music industry, as per this Images-KSA Study, is estimated at Rs.1100
crore of which about 36 percent is consumed by the pirated market and organized music retailing
 11
constitutes about 14 percent, equivalent to Rs.150 crore .
4.6 Book retail:
The book industry is estimated at over Rs. 3,000 crore out of which organized retail accounts for
only 7% (at Rs.210 crore). This segment is seen to be emerging with text and curriculum books
accounting to about 50% of the total sales. The gifting habit in India is catching on fast with
books enjoying a significant share, thus expecting this sector to grow by 15% annually 11.
4.7 Consumer durables retail:
The consumer durables market can be stratified into consumer electronics comprising of TV sets,
audio systems, VCD players and others; and appliances like washing machines, microwave ovens,
air conditioners (A/Cs). The existing size of this sector stands at an estimated USD 4.5 Billion with
organized retailing being at 5% 12.

Source: E&Y, The Great Indian Retail Story, 2006.

As noticed in the figure above, the organized retail penetration (ORP) is the highest in footwear
with 22% followed by clothing. Though food and grocery account for largest share of retail spend
by the consumer at about 76%, only 1% of this market is in the organized sector. However, it has
been estimated that this segment would multiply five times taking the share of the organized
market to 30 percent in the coming years 1.
5. Industry analysis of the Indian retail sector:
Modern retailing has entered India in form of sprawling malls and huge complexes offering
shopping, entertainment, leisure to the consumer as the retailers experiment with a variety of
formats, from discount stores to supermarkets to hypermarkets to specialty chains. However,
kiranas still continue to score over modern formats primarily due to the convenience factor.
Source: IT Retailing: Are You In The Loop?, July 16, 2006.
The organized segment typically comprises of a large number of retailers, greater enforcement of
taxation mechanisms and better labour law monitoring system. It's no longer about just stocking
and selling but about efficient supply chain management, developing vendor relationship quality
customer service, efficient merchandising and timely promotional campaigns. The modern retail
formats are encouraging development of well-established and efficient supply chains in each
segment ensuring efficient movement of goods from farms to kitchens, which will result in huge
savings for the farmers as well as for the nation. The government also stands to gain through
more efficient collection of tax revenues. Along with the modern retail formats, the non-store
retailing channels are also witnessing action with HLL initiating Sangam Direct, a direct to home
service. Network marketing has been growing quite fast and has a few large players today. Gas
stations are seeing action in the form of convenience stores, ATMs, food courts and pharmacies
appearing in many outlets.
In the coming years it can be said that the hypermarket route will emerge as the most preferred
format for international retailers stepping into the country. At present, there are 50 hypermarkets
operated by four to five large retailers spread across 67 cities catering to a population of half-a-
million or more. Estimates indicate that this sector will have the potential to absorb many more
hypermarkets in the next four to five years 1.
List of retailers that have come with new formats:

Retailer Current Format New Formats. Experimenting With

Shoppers' Stop Department Quasi-mall

Store

Ebony Department Quasi-mall, smaller outlets, adding food retail

Store

Crossword Large bookstore Corner shops

Piramyd Department Quasi-mall, food retail

Store

Pantaloon Own brand store Hypermarket

Subhiksha Supermarket Considering moving to self service

 Vitan Supermarket Suburban discount store

Foodworld Food Hypermarket, Foodworld express

supermarket

Globus Department Small fashion stores

Store

Bombay Bazaar Aggregation of Kiranas

Efoodmart Aggregation of Kiranas

Metro Cash and carry

S Kumar's Discount store

Traditionally, the small store (kirana) retailing has been one of the easiest ways to generate self-
employment, as it requires minimum investments in terms of land, labour and capital. These
stores are not affected by the modern retailing as it is still considered very convenient to shop. In
order to keep pace with the modern formats, kiranas have now started providing more value-
added services like stocking ready to cook vegetables and other fresh produce. They also provide
services like credit, phone service, home delivery etc.
The organized retailing has helped in promoting several niche categories such as packaged fruit
juices, hair creams, fabric bleaches, shower gels, depilatory products and convenience and health
foods, which are generally not found in the local kirana stores. Looking at the vast opportunity in
this sector, big players like Reliance and K Rahejas has announced its plans to become the
country's largest modern retainers by establishing a chain of stores across all major cities.

