PROJECT

ON
RETAIL INDUSTRY IN GLOBAL ENVIRONMENT

(WITH REFERENCE TO RETAIL OUTLET IN THE MARKET)

PROJECT SUBMITTED TO ANNAMALAI UNIVERSITY,

IN PARTIAL FULFILMENT OF THE REQUIREMENTS

FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

IN APPLIED MANAGEMENT

By

Name: - Amit Kumar Sharma

DIRECTORATE OF DISTANCE EDUCATION

ANNAMALAI NAGAR

2008

Page No. 1
 DECLARATION

I hereby declare that the project entitled “RETAIL INDUSTRY IN GLOBAL

ENVIRONMENT” submitted for the Degree of Master of Business

Administration in Applied Management is my original work and the project has

not formed the basis for the award of any degree, diploma, associate ship,

fellowship or similar other titles. It has not been submitted to any other

university or Institution for the award of any degree or diploma.

Place: Name: Amit Kumar Sharma

Date: Enrolment No.:

Page No. 2
 ACKNOWLEDGEMENT

It is with real pleasure that, I record my indebtedness to my academic

Guide, Mr. Sunil K. Singh for his counsel and guidance during the preparation

of this project.

I am grateful to Centre Head Mrs. Tultuli Gupta.

I wish to record my sincere and special thanks to Mr. Rakesh Sharma,

Mr. Vikram Pawar and Mr. Deepak Sharma.

My thanks are due to Mr. Manish Goyal and Mr. Bharat Kuldeep to

give me great and valuable support.

Place Name: Amit Kumar Sharma

Date: Enrolment No:

Page No. 3
 CERTIFICATE

Certified that the project is a work done by Mr. Amit K. Sharma during the

period of his study under my guidance, and that the project has not previously

formed the basis for the award of any degree, diploma, associates hip,

fellowship or similar other titles and that it is an independent work done by his.

Place: Name: Sunil K. Singh

Date: The NIS Academy,

Page No. 4
 TABLE OF CONTENT
Chapter Content Page No.

Acknowledgement II

List of Tables VI

List of Diagrams VII

(1) Introduction 01-44

1.1 Retail Industry 02-19
• What is Retail Industry? 02-05

• Structure of Retail Industry 06-11

• Evolution of Retailing 12-13

• Indian Scenario of Retail Industry 14-16

• Retail Worldwide scenario 17-19

1.2 Objectives and Role of Retail Industry 20

1.3 Review of Literature 21-27

• Major / Minor Challenges in Industry 21-26

• Example of Some Published Issue’s 27

1.4 Hypothesis 28-39

• Past/ Present/ Future of Industry 28-35

• Impact of Retail Industry in India 36-39

Page No. 5
 1.5 Limitations of the Study
40-42

1.6 Methodology 43-44

• Source of Data 43

• Other Source 44

(2) Significance of the study 45-48

2.1 Opportunities of the Western 46

Retailers in India

2.2 Contribution of ‘FDI’ In Retailing 47-

48

2.3 Benefits To The Indian Consumer 48

(3) Research and Analysis 49-69

3.1 Latest Trends in Retail Sector 50-53

3.2 Major Player of Retail Industry 54-69

(4) Finding & Conclusion 70-73

(5) Bibliography 74-76

Page No. 6
Table No. Title of the Table
Page No.

1.1. Growth of Retail Industry

08

1.2. Continuation of GDP

14

1.3. World Organization Trade

18

1.4. Comparison of Retail Industry 29

3.1. World-Wide Retail 66

Page No. 7
Table No. Title of the Diagram Page No.

1.1. Indian Retail Market 03

1.2. Map of Income Classes 05

1.3. Organized Retail Market 06

1.4 . Growing Format in India

10

1.5 . Retailing Map in India

11

1.6. Journey of Organized Retail 13

1.7. Total Retail Sales 2007 16

1.8. US Retailing Format 18

1.9 Penetration of Retail

19

1.10 Challenges in Retail Market 21

1.11 Retail Challenge 25

3.1 Retail Analysis

51

3.2 Retail Market

52

3.3 Retail Segment 53

3.4 Retail Touches Economy 73

Page No. 8
Chapter (1)

Page No. 9
Page No. 10
 Part-1.1
RETAIL INDUSTRY

The word "Retail" originates from a French-Italian word. Retailer-

someone who cuts off or sheds a small piece from something. Retailing is the

set of activities that markets products or services to final consumers for their

own personal or household use. It does this by organizing their availability on a

relatively large scale and supplying them to customers on a relatively small

scale. Retailer is a Person or Agent or Agency or Company or Organization who

is instrumental in reaching the Goods or Merchandise or Services to the End

User or Ultimate Consumer.

Retail is India's largest industry. It accounts for over 10 per cent of the

India's GDP and around eight per cent of the employment. Retail sector is one

of India's fastest growing sectors with a 5 per cent compounded annual growth

rate. India's huge middle class base and its untapped retail industry are key

attractions for global retail giants planning to enter newer markets. Driven by

changing lifestyles, strong income growth and favorable demographic patterns,

Indian retail is expected to grow 25 per cent annually. It is expected that retail

in India could be worth US$ 175-200 billion by 2016.

Emerging markets such as India and China are the final frontier for retail

taking the focus away from saturated Western markets. Since 2001, 49 global

Page No. 11
retailers entered 90 new markets, but at the same time, 17 retailers left markets

in 2005.

The Indian retail industry in valued at about $300 billion and is expected

to grow to $427 billion in 2010 and $637 billion in 2015. Only three percent of

Indian retail is organized. Retailers of multiple brands can operate through a

franchise or a cash-and-carry wholesale model.

The Indian retail environment has attained $ 210bn quiche, witnessing a

strong development pace of five percent per year as per latest survey by Price

Waterhouse Coopers. As per the estimation 200 malls, presenting additional

50mn sq ft of retail space will be ready in next two years. Existing retail space

in 160 malls is nearly 32mn sq ft

1.1 Indian Retail Market

The analysts foresee bright future of the retail sector. A huge number of

shopping malls, nearly 100, have come up in the recent past, generating 20mn

sq ft. retail space, extending more space of about 12mn sq ft to it. Nearly 60

Page No. 12
malls are on the verge of completion and may be operational by the end of

current financial year. A forecasted number of nearly 200 malls, in a move to

make additional 50mn sq ft of retail space, will be completed within the next

two-years.

India retail industry is expanding itself most aggressively, as a result a

great demand for real estate is being created. Indian retailers preferred means of

expansion is to expand to other regions and to increase the number of their

outlets in a city. It is expected that by 2010, India may have 600 new shopping

centers.

In the Indian retailing industry, food is the most dominating sector and is

growing at a rate of 9% annually. The branded food industry is trying to enter

the India retail industry and convert Indian consumers to branded food. Since at

present 60% of the Indian grocery basket consists of non- branded items.

The global retail giants like Wal-Mart, Gap, Tesco, Versace, K-

Mart/SEARS, Carrefour, ZARA, FCUK, Fendi, NEXT, Mother Care, lKEA,

Trussardi, DKNY and Debenhams have made plans to march in the Indian

market.

ESPRIT, GUESS, Chanel, Mango and many other global marked their

presence in India by implementing licensing and franchisee agreements. The

global retailers on the line of control, awaiting the green signal from Govt. to

enter Indian retail market. However, the current scenario has encouraged

Indian players to speed up retail expansion and fresh retail ventures.

Page No. 13
 Companies like Shoppers Stop, Trent, Reliance, Lifestyle, Pantaloons

Tanishq, Crossroads, Akbarallys' and Tanishq already have planned to invest

over Rs 5,000cr. Trent is on the edge to take both its brands 'Star India Bazaar'

and 'Westside' to new cities, meanwhile Shoppers' Stop has recently geared up

for expansion of present ones and to add 11 new stores including two

hypermarkets. Also, Pantaloon has planned to add eight 'Big Bazaar' malls

within the next 6 to 8 months.

After partition, Reliance Industries Ltd (RIL) is substantially getting

ready to enter in field of retailing. RIL is poised to emerge as the single largest

player in this sector. On the other hand, Tosco’s, Wal-Marts or Safeway does

ultimately enter in the country. So finally, Shoppers' Stops, Westside,

Pantaloons and West sides in coming years have will face stiff competition.

