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Retail industry in India

SUMMARY Introduction Retailing includes all the activities involved in selling goods or services directly to final consumers.Any organization that does this selling is doing retailing.A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. Retailing is the second largest industry in the US in terms of number of people employed. Wal-Mart the largest retailer in the world with an annual sales of $284 billion so also the largest employer in the US Retail is the booming sector of India in the present times. Retail, one of India s largest industries, has presently emerged as one of the most dynamic and fast paced industries with several players entering the market. Accounting for over 10 per cent of the country s GDP and around 8 per cent of the employment in the country. Traditionally ,the retail industry in India compromised of large,medium and small grocery stores and drugs stores which could be categorized as unorganized retailing. But today, as per the Global Retail Developmnet Index of 2010 India was ranked among 10 largest retail market in the world. The retail sector in India is worth USD 394 billion and is growing at the rate of 30% annually.

Challenges faced by Retail Industry To become a truly flourishing industry, retailing needs to cross the following hurdles: Automatic approval is not allowed for foreign investment in retail.  Regulations restricting real estate purchases, and cumbersome local laws.  Taxation, which favours small retail businesses.


Absence of developed supply c n and integrated IT management  Lac of trained work force  Low skill level for retailing management  Lack of etailing Courses and study options  Intrinsic comple ity of retailing rapid price c anges, constant threat of product obsolescence and low margins


One very important measure to overcome some of the challenges faced by retail, is for companies to invest heavily in training and recruitment, using up to date cost efficient services One of the leading retail training companies in India is etamorph Learning Pvt Ltd, a Bangaloreheadquartered, pan-India company which specialises in e-learning, content development as well as blended training (classroom+virtual training) to cater to retail and other companies across India Indian market has high comple ities in terms of a wide geographic spread and distinct consumer preferences varying by each region necessitating a need for localization even within the geographic zones India has highest number of outlets per person (7 per thousand) Indian retail space per capita at 2 sq ft (0.19 m2)/ person is lowest in the world Indian retail density of 6 percent is highest in the world. 1.8 million households in India have an annual income of over 45 lakh ( S$100,350). While India presents a large market opportunity given the number and increasing purchasing power of consumers, there are significant challenges as well given that over 90 of trade is conducted through independent local stores. Challenges include Geographically dispersed population, small ticket sizes, comple distribution network, little use of IT systems, limitations of mass media and e istence of counterfeit goods.

ajor etail Companies Pantaloon etail (India) Limited, is India s leading retailer that operates multiple retail formats in both the value and lifestyle segment of the Indian consumer market. Headquartered in umbai (Bombay), the company operates over 16 million square feet of retail space, has over 1000 stores across 73 cities in India and employs over 30,000 people. The company s leading formats include Pantaloons, a chain of fashion

 

outlets, Big Bazaar, a uniquely Indian hypermarket chain, Food Bazaar, a supermarket chain, blends the look, touch and feel of Indian bazaars with aspects of modern retail like choice, convenience and quality and Central, a chain of seamless destination malls. Some of its other formats include Brand Factory, Blue Sky, aLL, Top 10 and Star and Sitara. The company also operates an online portal, futurebazaar.com. Future Value Retail Limited is a wholly owned subsidiary of Pantaloon Retail (India) Limited. This entity has been created keeping in mind the growth and the current size of the company s value retail business, led by its format divisions, Big Bazaar and Food Bazaar. The company operates 148 Big Bazaar stores, 169 Food Bazaar stores, among other formats, in over 70 cities across the country, covering an operational retail space of over 6 million square feet. As a focussed entity driving the growth of the group's value retail business, Future Value Retail Limited will continue to deliver more value to its customers, supply partners, stakeholders and communities across the country and shape the growth of modern retail in India. A subsidiary company, Home Solutions Retail (India) Limited, operates Home Town, a large-format home solutions store, Collection i, selling home furniture products and eZone focussed on catering to the consumer electronics segment. Pantaloon Retail is the flagship company of Future Group, a business group catering to the entire Indian consumption space.

The Tata group expects its chain of electronics goods shops to generate revenue of Rs 8,000 crore in two years. Infiniti Retail, which opened its first shop in Mumbai on Monday, will invest Rs 400 crore to open 30 stores by March 2008 and double outlets by end of 2009, the Tata Sons director, Mr R K Krishna Kumar said. "'We estimate, by the end of 200 8 financial year, a turnover in the region of Rs 8,000 crore, if all goes as planned," he said at the opening of the group's first Croma outlet in Mumbai.

Infiniti may form an alliance with Woolworths of Australia for sourcing and technical support. Tata, Reliance Industries and other domestic retailers are expanding consumer businesses to grab a share of the $219 billion of annual purchases made by Indians in 2005 as foreign retailers form strategies to enter the country. Tesco Plc has sent a team of researchers to plan the UK group's strategy in India. India is in discussions with Wal-Mart, Carrefour SA and other retailers to develop a foreign investment policy, the Commerce and Industry minister, Mr Kamal Nath, had said recently. The Tata group owns Trent, which runs the Westside retail chain in India. Trent, set up in 1998, sells garments, shoes and other merchandise including perfumes and cosmetics through its Westside stores.