Apart from metro cities, several small towns like Nagpur, Nasik, Ahmedabad, Aurangabad,
Sholapur, Kolhapur and Amravati as witnessing the expansion of modern retails. Small towns in
Maharashtra are emerging as retail hubs for large chain stores like Pantaloon Retail because
many small cities like Nagpur have a student population, lower real estate costs, fewer power
cuts and lower levels of attrition. However, retailers need to adjust their product mix for smaller
cities, as they tend to be more conservative than the metros.
In order for the market to grow in modern retail, it is necessary that steps are taken for rewriting
laws, restructuring the tax regime, accessing and developing new skills and investing significantly
in India.
6. Business analysis of the Indian retail sector:
The size of modern retail is about US$ 8 Billion and has grown by 35% CAGR in last five
years. 14 (KSA Technopak, June 2006). In modern retailing, a key strategic choice is the format;
retailers are coming up with various innovative formats to provide an edge to retailers.
Most attractive developing markets for retail by region according to AT Kearney Study:
Percentage of markets that are `on the radar' and `to consider':
Source: AT Kearney, GRDI 2006.
A look at the graph above shows that the Asian markets are considered attractive for retail as per
the AT Kearney's report; India is being placed on the radar by the USA and UK. Global giants like
Tesco and Walmart are experimenting with various options to enter India. One possibility for
Walmart would be to open Sam's club wholesale business through a joint venture and sell strictly
to other retailers. This strategy skirts the issue of not being able to sell directly to customers and
establish a strong presence in the local market. On the other hand, Tesco is planning to get into a
partnership with Home Care Retail Mart Pvt. Ltd expecting to open 50 stores by 2010 4. The
government is taking gradual steps in allowing the FDI into Indian retail, when it takes the final
steps the peak time will quickly pass giving the existing players a distinct edge.
6.1 Merger and acquisition activity:
India witnessed a record number of M&A deals in the first half of 2006, which were collectively
worth USD 25.6 billion. A significant number of deals have being carried out in the Indian retail
sector in the past few months in order to acquire a larger share in the growing domestic market
and to compete against the prospective global and domestic players. 13 The table below shows
some recent deals that have taken place in the Indian retail sector:

Acquired/ JV Company/ Nature of Stak Consideration

Year Acquirer
Target Business e (US$ million)

Retail 51
2005 Liberty Shoes Future group 3
(Footwear) %

Retail 68
2005 Indus - League Clothing Future group 5
clothing %

Leisure
retail chain
Deccan Chronicle 100
2005 Odyssey India (books, 14
Holdings %
music,
toys)

Books,
74
2005 Landmark Tata Trent music, 24
%
accessories

2006 Bistro Hospitality TGI Friday's (a Restaurant 25 N/A

subsidiary of (Food %
Carlson retail)
Restaurant
 World-wide)

Lingerie
and 50
Indus League clothing Etam group,
2006 women's % 8
(Future group company) France
wear (JV)
retailing

Source: PricewaterhouseCoppers, Asia-Pacific M&A bulletin, Mid year 2006.

6.2 Business models for entry in Indian markets:
Due to the FDI restrictions the international players are looking for alternative avenues to enter
the Indian markets. The chart below shows the current formats permitted by the Government of
India for the international players.