1.2 Map of Income Classes

Page No. 14
STRUCTURE OF RETAIL INDUSTRY
The retail industry continued in India in the form of Kiranas till 1980.

Soon, following the modernization of the retail sector in India, many companies

started pouring in the retail industry in India like Bombay Dyeing, Grasim etc.

As has been mentioned earlier the retail sector in India can be widely split into

the organized and the unorganized sector.

Organized Retail Sector

After 50 years of unorganized retailing and fragmented Kiranas stores,

the Indian retail industry has finally begun to move towards modernization,

Systematization and consolidation. Today, modernization is the catch phrase

and the key to understanding retail in the next decade. Traditionally retailers

2006-07

1.3 Organized Retail Market

Have had localized operations. This localized nature of the industry is Changing

as retailers face lower growth rates and threatened profitability in home

Markets. New geographies help them sustain top line growth in Addition to

Page No. 15
enabling global sourcing and encasing on global advantages of getting the best

products at optimum prices.

There has been a boom in retail trade in India owing to a gradual increase

in the disposable incomes of the middle class households, as a result of good

performance of IT, Service and Infrastructure sectors. More and more players

are entering the retail business in India to introduce new formats like malls,

supermarkets, discount stores, department stores and even changing the

traditional looks of bookstores, chemist shops, and furnishing stores.

Organized retail formats prevalent globally

Supermarkets: Self-service 4000-20000 sq ft stores with shopping carts

typically focused on regular groceries, household goods and personal care

Hypermarkets: Huge stores over 40000 sq ft situated outside the town with

ample parking space aimed for bulk purchases stocking electronics, furniture

and clothing. Carrefour is the global major in this format.

Mass merchandisers: Large destination stores that sell everything at

competitive prices. They have cross-country chain operations with centralized

sourcing and a hub-and-spoke distribution. Makro and Sam's Club are leading

players in this format.

Page No. 16
Discounters: Aimed at bargain buyers offering less choice but deep discount on

bulk sourcing deals through controlled inventory. Aldi is the world leader in this

format.

Convenience Stores: Small stor

es located at convenient points

like petrol stations working

round the clock.

1.1 Growth of Retail Industry

Unorganized Retail Sector

The unorganized retail sector basically includes the local Kiranas, hand

cart, the vendors on the pavement etc. This sector constitutes about 98% of the

total retail trade. As 70% of the employment is generated in Agriculture sector,

hence this form of retailing is widely seen in those areas and of course to some

parts of the urban. There is a lot of hue and cry in the sector for opening of

sector for direct investment from the foreign players, but government can not

neglect the interests of small players. One of main reason of not opening this

sector to FDI is it may shrink the employment in the unorganized sector and

expand that in the organized.

RETAILING FORMATS IN INDIA

Page No. 17
  Malls:
The largest form of organized retailing today. Located mainly in metro
cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sq
ft and above. They lend an ideal shopping experience with an amalgamation of
product, service and entertainment, all under a common roof. Examples include
Shoppers Stop, Pyramid, and Pantaloon

 Specialty Stores:
Chains such as the Bangalore based Kids Kemp, the Mumbai books
retailer Crossword, RPG's Music World and the Times Group's music chain
Planet M, are focusing on specific market segments and have established
themselves strongly in their sectors.

 Discount Stores:
As the name suggests, discount stores or factory outlets, offer discounts
on the MRP through selling in bulk reaching economies of scale or excess stock
left over at the season. The product category can range from a variety of
perishable/ non perishable goods

• Department Stores:
Departmental Stores are expected to take over the apparel business from
exclusive brand showrooms. Among these, the biggest success is K Raheja's
Shoppers Stop, which started in Mumbai and now has more than seven large
stores (over 30,000 sq. ft) across India and even has its own in store brand for
clothes called Stop.

Page No. 18
  Hyper marts/Supermarkets:
Large self service outlets, catering to varied shopper needs are termed as
Supermarkets. These are located in or near residential high streets. These stores
today contribute to 30% of all food & grocery organized retail sales. Super
Markets can further be classified in to mini supermarkets typically 1,000 sq ft to
2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft.
having a strong focus on food & grocery and personal sales.

 Convenience Stores:
These are relatively small stores 400-2,000 sq. feet located near
residential areas. They stock a limited range of high-turnover convenience
products and are usually open for extended periods during the day, seven days a
week. Prices are slightly higher due to the convenience premium.

 Mob's :
Multi Brand outlets, also known as Category Killers, offer several brands
across a single product category. These usually do well in busy market places
and Metros.

1.4 Growing Format in India

Page No. 19
RETAILING MAP IN INDIA

1.5 Retailing Map

Page No. 20
EVOLUTION OF RETAILING

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. The traditional

food and grocery segment has seen the emergence of supermarkets/grocery

chains, convenience stores and fast-food chains.

The traditional grocers, by introducing self-service formats as well as

value-added services such as credit and home delivery, have tried to redefine

themselves. However, the boom in retailing has been confined primarily to the

urban markets in the country. Even there, large chunks are yet to feel the impact

of organized retailing. There are two primary reasons for this. First, the modern

retailer is yet to feel the saturation' effect in the urban market and has, therefore,

probably not looked at the other markets as seriously. Second, the modern

retailing trend, despite its cost-effectiveness, has come to be identified with

lifestyles.

In order to appeal to all classes of the society, retail stores would have to

identify with different lifestyles. In a sense, this trend is already visible with the

emergence of stores with an essentially `value for money' image. The

attractiveness of the other stores actually appeals to the existing affluent class as
Well as those who aspire to be part of this class. Hence, one can assume that the

retailing revolution is emerging along the lines of the economic evolution of

society.

It was only in the year 2000

that the economists put a

figure to it: Rs. 400,000

crore which is expected

develop to around Rs.

800,000 crore by the year

1.6 Journey of Organized Retail
2005 – an annual increase of 20 per cent. Retailing in India is unorganized with

poor supply chain management perspective. According to a recent survey by

some of the retail consulting bodies, an overwhelming proportion of the Rs.

400,000 crore retail markets are UNORGANISED. In fact, only a Rs. 20,000

crore segment of the market is organized. As much as 96 per cent of the 5

million-plus outlets are smaller than 500 square feet area. This means that India

per capita retailing space is about 2 square feet in comparison to 16 square feet

in the United States. India's per capita retailing space is thus the

lowest in the world.

INDIAN SCENARIO OF RETAIL INDUSTRY

The present value of the Indian retail market is estimated by the India

Retail Report to be around Rs. 12,00,000 crore($270 billion) and the annual

growth rate is 5.7 percent. Retail market for food and grocery with a worth of

Rs. 7,43,900 crore is the largest of the different types of retail industries present

in India. Furthermore around 15 million retail outlets help India win the crown

of having the highest retail outlet density in the world. The contribution of retail

sector to GDP has been manifested below:

Country Retail Sector's share in GDP (in %)

India 10
USA 10
China 8
Brazil 6
1.2 Continuation to GDP

As can be clearly seen, retailing in India is superior to those of its contenders.

Retail sector is a sunrise industry in India and the prospect for growth is simply

huge. There are many factors that have stimulated the rise of the shopping

centers and multiplex-malls in a jiffy. Some of them can be listed as follows:

1. Rise in the purchasing power of Indians- the rise in the per capita income

in the last few years has been magnificent. This has led to the generation of

insatiable wants of the upper and middle class. The demand of new as well as
second hand durables has risen throughout the country thus providing the

incentive for taking up retailing.

2. Favorable to farmers- retailing has helped in removing the middlemen and

has thus enhanced the remuneration to farmers. This is a new revolution in the

agricultural sector in India and will go a long way in amending the condition of

agriculture, a major concern among policy makers.

3. Use of credit- a typical Indian is most conversant with using credit cards

than carrying money. This is led to shift of the consumer base towards

supermarkets and make the payments in the form of credit.

4. Comfortable Atmosphere- a visit to a retail store appears to be more

soothing for the generation-Y. People and kids prefer to shop in an air

conditioned. The retail industry is the second largest employer in India. It

currently employs about 7 percent of the total labor force in India. Finance

Minister P. Chidambaram's recent statement “salaries ought not to be

legislated” is a welcome move as most of the organized retail is in private

hands. Only 4.6% of the total retail trade is into organized sector. It generates

about Rs.55,000 crore ($12.4 billion). The major and minor players desperately

need to work hard in this direction so that next time the figures look more

decent. The government must also make an attempt to ameliorate the situation

as political instability and infrastructure namely power and roads are the major

roadblocks in the path of smooth functioning of the market.