The RPG Group one of India's largest industrial conglomerate headquartered in Mumbai, India. It was founded by RP Goenka in 1979, and initially encompassed Phillips Carbon Black, Asian Cables, Agarpara Jute and Murphy India. Currently, RP Goenka retains the title of Chairman Emeritus, while the chairmanship and vicechairmanship have been assumed by his sons Harsh and SanjeevGoenka, respectively. Today the RPG Group is involved in diverse sectors of business, including power generation, power transmission, information technology , retail, and entertainment. The group recorded a turnover of INR 11,500 crore (equivalent to INR 115 billion) for fiscal year 2007.

CONCLUSION
Theretail 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%.

S-W-0-T Analysis
STRENGTHS y y y y y y y y y Demographic favor Rising disposable income Increase in number of people in earner category. Urbanization Shopping convenience Low labor cost of skilled ones. Changing consumer habits and lifestyles. Plastic card revolution. Greater availability of quality retail space.

WEAKNESS
y

Policy related issues - lack of industry status for retail. - numerouslicence,permits and registration requirement. - farmer and retailer unfriendly APMC act.

y Limited consumer insight -lack of detailed region specific customer data. -less data on spending pattern. y Inadequate human resources -lack of trained personnel at all level. -stringent employment and industry laws. -fragment approach to human resources. y Taxation hurdle -inconsistent octori and entry tax structure. -vat and multiple taxation issues.

-large grey market presence. y Underdeveloped supply chain -underdeveloped logistics infrastructure. -absence of national cold chain networks. -lack of national distribution networks and hubs y Lack of adequate utilities -lack of basic infrastructure like power, transport and communication creates difficulty in sustaining retail operations across the large geographical spread of country.

OPPURTUNITIES y y y y y y y y y Potential for investment. Locational advantage. Sectors with high growth potential. Fastest growing formats. Rural retail. Wholesale trading. Falling real estate cost E-retailing Retail franchising

THREATS y y y y y y Political issues. Social issues. Inflation. Nostalgia Lack of differentiation among the malls that are coming. Poor inventory turns and stock availability measures.

Question And Answers

1.The current retail format in India is as follows Hypermarts supermarkets: large self-servicing outlets offering products from a variety of categories. y Mom-and-pop stores: they are family owned business catering to small sections; they are individually handled retail outlets and have a personal touch. y Departmental stores: are general retail merchandisers offering quality products and services. y Convenience stores: are located in residential areas with slightly higher prices goods due to the convenience offered. y 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. y E-trailers: are retailers providing online buying and selling of products and services. y Discount stores: these are factory outlets that give discount on the MRP. y Vending: it is a relatively new entry, in t he retail sector. Here beverages, snacks and other small items can be bought via vending machine. y 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. y 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.
y

Over the last few years, retail has become one of the fastest growing sectors in the Indian economy. The organized retail however is at a very nascent stage though attempts are being made to increase its proportion to 15-25% by the year 2011 bringing in a huge opportunity for prospective players . The sector is the largest source of employment after agriculture, and has started to penetration into rural India generating more than 10% of India's GDP.

We had started from small medium and semi large grocery stores and now is the era of malls, super markets and hyper markets where different categories of commodities are sold under one roof.The good old idea of grocery shops have been left far behind.However we are still developing when compared to the U.S.Today 10% of GDP is from retail and we are striving for more.The challenges that come our way are
y y y y y y y y

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

However the future of Retail seems very bright with a large group of Multi national companies entering the retail market taking the concept of globalization on a new scale.

2.Walmart is a big name in the retail market. It has the largest number of employees any retail company can have as well as it is ranked t largest retail name in the world.It is god news that Wal-Mart wants to invest in Indian Retail industry giving it the right amount of boost that we need. There are two basic conditions that a MNC like Wal-Mart, etc are looking for when they come to expand their business in countries like In dia.
y y

Cheap Labour Cheap Real-estate

These are the two basic conditions that are required by a company to score big in the retail industry. Availability of space is a major concern When it comes to setting up a retail business.The next highest cost incurred is the employee cost which every big retail has to have when they decide on selling consumer products that will be directly consumed by the customers. A country like India who is just preparing to get into the shoes of big retail giants is the perfect place for an already established company to operate.The cheap labour and real-estate gives these big multi national companies enough reason to set up their operations and for a country liek India where employment of few of its citizens could help in contributing to the nationswealth,a company like Wall-mart is always welcome. It always gives India the required Global recognition that could be very beneficial for them. Our government has also opened up to a 51% investment from a foreign company to come to India and do business for example Wal-mart has been allowed to joint venture with Bharti Enterprise.