Source: Ernst & Young, The great Indian Retail Story, 2006.
7. Employment opportunities in this sector:
The Indian retail sector offers an economic opportunity on a massive scale both as a global base
and a domestic market. This sector yields many positive results like generating more jobs and
bringing numerous goods to the consumers at reasonable prices. According to Ernst &Young's
report `The Great Indian Retail Story' this sector is expected to create 2 million jobs by 2010.
About 4 crore people are employed in retail trade, assuming each person supports a family of 5,
this, implies that about 20 crore people are dependent on this sector. For a vast majority of the
households, retailing is a euphemism for a marginal existence. Modern retail formats have
generated huge employment for the young and even senior citizens and women wanting to work
part-time (even in small towns). People have greater exposure to the technical aspects, training
and also earn higher salaries along with bonuses and incentives. With foreign companies opening
expanding in India, employees are being re-trained according to international standards and
practices that are being bought in. There is also an increase in the number of retail management
programmes and institutes. This will bridge the gap in availability of talented professionals at the
middle and lower levels. Successful Indian retailers are creating a robust second and third level of
management by hiring aggressively for these key roles. Talented professionals will put increased
pressure on wage costs. Therefore operating margins, especially for mid-sized retailers, are
becoming a poaching ground for international retailers once they enter India.
With private companies getting into retail, there are people employed from diverse cultures (no
room for reservations unlike government owned stores) where there is a sense of unity in
diversity. The companies are also employing people who are physically handicapped. The next
few years are expected will see the sector offering new jobs to 50,000 young graduates and
diploma holders.
8. What makes foreign firms come to India?
A host of traditional `brick and mortar' companies such a Tatas have entered the retail business.
With demographic changes like rising disposable incomes and rapidly expanding middle class, the
Indian retail sector is at an inflexion point where the growth in consumption and growth of
organized retailing are taking it towards higher growth. Market liberalization and an increasingly
assertive consumer population have attracted bigger Indian and multinational operations to make
investments, but are yet to achieve success or reach break even.
The Indian consumption pattern and preference have undergone vast changes over the years
allowing the foreign retailers to play with the psyche of the brand conscious modern Indian, who
has no qualms spending a fortune on overhauling his wardrobe. This led to the entry of up-
market brands like Nautica and New Balance into the country to cash in on this opportunity.
India has the youngest population in the world, with large population between 20-34 age groups
in the urban regions boosting the demand. All these factors have tempted the foreign firms such
as Walmart, Tesco and Carrefour to enter India. India is now firmly placed on the US and UK
radars as US retailers are gradually realizing the potential of the retail and consumer goods
sector. The timing is the most important source of competitive advantage for global and regional
retailers in the globalization race. Knowing when to enter emerging retail markets is the key to
success.
AT Kearney's study on global retailing trends found that India is the least competitive as well as
least saturated of all major global markets. This implies that there are significantly low entry
barriers for players trying to setup base here, in terms of the competitive landscape. The report
further stated that global retailers such as Walmart, Carrefour, Tesco and Casino would take
advantage of the more favourable FDI rules that are likely in India and enter the country through
partnerships with local retailers. Other retailers such as Marks & Spencer and the Benetton Group,
who operate through a franchisee model, would most likely switch to a hybrid ownership
structure.
However, in order to achieve breakthrough growth the global retailers might have to face some
glitches in India. High taxes, poor infrastructure, bureaucratic hurdles and high cost of real estate
are some of the challenges that overseas retailers may have to tackle in the country.
9. IT and latest development:
Technology has played a key role in retailers' efforts to compete in this volatile market. With e-
tailing channels making its presence felt in India companies are using either their own web portal
or are tying up with horizontal players like Rediff.com and Indiatimes.com to offer their products
on the web 15 (www.alexa.com). IT has been used by retailers ranging from Amazon.com to eBay,
in order to radically change the buying behavior across the globe 16.
Retailers worldwide are looking forward to increase their IT spending by almost 15% in 2006,
allocating almost half of this increase to application software with a particular focus on tools that
facilitate multi-channel customer relationships, point of sale systems, strategic merchandising and
supply chain management 17. The last 2-3 years have seen several retailers ranging from F&B
operations to discount clothing implementing supply chain management (SCM) solutions to
improve core business processes such as global sourcing, distribution, logistics, innovations,
transparency and visibility in financials and inventory, compliance and management of point of
sale (POS) data. However, organized retailers have not taken well to the concept of 3PL (third
party logistics) due to their apprehensions of losing control over the supply chain. Currently, the
transportation is carried out partly by organized service providers and partly by truckers and local
transporters.
In conclusion, it can be said that in order to deliver the levels of quality and service that
consumers are demanding; the organized retailers are in a pressing need for a single enterprise
wide IT platform to manage operations, which will become increasingly complex once the market
expands.
10. A look at the rural retailing:
More than half of retail market in India is in the rural areas (55%); although share of urban
market is increasing by almost 5% every 8-10 years 14. Accommodating almost two-third of the
country's consumers and generating almost half of the national income, the rural India offers
tremendous opportunities for organized retailers which many companies have failed to access.
According to the study conducted by NCEAR, the number of `lower middle income' group in rural
areas is almost double as compared to the urban areas, having a large consuming class with 41%
of the Indian middle class and 58% of the total disposable income.

Source: Census; National Council of Applied Economic Research (NCAER).