 PRESENT INDIAN SCENARIO

* Unorganized market: Rs. 583,000 cores

* Organized market: Rs.5, 000 cores

* 5X growth in organized retailing between 2000-2005

* Over 4,000 new modern Outlets in the last 3 years

* Over 5,000,000 sq. ft. of mall space under development

* the top 3 modern retailers control over 750,000 sq. ft. of retail space

* Over 400,000 shoppers walk through their doors every week

* 47 global fortune companies & 25 of Asia's top 200 companies are retailers

* Biggest player in India is Pantaloon Retail India Limited

* Growth in organized retailing on par with expectations and projections of the

last 5 Years: on course to touch Rs. 35,000 corers (US$ 7 Billion) or more by

2005-06

1.7 Total Retail Sales 2007

 RETAIL : WORLDWIDE SCENARIO
China- the total sales from retail market in China reached US$755 billion in

2005. However organized retailing in China accounts for only 20% of it. Also

the fragmentation of China's retail market is so high that top 100 retailers make

up for only 10.5% of the total market. The registered sales of department stores

grew by 25.7% and that of convenience stores grew by 36.5% in 2005. The

Chinese retail market is expected to reach new highs as the population of strong

middle class is expected to double by 2020 and mergers and acquisitions among

retailers are3 going in great guns. The WTO restrictions are also expected to

have a favorable impact on its retail sector. Key Players Analyzed This section

covers the key facts about players currently operating in the China retail

industry including Shanghai Bailian Group, Beijing Gome Electric, Carrefour,

Wal-Mart Stores, Wuhan Zhongbai Group, and China Paradise Electronics

Retail.

Japan- total annual sales for the Japanese retail industry for 2003 amounted to

JPY 133,273 billion. Japan had 1.2 million retail establishments in June 2004

and there were 42,738 specialty superstores. The year 2002 to 2004 the annual

sales per store increased by 3.8%. The growth was mainly driven by the grocery

superstores but the number of superstores specializing in clothes gradually

came down. The organized retail sector in Japan couldn't perform at its full

efficiency because of collapse of the 'bubble economy' in the early 90s

Spain- Spain Energy Industry Spain energy consumption is estimated to have

reached 165 Million Tons of Oil Equivalent in 2006. Fossil fuels are the major

sources for energy in Spain especially Oil (49.5%) & Natural Gas (19.9%).

With the Spanish objective of energy security & diversity, and clean energy

sources, renewable sources are expected to grow at rapid pace. Key Findings §

Spain is a net energy importer, with imports accounting for 99% of its total

annual oil and natural gas consumption and 50% of its coal consumption key

players in Spain energy such as Gas Natural Group, CEPS Group, Repsol YPF,

Endesa S.A. and Gamesa.

1.3 World Trade Organization

United State- Retail is the

second-largest industry in the U.S.

by number of businesses and

number of employees. Retail sales

in the U.S. (total retail sales

1.8 US Retailing Format
include the categories of gasoline,
automobiles, and food service) were up about 3.8% in 2007, to $4.49 trillion

(Plunkett Research estimate). The 2007 growth was driven partly by higher

gasoline costs as well as by deep price discounting during the Christmas season

by mass merchandisers and year-long discounting by automobile dealers.

Brazil- Emerging as one of the world's largest retail markets. The sales in the

industry have been growing strongly since 2003 and are expected to continue at

this momentum only over the next few years as constantly declining inflation

rate allows for continued expansion of real incomes (increasing demand for non

durable consumer goods) and credit conditions ease (sustaining demand for

durable goods). A process of consolidation of the retail industry has been

underway but overall, the market remains relatively fragmented, indicating

substantial scope for the larger players to grow their market share in future. The

top five supermarket chains account for approximately 40% of total sales.. All

the market values have been converted to US$ at May 2007 exchange rate

where, 1 Brazil Real (BRL) = US$ 0.494 (Approx).

1.9 Penetration of Retail

Part 1.2
 OBJECTIVES & ROLE OF RETAIL INDUSTRY

Retail is clearly the sector that is poised to show the highest growth in
the next five years. The sector is set for a revolution, as both the present players

and new entrants are gearing up to explore the market. This sector contributes

10% of India's GDP and the current growth rate is 8.5%. The present size of the

organized retailing sector is approximately 3% and is expected to grow to 25-

30% by the year 2010. There are about 300 new malls, 1500 supermarkets and

325 departmental stores currently under construction. Many players are coming

up with huge investments, due to which the present 12 million mom-and-pop

shops and Kiranas stores fear losing their business. Most predictions say that

the sector might reach to US$ 400-600 billion by the year 2010

The retail sector has played a phenomenal role throughout the world in

increasing productivity of consumer goods and services. It is the second largest

industry in the United States of America in terms of numbers of employees and

establishments. Wal-Mart, the largest retailer in the United States is also the

largest employer in the United States with annual sales over $ 284 Billion.

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. Analysts, CEOs,

and others are using consumer spending and consumer confidence data

originating from the retail sector as an indicator to gauge the status of the economy
 Part 1.3

CHALLENGES OF RETAIL INDUSTRY

The big challenge for the Indian retailing industry is the heterogeneity of

the market. It is up to us retailers to evolve with consumers, predict where and

what they will spend on, be there and take the highest share of their wallet and

use this last leg of the economic chain to build India. At Panta-loon, through our

delivery formats, we touch 52% of the customer’s wallet. My vision is to

capture where this new, young and emergent India is going to spend and capture

as close to 100% of their shopping.

So far, modern-format

retail has scaled up its

presence in the metros and

a few cities. However, the

future will see tier-II and,

1.10 Challenges in Retail Market
maybe, even tier-III cities attract

more retail outlets. Consumer mindset and behavior is changing in these cities.

A growing base of affluent, upwardly mobile consumers have similar needs and

desires as their urban counterparts and they are looking for instant gratification.

With satellite television, internet and mobile communication available in

smaller cities, people are increasingly exposed to how the ‘West’ lives. Tier-II
and tier-III cities present an enormous growth potential over the next five years and are

the future of modern retail in India

MAJOR CHALLENGES

1. Amalgamation or Confusion- According to TATA Strategic Management

Group, India has a high density retail structure of 1 retail outlet per 90 people

and is the 9th largest retail market in the world. But the structure of the retail

industry in India is in utter jumble. The parallel operation of convenience

stores, supermarkets, hypermarkets and specialty stores in the economy is

bewildering. According to the 'Wheel of Retailing Theory', certain loopholes in

one of the forms of marketing can get communicated to other forms also.

2. What to sell- Another bemusement is the category of items to be offered.

According to researches, 41 percent of total consumption expenditure goes to

the segment of food and groceries and it accounts for 77 percent of total retail

sales. So it is obvious that this is the most preferred section of retailers. But

unfortunately the foible taste bias for 'wet market' (i.e. fresh food available

through hawkers) has marred this prospect also. Therefore supply chain

management, storage of fresh perishable foods and persuading the customers

that the food is inexpensive despite being fresh are genuine challenges to the

newcomers. Diversifying the product base to consumer products such as

readymade garments, furniture’s, mobiles and computers can mitigate the

losses, if any from food marketing and also broaden the reach to consumers.
3. Nostalgia- Indian shopping habits are no different. People tend to attach

qualities like honesty, fair price, good behavior etc. to shopkeepers with whom

they have been dealing right from childhood. They find no reason to go to a

distant megaspore without any genuine reason. This problem is difficult to deal

with as it demands a change in long-formed mindset. Organized retail outlets

can overcome this problem by employing eligible local peoples who can

interact in vernacular language and win the confidence of people.

4. Information Technology- This is a major problem and India must act fast if

it wishes to create a smooth field for organized retailing. Digitization of

services will make transfer of goods easy and an improvement in supply chain

management will definitely play a significant role in attracting more consumers

and less consumer grievances. Besides, it will generate easier payments option

for customer and easier money movement for the CEOs of these highly

diversified malls.

MINOR CHALLENGES

1. Human resource crunch- the concern for insufficient manpower in the

industry has been in news for the last few months. This fear is somehow

unfounded. The retail industry according to recent reports is growing at a rate of

100 percent. Kishore Biyani's Future Group i.e. the Big Bazaar chain of retail

outlet alone provides employment to more than 18,000 people and is planning

to expand its employment base to 34,000 by June 2008. If we add to this the

foray by mega players like Reliance and Bharti-Walmart then the fear can

surely turn into a misperception. Retailing mainly deals with hard-selling of

space, trade of stocks and building of relationships. Since most of the openings

are for front line shop people, a graduation will suffice. Nowadays many

institutes also provide post-HSC and post-graduate retail-specific courses.

2. Hindrances from government- Some political parties want the government

to amend laws and improve curbs so that the mega players can't openly

decimate the unorganized retail sector. This is a conclusion based on a myopic

outlook and must be amended for a long term strategy. The fear is baseless

because of the reasons mentioned above. The mega stores will no doubt provide

employment to the less educated masses. Also taking business away especially

from small food vendors is more easily said than done. Instead the limiting

move will send wrong signals to the investors and will ward off investments

when the states need it most. Allowing 51 percent retail FDI in single brand

retailing is a welcome move in this direction. It is expected that the government

will create further opportunities for the organized retail to come up as home

grown investment is always sweeter than foreign investment.

OTHER CHALLENGES:

(1) LOCATION:

"Right Place, Right choice"

Location is the most important ingredient for any business that relies on

customers, and is typically the prime consideration in a customers store choice.

Locations decisions are harder to change because retailers have to either make

sustainable investments to buy and develop real estate or commit to long term

lease with developers. When formulating decision about where to locate, the

retailer must refer to the strategic plan:

* Investigate alternative trading areas.

* Determine the type of desirable store location

* Evaluate alternative specific store sites

2) MERCHANDISE:

The primary goal of the

most retailers is to sell the

right kind of merchandise

and nothing is more

1.11 Retail Challenge

central to the strategic thrust of the retailing firm. Merchandising consists of

activities involved in acquiring particular goods and services and making them

available at a place, time and quantity that enable the retailer to reach its goals.
Merchandising is perhaps, the most important function for any retail

organization, as it decides what finally goes on shelf of the store.

3) PRICING:

Pricing is a crucial strategic variable due to its direct relationship with a firm's

goal and its interaction with other retailing elements. The importance of pricing

decisions is growing because today's customers are looking for good value

when they buy merchandise and services. Price is the easiest and quickest

variable to change.

4) TARGET AUDIENCE:

"Consumer the prime mover"

"Consumer Pull", however, seems to be the most important driving factor

behind the sustenance of the industry. The purchasing power of the customers

has increased to a great extent, with the influencing the retail industry to a great

extent, a variety of other factors also seem to fuel the retailing boom.

5) SCALE OF OPERATIONS:

Scale of operations includes all the supply chain activities, which are carried

out in the business. It is one of the challenges that the Indian retailers are

facing. The cost of business operations is very high in India.

 SOME PUBLISHED ISSUE OF RETAIL INDUSTRY

 The retail industry is expected to grow into a USD 427 billion industry by

2010- FICCI

 India’s retail industry, which is in the middle of rapid growth, has already

scripted success stories fit to be the subject of a Bollywood film-Business

Standard

 The impact of organized retailers that have seen swarming of malls lately, on

the “mom-n-pop stores” in 20 Indian cities- Indian Council of

Research in International Economic Relations (ICRIER)

 Modern Retailing Comprehensive policy vital- The Hindu

 Retail boom triggers ancillary industry growth- The Times of India

 Part 1.4

 PAST/ PRESENT/ FUTURE OF RETAIL INDUSTRY

Before the decade of eighties, India with hundreds of towns and cities

was a nation striving for development. The evolution was being witnessed at

various levels and the people of India were learning to play different roles as

businessmen and consumers.

Retail-which literally means to put on the market, is a very important

aspect of every city. Without a well organized retail industry we would not have

our necessities and luxuries fulfilled. Be it our daily groceries or fashion

accessories and everything in between, retail industry brings us the blissful

experience of shopping. Though organized retailing industry began much earlier

in the developed nations, India had not actively participated. However with its

vast expanse and young population, India in the 21st century emerges as a

highly potential retail market. The journey of retailing in India has been riveting

and the future promises further growth. Here is a complete picture deciphering

the past, present and future trends of Indian Retail Market.

It is widely accepted that the retail industry has undergone a drastic

change in last five years and there is yet more to come. Let us compare the

image of Indian retailing in 2004-05 to that of its status in 2007-08 in the

following table:
Magnification of the Indian Retail Industry

Yardstick Situation in 04-05 Situation in 07-08

Value of retail sales Rs. 10,20,000 crore Rs 12,00,000 crore
Annual growth rate 5% 5.7%
Value of organized market Rs 35,000 crore Rs 55,000 crore
Share of organized market in the 3.4% 4.6%

sector
Forecasts (after 5 years) about Over Rs. 1,00,000 Rs. 2,00,000 crore

size of organized retail market crore

Forecasts about growth rate of Around 30% Around 40%

organized retail market

1.4 Comparison of Retail Industry

The above table clearly shows that the retail market as well as the mindset

required for it has experienced a thorough revisal in the last three years. This is

just the beginning and Indians are sanguine that the sector will see rosy days in

the future. This confidence has helped India acquire the No.1 position among

30 most attractive retailing destinations in the world according to the Global

Retail Development Index of 2005 (by AT Kearney, India). Among emerging

markets, India holds the second position after China in the list of most favored

retail destinations

Past – Retail Industry in India

Before the decade of eighties, India with hundreds of towns and cities
was a nation striving for development. The evolution was being witnessed at

various levels and the people of the nation were learning to play different roles

as businessmen and consumers. The foundation for a strong economy were

being laid, youth were beckoning new awareness in all spheres. And this

brought in an opportunity for retail industry to flourish. First in the metros and

major cities later to impact sub urban and rural market as well.

Retailing in India at this stage was completely unorganized and it thrived as

separate entities operated by small and medium entrepreneurs in their own

territories. There was lack of international exposure and only a few Indian

companies explored the retail platform on a larger scale. From overseas only

companies like Levi's, Pepe, Marks and Spencer etc. had entered targeting

upper middle and rich classes of Indians. However as more than 50 %

population was formed by lower and lower middle class people, the market was

not completely captured. This was later realized by brands like Big Bazaar and

Pantaloons who made their products and services accessible to all classes of

people and today the success of these brands proves the potential of Indian

retail market.

A great shift that ushered in the Indian Retail Revolution was the eruption

of Malls across all regional markets. Now at its peak, the mall culture actually

brought in the organized format for Retailing in India which was absent

earlier.To your surprise there was not a single mall in India a decade before and

just a few years ago only a handful of them were striving, today there are more
than 50 malls across different cities and 2 years from now around 500 malls are

predicted to come up.

Present – Retail Industry in India

At present the Retail industry in India is accelerating. Though India is

still not at an equal pace with other Asian counterparts, Indian is geared to

become a major player in the Retail Market. The fact that most of the developed

nations are saturated and the developing ones still not prepared, India secures a

great position in the international market. Also with a highly diverse

demography, India provides immense scope for companies brining in different

products targeting different consumers.

According to the Global Retail Development Index, India is positioned as the

foremost destination for Retail investment and business development. The

factor that is presently playing a significant role here is the fact that a large

section of Indian population is in the age group of 20-34 with a considerably

high purchasing power; this has caused the increase in the demand in the urban

market resulting in consistent growth in the Retail business.

And though the metros and other tier 1 cities continue to sustain Retail

growth, the buzz has now shifted from these great cities to lesser known ones.

As the spending power is no longer limited to metros, every tier 2 city in the

country has good market for almost every product or service. Due to this, tier 2

cities like Chandigarh, Coimbatore, Pune, Kolkatta, Ahmedabad, Baroda,

Hyderabad, Cochin, Nagpur, Indore, Trivandrum etc. provide a good platform

for a brand to enter Indian market.

However there are a few precautions for every brand that explores Indian

market. As Indian consumers are very curious and have a broad perspective,

they respond well to a new product or concept and there are very fair chances of

a brand surviving well, but every Indian consumer be it an urbanite or a small

town dweller needs a feeling of value for money. Although labeled as tight

fisted, Indian consumers are great spenders once they realize that they are

getting value for their money. Also new product /service concepts from the

western world are better adopted first by the urban Indians, the smaller markets

respond well to the need based retailing rather than luxury concepts.