A look at the demographics reveals that the highest income levels households in the rural areas
are 1.6 million as compared to 2.3 million in urban areas. It has also been forecasted that the
middle and the higher income households are expected to grow to 111 million by 2007 from the
current levels of 80 million. Thus, it can be said that with 128 million households, the rural
population is nearly three times the urban. This vast demand base and size offers a huge
opportunity that MNCs cannot afford to ignore.
In order to meet with this rapid growth in demand the government has shown its concern by
providing an induction of Rs.140 billion and Rs. 300 billion in the rural sector through its
development schemes in the Seventh and the Eight plan respectively. The large players like ITC,
HLL, BPCL are realizing the potential of this sector and are seen experimenting with new ways to
tap this segment.
ITC spent 3 years and Rs. 80 crore on r&d to come up with the concept of E-choupal and Choupal
Sagar-rural hypermarkets 18. Through this, the farmers can access latest local and global
information on weather and market prices, scientific farming techniques at the village itself
through a web-portal - all in Hindi. E-Choupal also facilitates supply of high quality inputs as well
as purchase of commodities at their doorstep. The hypermarket (Choupal Sagar) provides them
with another platform to sell their produce and purchase necessary farm and household goods
under one roof.
Next in line, HLL came up with Project Shakti in late 2000 to sell its products through women self-
help groups who operate like a direct-to-home team of sales women in inaccessible areas where
HLL's conventional sales system does not reach. Another step to tap the rural market was
`Operation Bharat' wherein low-priced sample packets of toothpastes, fairness creams, Clinic Plus
shampoos and Ponds face creams to 20mn households.
As a part of their rural strategy, BPCL introduced Rural Marketing Vehicles (RMVs) that move from
village and village and filling cylinders on the spot for rural consumers keeping in mind the low-
income of the rural population. The Company also introduced a smaller size cylinder to reduce
both the initial deposit cost as well as the recurring refill cost.
Future outlook:
Investments in the range of US$ 20+ Billion are expected in the next 5 years in Retail & its
Supply Chain alone.
Size of modern retail likely to touch US$ 60+ Billion by 2011:
At least 2.5 Million additional direct jobs likely to be created in the next 5 years.
Hyper-competition is expected to set in by 2008-9 as the footprint of the top-5 players starts
significant overlapping in top 20 - 30 towns.
Significant impact on other retailers and branded good players - creating
new opportunities and threats:
According to Assocham, the overall retail market would grow by 36 per cent with the organised
sector expected to register three-fold growth to Rs 15,000 crore by 2008. The total size of the
market is also expected to increase to Rs 14,79,000 crore from the current level of Rs 5,88,000
crore.
Challenges faced by this sector:
The industry is facing a severe shortage of talented professionals, especially at the middle-
management level.
Most Indian retail players are under serious pressure to make their supply chains more efficient in
order to deliver the levels of quality and service that consumers are demanding. Long
intermediation chains would increase the costs by 15%.
Lack of adequate infrastructure with respect to roads, electricity, cold chains and ports has further
led to the impediment of a pan-India network of suppliers. Due to these constraints, retail chains
have to resort to multiple vendors for their requirements, thereby, raising costs and prices.
The available talent pool does not back retail sector as the sector has only recently emerged from
its nascent phase. Further, retailing is yet to become a preferred career option for most of India's
educated class that has chosen sectors like IT, BPO and financial services.
Even though the government is attempting to implement a uniform value-added tax across
states, the system is currently plagued with differential tax rates for various states leading to
increased costs and complexities in establishing an effective distribution network.
Stringent labor laws govern the number of hours worked and minimum wages to be paid leading
to limited flexibility of operations and employment of part-time employees. Further, multiple
clearances are required by the same company for opening new outlets adding to the costs
incurred and time taken to expand presence in the country.
The retail sector does not have 'industry' status yet making it difficult for retailers to raise finance
from banks to fund their expansion plans.
Government restrictions on the FDI are leading to an absence of foreign players resulting into
limited exposure to best practices.
Non- availability of government land and zonal restrictions has made it difficult to find a good real
estate in terms of location and size. Also lack of clear ownership titles and high stamp duty has
resulted in disorganized nature of transactions.
13. Performance of the players in the retail industry:

Revenue Growth% Growth Net Growth Grow OPM OP EPS CM P/E

s % Profi % th% % M% P
t

(Rs mn) QoQ YoY (Rs QoQ YoY Q1F Q1F Q1F
mn) Y06 Y05 Y06
(compared (compar
to ed to
correspondi correspo
ng quarter) nding
quarter)

Trent 87
243. 4.5
3464.41 15.94 47.75 (1.35) 27.91 6.25 7.07 5.0 53.88
78 5
0

Shoppers' 60
271. 2.0
Stop 6455.74 4.75 57.07 (4.94) 42.43 4.38 3.00 4.6 76.73
05 3
0

Pantaloon 5.8
6.82
(Retail) 7.00 9 18
India 641.
18677.71 26.28 72.30 (2.50) 66.42 (Q3F (Q3 (Q3 44. 120.42
Limited 58 FY0
Y06) FY0 85
6)
6)

Pyramid 11
(74.7 (16. (3.5
Retail 991.99 (9.67) 0.00 3.20 0.00 0.00 4.8 0.00
6) 62) 3)
Limited 5

Note: Market Price as at 11/10/2006.

 Source: bseindia.com, economictimes.com, myiris.com,
List of resources:
1. Ernst & Young, The Great Indian Retail Story, 2006.
2. FICCI - ICICI Property Services Study.
3. Let gradualism guide FDI in retail, Economist, 2006.
4. AT Kearney, GRDI 2006.
5. Retail scenario most developed in Bangalore, DH News service, According to Bijou Kurien, 6.
President & Chief Executive - Life Style, Reliance Retail.
7. CII, Logistics and Freight News, March 2006.
8. KPMG analysis, Consumer markets in India - the next big thing, September 2005.
9. India's changing household, Deutche Bank, November 2004.
10. CII, Manufacturing Bulletin, June 2006.
11. Pharma's retail push, Business Line, 2006.
12. Northbridge Journal, Industry Outlook - Retail, 2006.
13. Express Press release, Consumer durables sector sees pick-up sales in India, 2006.
14. Price Water Coppers, Asia-Pacific M&A bulletin, Mid year 2006.
15. KSA Technopak, June 2006.
www.alexa.com.
Hoilday shopping defined by outlet malls of Amazon, eBay, CNet News, 9th December 2002.
According to Frost & Sullivan Research analysts.
www.itcportal.com.
CII, Retail scenario in India: Unlimited Opportunity.
Disclaimer:
This document has been based on the information obtained from secondary sources believed to be reliable and which are
not independently verified. The author makes no guarantee, representation or warranty and accepts no responsibility or
liability as to its accuracy or completeness. The recipients of this report should be aware that the past performance is not
necessarily a guide to future performance and value of investments can go down as well.
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This publication is for information purposes only. While due care has been taken during the compilation of this publication
to ensure that the information is accurate to the best knowledge and belief, the content should not be taken as a
substitute for professional advice. Expressions of opinion are those of the research department only and are subject to
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FUTURE TRENDS OF RETAIL IN INDIA

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FUTURE TRENDS OF RETAIL IN INDIA

ABSTRACT
Retail is India's largest industry, accounting for over 10 per cent of the country's GDP and around
eight per cent of the employment. Retail industry in India is at the crossroads. It has emerged as
one of the most dynamic and fast paced industries with several players entering the market. But
because of the heavy initial investments required, break even is difficult to achieve and many of
these players have not tasted success so far. However, the future is promising; the market is
growing, government policies are becoming more favorable and emerging technologies are
facilitating operations.

FUTURE TRENDS OF RETAIL IN INDIA

R.Yuvarani*
INTRODUCTION
Indian retail sector is highly fragmented as compared to the developed as well as the other
developing countries. This shows a great potential for the organized retail industry to prosper in
India, as the market for the final consumption in India is very large. Retail trade is largely in the
hands of private independent owners and distributor’s structure for fast moving consumer goods
consisting of multiple layers such as carrying and forwarding agents, distributors, stockiest,
wholesalers and retailers. Thus, the growth potential for the organized retailer is enormous. In the
next 2-3 years, India will finally see operations of a number of very serious international players-
net withstanding the current restrictions on FDI in retail.