As the Indian retailing is getting more and more organized various retail

formats are emerging to capture the potential of the market.

* Mega Malls

* Multiplexes

* Large and small supermarkets

* Hypermarkets

* Departmental stores are a few formats which flourishing in the both big and

small regional markets.

As the major cities have made the present retail scenario pleasant, the future of

the Indian Retailing industry lies in the rural regions. Catering to these

consumers will bring tremendous business to brands from every sector.

However as the market expands companies entering India will have to be more

cautious with their strategic plans.

Future – Retail Industry in India

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 regulations and local laws and real estate purchase restrictions bring

up challenges. And with Good Planning, Timely Implementation and a media

campaign that touches Indian consumers any brand can go far ahead in the

Indian Retail Revolution.

 IMPACT OF RETAIL INDUSTRY IN GLOBAL WORLD

Organized retailing is spreading and making its presence felt in different

parts of the Country. The trend in grocery retailing however, has been slightly

different with a Growth concentration in the South. Though there was

traditional family owned retail Chains in South India such as Nilgiri’s as early

as 1905, the retail revolution happened With the RPG group starting the Food

world chain of food retail outlets in South India With focus on Chennai,

Hyderabad and Bangalore markets, preliminarily. The Experiment has reaped

rich dividends and the group is now foraying into other Territories as well as.

Owing to the success of Food world model of RPG group, several new models

such as Trinethra, Subhiksha, Margin Free and others have made their foray

into this sector albeit at regional levels. Today the food retail sector in India is

about Rupees Ten Lakh Crores (USD 200 billions) of which the organized food

retail segment is about 1 per cent and increasing at a pace of over 20% year to

year.

To be successful in food retailing in India essentially means to draw away

shoppers from, the roadside hawkers and Kiranas stores to supermarkets. This

transition can be achieved to some extent through pricing, so the success of a

food retailer depends on how best he understands and squeezes his supply

chain. The other major factor is that of Convenience shopping which the

supermarket has the edge over the traditionalKiranas Stores. On an average a

supermarket stocks up to 5000 SKU’s against few hundreds stocked at an

average Kiranas stores.

Though with excellent potential, India poses a complex situation for a

retailer, as this is a Country where each State is a mini-Country by itself. The

demography’s of a region Vary quite distinctly from others. In order to appeal to

all classes of the society, retail Stores would have to identify with different

lifestyles. Hence we may find more of Regional players and it would take

enormously long time before nation wide successful Retail chains emerge. This

is the main reason as to why the successful retail chains in the Countries today

operate at regional segments only and are not aiming at nation wide Presence, at

least for the time being.

In the organized retail industry, the gestation periods are long,

institutional funding is Difficult, and there is none or little Government support.

But the belief among top Retailer chains in the country is that the industry will

see large investments coming once. The current ban on foreign direct

investment is lifted. But that could be two-three years Away. Food and grocery

retailing is a tough business in India with margins being very Low and

consumers not dissatisfied with existing shops where they buy. For example,

the next-door grocery shopkeeper is smart and delivers good customer service,

though not value.

As of now, while Chennai has about five organized food and grocery retail

chains, other big cities such as Delhi, Bangalore, and Mumbai average only

two-three such chains. Almost all food retail players have been region-

specific as far as geographical presence is concerned in the country. To illustrate

with examples, the RPG Group's Food World, Nilgiri’s, Margin Free, Giant,

Varkey's and Subhiksha, all of which are more or less spread in the Southern

region; Sabka Bazaar has a presence only in and around Delhi; names such as

Haiko and Radhakrishna Food-land are Mumbai-centric; while Adani is

Ahmedabad-centric. Industry topography in India is such that spreading

presence across cities is a tough call. As pointed out by many experts, organized

food and grocery retailing chains going national requires significant

investments. Retailing within this sector is not just about the front-end, but

involves complex supply chain and logistics issues as well.

The trend and mindset of the present retailer chains in India can be best

understood by studying Food-World as an example, which came in first in the

food and grocery retailing sector. The chain has no plans to venture beyond the

Southern region just yet. Current plans are to focus on the Southern markets and

achieve saturation. The intention is that by 2005, they could look at the other

regions. Subhiksha, a Chennai based discount chain, too wants to be the

principal store of purchase for at least 40 per cent of all consumers living within
500-750 meters of the store, that is, within walking distance. This makes the

point very clear that the strategy among most existing retail chains of various

formats is to completely saturate the markets where they are already established

players and then move on to virtually untouched areas where the challenge of

sourcing resources and extending their supply chain model to best suit the size

and expanse of the market would be a challenging task.

Meanwhile, the RPG group plans to take its new formats such as Giant

Hypermarkets national over the next three years. Grocery is a large component

of this format, but not the only one. To elaborate on the hurdles of going pan-

Indian, fundamentally, the way a basic grocery retailing model works is that the

high set-up costs in terms of setting up buying/ distribution infrastructure is

gradually amortized over a larger number of stores. The back-end costs without

distribution centre costs, or what in retail jargon is called retail administration

costs, should stabilize at around 2.5 per cent to 3 per cent of sales.
 Part-1.5
There are many problems face by Retail industry in Indian Market. They are

following:-

The format does not suit rural India: While the format suits the urban areas,

it does not suit the rural areas in a country like India. Today, in Indian,

organized retailing is confined to class A cities, the 23 largest cities. About 82

per cent of organized retailing comes form the top six cities and another 12

percent from the next four. Thus, the top 10 cities account for 94 per cent of all

organized retailing in India. The scattered location of consumers has been the

main deterrent to the rapid spread of the idea in the rural areas.

Purchasing patterns not very conducive: Even in urban centers, the

purchasing patterns of the Indian consumers differ form those of westerners.

Whereas in the west, the purchases are spread better over the month, in India.

Purchases are by and large made in the first week of the month. Theirs perhaps

has a correlation to patterns of payment of wages; Purchasing patterns differ

also because of the difference in the eating habits of people.

Inadequate growth of brands: Inadequate growth of brands is another factor,

In India, branding was almost not-existent in convenience products until

recently; this has naturally inhibited retailing through sophisticated chains.

Supply chain problems: As suppliers are not properly organized in the country,

replenishment of stock poses problems for large chains. Source development

also poses special problems.

Being family businesses, retailing enterprises have limitation in expansion;

Yet another reason for the slow pick up of mega retailing idea in India is that all

along retail enterprises have been family concerns. And, family businesses

usually have a limitation in expansion,

Example of Vivek’s; The Vivek’s (Formerly Vivek’s & Co. ) of Chennai, is an

example. For the past several years, it remained rather small because of its

family character. During the three decades from 1965 to 1995, it had just three

showrooms. It was a family concern and remained for a long time, a single store

outfit, managed by the father and assisted by his three sons. Once the father

grew old, the sons started managing the business, and because there were three

sons engaged in the business, the enterprise went in for three showrooms. In

recent years, however, it has emerged as a major chain, as it has shed its family

business character, now it is actually the largest consumer durable chain in the

country. It has big sales volumes and multiple locations.

Real estate problems; Real estate is an integral requirement of large scale

chain store operation. One needs a large number of stores in each city to

achieve optimum scale. Also, big chains have to operate in several cities. Real

estate thus becomes crucial. That is why groups that have been in real estate and

hotel businesses are more comfortable in branching off into retailing. Fro other

firms, real estate development are a problem; they don not command property

in prime locations.
Other Limitation of Retail Industry

 The organized retail industry in India is faced with stiff competition from the

unorganized sector.

 There is a shortage of quality real estate and infrastructure requirements in

our country.

 Opposition to Foreign Direct Investment from small traders affects retail

industry.

 A very high stamp duty on transfer of property affects the industry.

 Shortage of retail space in central and downtown locations also hinders the

growth of retail industry.

 Presence of strong Pro-tenancy laws makes it difficult to evict tenants and

this is posing problems.

 Land-use conversion is time consuming and becoming complex.

 For settling property disputes, it consumes lot of time.

 Non residents are not allowed to own property except they are of Indian

origin.

 Inadequacies in infrastructure such as lack of high quality road networks,

power shortages and insufficient storage spaces

 The retail industry loses to the tune of US$120 to US$130 million every

year

in frauds ,thefts and employee pilferage, shop lifting, vendor frauds or inacc
 urate supervision despite using standard and modern security features.

Part 1.6

 SOURCE OF DATA

Data’s are the useful information or any forms of document designed in a

systematic and standardize manner which are used for some further

proceedings. One of the important tools for conducting marketing research is

the availability of necessary and useful data. Some time the data are available

readily in one form or the other and some time the data are collected afresh. The

sources of Data fall under two categories, Primary Source and Secondary

Sources.

Primary Data- the primary data was collected through the following

activities:

Filled the Retail Industry related questionnaire to managers of a select group of

companies And Paper Conversation

Secondary Data- the secondary data was collected through the following:

Online Research material of the Various Institution/Outlets directly or indirectly

involved with Retail Industry, Secondary Data used in External Source of

Information Like internet, magazine, paper cutting

 OTHER SOURCE

 Information Sources

Information has been sourced from namely, books, newspapers, trade

journals, and white papers, industry portals, government agencies, trade

associations, monitoring industry news and developments, and through

access to access to more than 3000 paid databases.

 Analysis Method

The analysis methods include the following: Ratio Analysis, Historical

Trend Analysis, Linear Regression Analysis using software tools,

Judgmental Forecasting and Cause and Effect Analysis etc.

Chapter (2)
 Part 2.1

 OPPORTUNITIES OF THE WESTERN RETAILERS

IN INDIA

The retail industries in the western countries have reached a point of

saturation and there is no way of expanding. In this backdrop the retail giants

are trying to make their mark in the retail market of countries that still have

untapped potential of expansion. India happens to be one of them. AT Kearney

has constructed the Global Retail Development Index which has helped the

western retailers to identify the countries in which investments could be made.

Opportunities in India have attracted the western retailers like Wal-Mart,

Euroset, and Supervalu who have plans to enter as single branded retailers. In

gauging whether to enter, the companies keep into account the timing factor

that is whether the consumers are ready to accept the products that are offered

by them. It is highly possible that there are potentials in the market but the

consumer preferences are skewed against the products that are offered.
 Part 2.2

 CONTRIBUTION OF ‘FDI’ IN RETAILING

Permitting Foreign Direct Investment in the retailing sector can have

immense benefits. It can generate huge employment for the semi-skilled as

well as illiterate population which otherwise can't be employed in the

already confined rural and organized sector. The retail sector is highly

dependent on the rural sector. Thus it can facilitate the improvement of the

standard of living of farmers by purchasing commodities at a reasonable

cost. It also stems out an indirect employment generation channel by training

and employing people in the transportation and distribution sectors such as

drivers, mechanics etc. It is also evident that real estate is a genuine

challenge for organized retailing. Traditional retailers can use this situation

in their favor by taking franchisees of the mega players of this industry. On

the other hand, the consumer gains from the wide variety of choices and a

more diversified basket of prices available under one roof. Secondly the

indirect benefits like better roads, online marketing, expansion of telecom

sector etc. will give a 'big push' to other sectors including the rural one itself.

Last but not the least the huge tax revenue generated from these retail

biggies and collected in government coffers will gradually wipe out the ugly

looking fiscal and revenue deficits. Besides the transaction in foreign

currencies by these MNCs will create a balance in exchange rate and will
 bring in stable funds in the economy as opposed to FII's hot money. This

will in turn act as a boost to the developing (or 'transforming', as suggested

by the USAID) economy of India.

Part 2.3

 BENEFITS TO THE INDIAN CONSUMER:

One has to agree that the entrance of big players will ensure the higher

quality of service and produce being sold to the consumers. There are other

indirect benefits in terms of choice and pricing that will be passed along to the

consumers as the big retailers will compete with each Other for greater share of

the market.
Chapter (3)
 Part 3.1

LATEST TRENDS IN RETAIL SECTOR

Today, retail in India is huge, close to $200 billion, of which organized

retail accounts for just $6 billion. This $200 billion should become $300 billion

in the next five to six years. This is a time when organized retailing is just

getting into full steam and the opportunity is huge. Organized retail in India is

expected to grow at 40% for the next five years, thanks to the nascent stage of

modern retail and the ‘malling’ of India.

It is expected that by 2016 modern retail industry in India will be worth

US$ 175- 200 billion. India retail industry is one of the fastest growing

industries with revenue expected in 2007 to amount US$ 320 billion and is

increasing at a rate of 5% yearly. A further increase of 7-8% is expected in the

industry of retail in India by growth in consumerism in urban areas, rising

incomes, and a steep rise in rural consumption. It has further been predicted that

the retailing industry in India will amount to US$ 21.5 billion by 2010 from the

current size of US$ 7.5 billion. The retail sector would generate employment

for more than 2.5 million people by the year 2010, says an analysis by Ma Foi

Management Consultants Ltd. And A KPMG report says that the organized

retail would grow at a higher rate than GDP in the next five years
Recent Trends & Changes
• Retailing in India is witnessing a huge revamping exercise as can be seen in

the graph

• India is rated the fifth most attractive emerging retail market: a potential

goldmine

• Multiple drivers leading to a consumption boom:

• Favorable demographics

• Growth in income

• Increasing population of women

• Raising aspirations : Value added goods sales

3.1 Retail Analysis

• Organized retailing in India has been largely an urban phenomenon with

affluent classes and growing number of double-income households.

 • Rural markets emerging as a huge opportunity for retailers reflected in the

share of the rural market across most categories of consumption.

• Companies using their own web portal or tie-sups with horizontal players

like Rediff.com and Indiatimes.com to offer products on the web

• Spencer's is also planning to set up 500 more stores by June 2008 with an

investment of nearly US$ 125.89 million

• DLF plans to invest US$ 4.02 billion over four years to develop about 20

large shopping malls across the country

•Israeli mall developer

Plaza Center NV plans

to invest US$ 1.25

billion over the next

five-seven years to set

3.2 Retail Market up 50 malls in India.

Size
• Reliance Retail is going ahead with plans worth an investment of US$ 3.77

billion for setting up 205 stores

• IT is a tool that has been used by retailers ranging from Amazon.com to

eBay to radically change buying behavior across the globe

• Experimentation with formats: Retailing in India is still evolving and the

sector is witnessing a series of experiments across the country with new

 formats being tested out. Ex. Quasi-mall, sub-urban discount stores, Cash

and carry etc

• Unorganized retailing is getting organized: To meet the challenges of

organized retailing such as large cineplexes, and malls, which are backed by

the corporate house such as 'Ansals' and 'PVR‘ the unorganized sector is

getting organized. 25 stores in Delhi under the banner of Provision mart are

joining hands to combine monthly buying. Bombay Bazaar and E-food mart

formed which are aggregations of Kiranas.

• Emergence of discount stores: They are expected to spearhead the

organized retailing revolution. Stores trying to emulate the model of Wal-

Mart. Ex. Big Bazaar, Bombay Bazaar, RPGs

3.3 Retail Segments

 Part 3.2
MAJOR PLAYER OF RETAIL INDUSTRY

The Indian retail sector has been euphoria over the last five years. India

topped the A.T. Kearney's Global Retail Development Index for two

consecutive years and this has infatuated Indian as well as foreign retail players

to go gaga on the merchandising track. According to geographical expansion,

Delhi/NCR and Mumbai are the felicitated regions as the top companies have

rated the spending potential of consumers in the vicinity of the national capital

and the financial capital as excellent. Other metros such as Kolkata, Chennai,

Hyderabad and Bangalore have caught the sight of investors but their fortunes

are yet to be illuminated. Companies like the Future Group, Reliance, Bharti-

Walmart, DLF etc. have shown the way for other to enter. The countries are

expecting a surge in the growth sprint and let’s hope for the best.

Top Companies: An analysis

Big Bazaar is a chain of department stores in

India, currently with 75 outlets. It is owned by

the Pantaloon Retail India Ltd, Future Group. It works on the same economy

model as Wal-Mart and has considerable success in many Indian cities and
small towns. The idea was pioneered by entrepreneur Kishore Biyani, the

CEO of Future Group. Currently Big Bazaar stores are located only in India.

It is the biggest and the fastest growing chain of department store and aims at

being 350 stores by the end of year 2010.