The Indian retail sector is ready to take on challenges from global retail players such as Wal-mart
and Carrefour because unlike them, they have a better understanding of the Indian consumer’s
psyche. Ultimately, a successful retailer is one who understands his customer. The Indian
customer is looking for an emotional connection, a sense of belonging. Hence, to be successful any
retail outlet has to be localized. The customer should feel that it is a part of his culture, his
perceived values, and does not try to impose alien values or concepts on him. Indian customer is
not keen to buy something just because it is sold by an international company.

PRESENT SCENARIO
Retailing in India is witness to the boom in terms of modern retailing formats, shopping malls etc.
the future of retailing for any product across the country will definitely be in malls where the
consumer can get variety, quality and ambience.

However, in spite of this continuous debate to be or not to be, recently Government has allowed
up to 51 percent FDI in single brand retailing by foreign companies like Reebok and Louis Vuiton.
 As of now, single brand retailers operate through the franchisee route and there is a strong view
that FDI in this segment would not displace jobs or impact the local industry but help create
employment.

Even today the government is undecided about the level FDI in retail, but a number of foreign
players, including the Wal-mart stores, Inc., have announced their intention to enter India in a big
way. At present Wal-mart is operating through its subsidiary in Bangalore, which was functioning
as a liaison office till last year. Now it is in the process of setting up offices in New Delhi and
Mumbai.

RETAILING IN THE 21ST CENTURY

Retailing in the new millennium stands as an exciting, complex and critical sector of business in
most developed as well as emerging economies. Today, the retailing industry is being buffeted by
a number of forces simultaneously, e.g., increasing competition within and across retailing
formats, the growth of online retailing, the advent of “Radio Frequency Identification (RFID)
technology, the explosion in customer-level data availability, the global expansion of major retail
chains like WAL-MART and METRO Group and so on. Making sense of it all is not easy but of vital
importance to retailing practitioners, analysis and policymakers.

RETAIL IN INDIA - THE FUTURE

According to a study the size of the Indian Retail market is currently estimated at Rs.704 crores,
which accounts for a meager 3% of the total retail market. As the market becomes more and more
organized the Indian retail industry will gain greater worth. The Retail sector in the small towns
and cities will increase by 50% to 60% pertaining to easy and inexpensive availability of land and
demand among consumers.

Growth in India Real estate sector is also complementing the Retail sector and thus it becomes a
strong feature for the future trend. Over a period of next 4 years there will be a retail space
demand of 40 million sq. ft. However with growing real estate sector space constraint will not be
there to meet this demand. The growth in the retail sector is also caused by the development of
retail specific properties like malls and multiplexes.

According to a report, from the year 2003 to 2008 the retail sales are growing at a rate of 8.3%
per annum. With this the organized retail which currently has only 3% of the total market share
will acquire 15%-20% of the market share by the year 2010.

Factors that are playing a role in fuelling the bright future of the Indian Retail are as follows:

• The income of an average Indian is increasing and thus there is a proportional increase in the
purchasing power.
• The infrastructure is improving greatly in all regions is benefiting the market.
• Indian economy and its policies are also becoming more and more liberal making way for a wide
range of companies to enter Indian market.
• Indian population has learnt to become a good consumer and all national and international brands
are benefiting with this new awareness.
• Another great factor is the internet revolution, which is allowing foreign brands to understand
Indian consumers and influence them before entering the market. Due to the reach of media in the
remotest of the markets, consumers are now aware of the global products and it helps brands to
build themselves faster in a new region
However despite these factors contributing to the growth of Indian retail Industry, there are a few
challenges that the industry faces which need to be dealt with in order to realize the complete
scope of growth in Indian market.
Foreign direct investment is not allowed in retail sector, which can be a concern for many brands.
But Franchise agreements circumvent this problem. Along with this regulation, local laws, and real
estate purchase restrictions bring up challenges. Other than this lack of integrated supply chain,
management, and lack of trained workforce and flux of the market in terms of price and product
choice also need to be eliminated.
The Indian Retail Street is set to glow brighter with India recapturing its position as the most
attractive destination for global retailers, despite the global slump. According to the Global Retail
Development Index (GRDI) released by US-based global management consulting firm, A T
Kearney, India has emerged as best country amongst 30 emerging markets. This reinforces the
fact that trade with India is a golden opportunity to be capitalized upon. Interestingly, Russia
clinched the second position, while China settled for the third spot. The report also stated that
India has become the most attractive destination for retail investment for the fourth time in five
years.
Currently India has one of the largest numbers of retail outlets in the world. According to a report
by images Retail estimates the number of operational malls will grow more than two-fold, i.e., it
will cross 412, with 205 million square feet getting covered by 2010. Nearly 715 malls will be
added by 2015, with major retail developments in tier-II and tier-III cities fuelling further growth.
Many global retailers have given thumps up to trade with India.
The future ahead Industry experts see the rise of the rural sector in the coming years. Currently,
rural market comprises nearly half of the domestic retail market of India, i.e., US$ 300 billion. The
per capital income of the rural India has reportedly grown by 50 percent over the last 10 years,
mainly because of the rising commodity prices and better productivity. According to E&Y India,
basic infrastructure, generation of employment guarantee schemes, better information services
and access to funding are ushering in good times for the rural households.
• As per the new market research report by RNCOS, organized retail market is expected to reach
US$ 50 billion by 2011