It offers all types of household items such as home furnishing, utensils, fashion

products etc. It has a grocery department and vegetable section known as the

Food Bazaar and its online shopping site is known as FutureBazaar.com. The

real estate fund management company promoted by the Future Group expects

to develop more than 50 projects across India covering a combined area of

more than 16 million sq. ft. On April 1 2007, Big Bazaar had to shut its outlets

in Mumbai as the 120 retrenched employees called a strike with the support of

Bhatia Kamgar Sena (the trade Union wing of Shiv Sena). Later the

management agreed to reinstate the sacked workers

Pantaloon Retail India Ltd, is India’s leading

retail company with presence across food, fashion,

home solutions and consumer electronics, books and music, health, wellness

and beauty, general merchandise, communication products, E-tailing and leisure

and entertainment.

Headquartered in Mumbai (Bombay), has over 450 stores across 30 cities in

India and employs over 18,000 people. Pantaloon founded by Mr. Kishore

Biyani. The company owns and manages multiple retail formats catering to a
wide cross-section of the Indian society and its width and depth of merchandise

helps it capture almost the entire consumption basket of the Indian consumer.

Founded in 1987, as a garment manufacturing company, Pantaloon Retail

forayed into modern retail in 1997 with the opening up of a chain of department

stores, Pantaloons. In 2001, it launched Big Bazaar, a hypermarket chain,

followed by Food Bazaar, a supermarket chain. It went on to launch Central, a

first of its kind, seamless mall located in the heart of major Indian cities. Some

of its other formats include, Collection I (home improvement products), E-Zone

(consumer electronics), Depot (books, music, gifts and stationeries), all (fashion

apparel for plus-size individuals), Shoe Factory (footwear) and Blue Sky

(fashion accessories). It has recently launched its retailing venture,

futurebazaar.com.

In India's chaotic markets, Kishore Biyani is the unchallenged king of retail. He

has the knack of catching rivals off-guard and striking where it hurts most. And

now that he's set himself the task of retaining control of the largest retail space

in the country, he won't let anyone - suppliers or international promoters

included - catch him slacking. The latest to face the wrath of the 43-year-old is

South African hypermarket Shop rite, which opened shop in Mumbai last month

through a franchise agreement with local company Normal Lifestyle.

The hypermarket began retailing products from big boys Nestle, Unilever and

Procter & Gamble at consumer discounts of 20-30 per cent, lower than even

Biyani's purchase prices in his Big Bazaar and Food Bazaar stores.
 Reliance Fresh is the retail chain division of

Reliance Industries of India which is headed by

Mr.Mukesh Ambani. Reliance has entered into this segment by opening new

retail stores into almost every metropolitan and regional area of India. Reliance

plans to invest Rs 25000 cores in the next 4 years in their retail division and

plans to begin retail stores in 784 cities across the country. The Reliance Fresh

supermarket chain is RIL’s Rs 25,000 crore venture and it plans to add more

stores across different g, and eventually have a pan-India footprint by year

2011. The super marts will sell fresh fruits and vegetables, staples, groceries,

fresh juice bars and dairy products and also will sport a separate enclosure and

supply-chain for non-vegetarian products. Besides, the stores would provide

direct employment to 5 lakh young Indians and indirect job opportunities to a

million people, according to the company. The company also has plans to train

students and housewives in customer care and quality services for part-time

jobs.

Reliance Fresh recently (24th Jan, 2007) opened several "Fresh" outlets in

Chennai, New Delhi, Hyderabad, Jaipur, Mumbai, Chandigarh, Ludhiana

increasing its total store count to 40. Reliance is still testing its retail concepts

by controlled entry beginning in the southern states

 Subhiksha is an Indian retail chain with

more than 760 outlets selling groceries, fruits,

vegetables, medicines and mobile phones. It was started and is managed by Mr.

R. Subramaniam, IIM Ahmedabad alumni. He also plans to invest Rs.500 crore

to increase the number of outlets to 2000 across the country by 2009.

Derived from the Sanskrit word, Subhiksham or "giver of all things good", It

opened its first store in Thiruvanmiyur in Chennai in March, 1997 with an

investment of about Rs. 5 lakh. The retail chain has seen a considerable growth

by offering goods at cheaper rates and there by increasing its customer base. It

is also dubbed as India's largest retail chain. Vision to deliver consistently better

value to Indian consumers, has guided Subhiksha to deliver savings to all

consumers on each and every item that they need in their daily lives, 365 days a

year, without any compromise on quality of goods purchased.

Subhiksha now has the pan Indian presence with stores across Delhi, UP,

Punjab, Hariyana, Gujarat, Maharashtra, AP, Karnataka and TN. It has recently

commenced operation in Kerala also. Today, it is a multi-location,

professionally managed and vibrant organization. Subhiksha now has even

opened Specialized Mobile shops called Subhiksha Mobile where mobiles are

sold at a discounted price

Subhiksha is India's largest supermarket, pharmacy and telecom chain. Started

in 1997 as a single store entity in South Chennai, it is now present nationally

across 1000 outlets and spread across more than 90 cities. You can now locate
the nearest Subhiksha store in your area with the Store Locators. ICICI Venture

Capital has a 24% stake in Subhiksha.

Food world is a chain of supermarket stores. It

was started in May 1996 as a division of Spencer & Co, a part of the RPG

Group. In August 1999 it became a separate company. Currently it operates 89

stores in Bangalore, Chennai, Coimbatore, Erode, Hyderabad, Kodai,

Pondichery, Pune, Secunderabad, Salem, Trivandrum and Vellore

DLF Retail Developers Ltd. is one of the troikas

of the DLF Group. Besides being India's largest real estate developer, DLF is

also of the leaders in innovating shopping malls in India. It caught public eye

when it launched the 2, 50,000 sq ft. shopping mall in Gurgaon. It has brought a

dramatic change in the lifestyles and entertainment with its City Centers and

DT Cinemas. DLF has plans to invest Rs. 2000-3000 crore in all the emerging

areas from metros to class cities in the next two years. Till last year the

company was involved in building 18 malls out of which 10 were in the NCR

region. Future plans of DLF involve opening up of 100 malls (specialty malls,

big box retailing and integrated malls) across 60 cities in next 8-10 years. They

are slowly transforming into 'lease' and 'revenue share' models.

Local players like ITC, the A.V. Birla Group and Tatas have given the hints to
enter organized retail. France’s Carrefour SA and Britain’s Tesco too were

recently in news for their future plans to explore the Indian retail market

Bharti Retail, a wholly owned subsidiary of Bharti

Enterprises. Has announced two joint ventures (JV)with

the international retailing behemoth, Wal-Mart. The first JV ensures cash and

carry business, in which 100 percent FDI is permitted and it can sell only to

retailers and distributors. The second JV concerns the franchise arrangement.

Sunil Mittal, Chairman of the Bharti Group assured that the ventures will use

“low prices every day” and “best practices for the satisfaction of the customer”.

Processed foods and vegetables will be delivered by Bharti Field Fresh, Bharti's

JV with Rothschild. Bharti Retail aims to foray every city with a population

exceeding 1 million. It has plans to come up with an investment of more than

$2 billion in convenience stores, supermarkets and hypermarkets spread over an

aggregate 10 million sq. ft. The expansion drive looks ambitious but analysts

are worried that Bharti may face stiff competition from Pantaloon and Reliance

as they too have sanguine plans to flood the markets with thousands of retail

outlets in the coming five years. Bharti Telecom also has plans to offer all its

fixed and mobile telecom products and services from a single window to the

SMB (Small and Medium Business) enterprises under the Bharti Infotel

division...
 Lifestyle is part of the Landmark Group, a

Dubai-based retail chain. With over 30 years’

experience in retailing, the Group has become the foremost retailer in the Gulf.

Positioned as a trendy, youthful and vibrant brand that offers customers a wide

variety of merchandise at exceptional value for money, Lifestyle began

operations in 1998 with its first store in Chennai in 1999 and now has 13

Lifestyle stores, 5 Home Centers and 1 Baby shop store across Chennai,

Hyderabad, Bangalore, Gurgaon, Delhi, Mumbai and Ahmedabad.