• The boom in the retail market will fuel the growth of the logistic market. It is estimated the
market will reach around US$20 billion by 2011.

• Retailing of mobile handset and accessories is estimated to reach close to US$990 million by
2010.

• Rural market is estimated to lead the Indian retail industry landscape in the future.

• Shopping malls are expected to increase at a CAGR of more than 18.9 per cent from 2007 to
2015.

INDIAN RETAIL LANDSCAPE

Raising income and increase consumerism are fueling retail growth.

Year
$ billion retail growth
1998
201
2000
204
2002
238
2004
278
2006*
321
2008*
368
2010*
421
*Estimates

Sources: Retail in India-A CII-AT Kearney report

According to NCEAR forecasts, the number of ‘rich’ households (the target market for modern
retail stores) is expected to more than double from 57 million in 2002 to 107 million by 2010. The
proportion of India’s population, that is less than 25 years of age stands at more than 50 percent
currently while more than 80 percent of the population is below the age of 45 years. This ‘young
population’ segment is driving the changes in consumption habits and spending patterns. An
increasing proportion of the young population is joining the work force, and adding to overall
spending, which should bode well for the growth of modern retail formats in India. Growing
urbanization (malls are likely to be concentrated in urban areas) is also fuelling modern retail
format growth. It is expected that India’s urban population will grow from 21 percent of the overall
population in 2000 to 32 percent by 2010.

CHANGE ACCELERATORS
The following factors will be significant in driving growth in the retail sector:

Consumer factors

Supply side factors

Consumer factors
¨ Increase in income

¨ Working women

¨ Changes in lifestyle demand for ‘global’ trend

Supply side factors

¨ Growing importance of retailing in political and economic agenda.

¨ Real estate reforms to be undertaken in the next 24 months.

¨ Major restructuring of the manufacturing sector easing product supply constraints for efficient
retailing.

¨ Reduction in import duties- offering more global sourcing options.

COMPETITION FOR FUTURE MARKET LEADER

India’s organized retail, although less than Rs 45,000 crore in size, already boasts of several
players different formats and categories. The big players are Future Group (Big Bazzar and
Pantaloon) of Kishore Biyani, Tata Group (it runs departmental stores under Westsite, a books and
music chain called Landmark, hypermarket star India bazaar, and a customer durables Chain
christened Crima, in a tie up with UK’s Woolworths),Sanjiv Goneka,s RPG Group (Food World and
Spencer’s), and Dubai-based Micky Jagtiani’s Land mark group (life style). That apart, there are
several smaller players, including Subhiksha, Trinetra, and Nilgiri’s. Most recently, the Kumar
Mangalam Birla-led AV Birla Group has announced plans of entering retail.

CONCLUSION
The retail sector has played a phenomenal role throughout the world in increasing productivity of
consumer goods and services. It is also the second largest industry in US in terms of numbers of
employees and establishments. There is no denying the fact that most of the developed economies
are very much relying on their retail sector as a locomotive of growth. The Retail Industry in India
has come forth as one of the most dynamic and fast paced industries with several players entering
the market. But all of them have not yet tasted success because of the heavy initial investments
that are required to break even with other companies and compete with them. The India Retail
Industry is gradually inching its way towards becoming the next boom industry. Favorable
government policies and continued growth will mean that the future belongs to the most
aggressive players. The future is now.

(ArticlesBase SC #1315969)

R.Yuvarani - About the Author:

R.Yuvarani, M.Phil Scholar , Department of Commerce, Periyar University, Salem-11.

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