Business World-IMRB Most Respected Company Awards Survey has rated

Lifestyle as the Most Respected Company in the Retail Sector in 2003 and

2004. Lifestyle has also been awarded the ICICI-KSA Technopak Award for

Retail Excellence in 2005, the Reid & Taylor Retailer of the Year Award for

2006 and more recently, the Lycra Images Fashion Award for the Most Admired

Large Format Retailer of the Year in 2006

The foundation of Shopper's Stop was laid on

October 27, 1991 by the K. Raheja Corp. group of

companies Shoppers’ Stop aims to position itself as a

global retailer. The company intends to bring the world’s best retail technology,

retail practices and sales to India. Currently, they are adding 4 to 5 new stores

every year with an immense amount of expertise and credibility, Shopper's Stop
has become the highest benchmark for the Indian retail industry Shopper's Stop

in the only retailer from India to become a member of the prestigious

Intercontinental Group of Departmental Stores (IGDS).

With its wide range of merchandise, exclusive shop-in-shop counters of

international brands and world-class customer service, Shoppers’ Stop brought

international standards of shopping to the Indian consumer providing them with

a world class shopping experience. The stores offer a complete range of apparel

and lifestyle accessories for the entire family. From apparel brands like

Provogue, Color Plus, Arrow, Levi’s, Scullers, Zodiac to cosmetic brands like

Lakme, Chambor, Le Teint Ricci etc., Shoppers’ Stop caters to every lifestyle

need. Shoppers' Stop retails its own line of clothing namely Stop, Life, Kashish,

Vettorio Fratini and DIY. The merchandise at Shoppers’ Stop is sold at a quality

and price assurance backed by its guarantee stamp on every bill. Their

motto: “We are responsible for the goods we sell”.

Vishal Mega Mart is one of fastest growing

retailing groups in India. Its outlets cater to almost all

price ranges. The showrooms have over 70,000 products range which fulfills all

your household needs, and can be catered to less than one roof. It is covering

about 1996592 lac sq. ft. in 18 states across India. Each store gives you

international quality goods and prices hard to match. The cost benefits that is

derived from the large central purchase of goods and services is passed on to
 the consumer the group had a turnover of Rs. 1463.12 million for fiscal 2005,

under the dynamic leadership of Mr. Ram Chandra Aggarwal. The group had of

turnover Rs 2884.43 million for fiscal 2006 and Rs. 6026.53 million for

fiscal 2007.the group’s prime focus is on retailing. The Vishal stores offer

affordable family fashion at prices to suit every pocket.

Welspun Retail Limited (W.R.L.) was established in

2003 as a part of Welspun Group, one of the fastest growing

business conglomerates in India. Welspun is a U.S. $1 billion group, into

diverse businesses, industries, regions and has six companies under the

umbrella brand. Our International Home Textiles Company; Welspun India

Limited (W I L) launched its Indian retail division, WRL with an aim to capture

the Home Textiles market in 2003. The Retail brands, SPACES- Home &

Beyond has carved its niche with its fashion driven model in the country's

major metros, while Welhome targets a larger audience with its value for money

model. The turn over of the Retail division stands at 100 crore, expected to

double in the next 5 years

Key Differentiating Attributes

 W.R.L. is the first Retailer of soft furnishing for "Home" in India.

 W.R.L. has two models that cater to both, the aspiration clientele and the
value for money conscious clientele.

 Launched Spaces -Home & Beyond and Welhome (Welspun Factory Outlet)
in the same year.
 Phenomenal growth anticipated in FY 2007-08.

 Design Studio ranks amongst the best in the country.

 Panel of International Designers for the new collections.

 Offer specialized products at affordable prices, Bed sheets starting at Rs. 199,

towels starting at Rs. 79 and Curtains starting at Rs. 99

Trent is the retail arm of the TATA

group. Started in 1998, Trent operates Westside, one of the many growing

retail chains in India. The foresight of the TATA Group, which invested in retail

relatively early, is paying high dividends as retail is one of the booming sectors

in India. The company has a turnover of Rs. 357.6 crores (FY 2005-2006) and

currently operates 22 stores in the major metros and mini metros of India. An

international shopping experience, a perception of values, and offering the latest

styles, has created a loyal following for Westside's own brand of merchandise.

Westside was named the 'Most Admired Large Format Retail Chain of the Year'

by the Lycra Images Fashion Awards 2005.Westside operates stores in Mumbai,

Ahmedabad, Bangalore, Delhi, Chennai, Kolkata, Hyderabad, Pune, Surat,

Vadodara, Indore, Noida, Gurgaon, Ghaziabad, Mysore, Jaipur, Lucknow,

Nagpur.
 Wal-Mart Stores, Inc. is an American

public corporation that runs a chain of large, discount department stores. It is

the world's largest public corporation by revenue, according to the 2007 Fortune

Global 500. Founded by Sam Walton in 1962, it was incorporated on October

31, 1969. It opened its home office and first distribution center in Bentonville,

Arkansas. It had 38 stores operating with 1,500 employees and sales of $44.2

million .Wal-Mart is the largest grocery retailer in the United States, with

an estimated 20% of the retail grocery and consumables business, as well as the

largest toy seller in the U.S., with an estimated 22% share of the toy market.

Wal-Mart is the largest private user of electricity in the US. Owns a subsidiary

electric company in Texas, and will possibly move into the power business. It is

also undertaking a number of environmentally conscious initiatives to reduce

energy usage and waste. Wal-Mart operates in Mexico as Walmex, in the UK as

ASDA, and in Japan as Seiyu. It has wholly-owned operations in Argentina,

Brazil, Canada, Puerto Rico, and the UK. Wal-Mart's investments outside North

America have had mixed results: its operations in South America and China are

highly successful, but it sold its retail operations in South Korea and Germany

in 2006 after sustained losses. On September 12, 2007, Wal-Mart introduced

new advertising with the slogan, "Save Money Live Better," replacing the

"Always Low Prices, Always" slogan, which it had used for the previous 19

years. Global Insight, which conducted the research that supported the

ads, found that Wal-Mart's price level reduction resulted in savings for
consumers of $287 billion in 2006, which equated to $957 per person or $2,500

per household

3.1 World-Wide Retailers

Carrefour SA is a French international hypermarket

chain, with a global network of outlets. The group

was created by Marcel Fournier and Denis Deffore in 1957. It is the second

largest retail group in the world in terms of revenue after Wal-Mart. Carrefour

operates mainly in Europe, Brazil, Argentina, Dominican Republic and

Colombia, but also has shops in North Africa and Asia. Carrefour means cross-

road in French. Carrefour is active in many types of retail distribution:

hypermarkets, supermarkets, Discount Store, Grocery Stores, Cosmetics, and

Cash & Carry. Recently The $130 billion French retail Carrefour has set up a

100 percent-owned arm to enter the wholesale merchandise business in India

and will opt for the franchising route to open multi-brand retail stores in the
country, Carrefour WC&C India will also enter these areas where the Indian

franchisee can get the same technical expertise that go into running the retail

trade stores of the French company across the globally.

The Kroger Co. is an American retail supermarket chain

and parent company, founded by Bernard Henry Kroger in

1883 in Cincinnati, Ohio. It reported over US$66 billion in

sales during fiscal year 2007 and is currently the second-largest grocery retailer

in the country by volume and third-place general retailer in the country, with

Wal-Mart and The Home Depot filling slots one and two, respectively. Kroger

operated, either directly or through its subsidiaries, 2,500 grocery stores, 579 of

which had fuel centers, nearly 800 convenience stores, 400-plus jewelry stores,

and 42 manufacturing facilities in 32 states; we employ a growing family of

more than 290,000 associates coast-to-coast and presently Kroger is active in

many other Retail Distribution like Bakery, Banking, beer, dairy, wine etc….

The slogan of Kroger co. is “Right Store. Right Place”. Kroger’s recently

launched Perishable Donations Partnership will bring critically needed

perishable food items into the food bank process. The company-wide program

will increase the number of stores in the Kroger family that donate safe,

perishable food to Second Harvest food banks that are equipped to safely

handle and distribute fresh food. Kroger’s goal is to donate 50 million pounds

of nutritious, fresh food across the country.

 Latest News of Retail Market in India

 Israeli Giants Enter Indian Retail Sector

Israeli mall giants, owners of retail-linked realty assets across the world,

are buying into India’s money minting retail sector. Tel Aviv-based mall giant

Gazit Globe has tied up with one of the HDFC funds to pump in $150 million

into developing assets, including supermarket anchored retail play. Big

Shopping Group, of Israel’s biggies has teamed up with Lehman Brothers Real

Estate Private equity to set up ‘open malls’ in tier I and tier II cities.

Israeli tycoons and families, which raked in money from core real estate

developments in the US, have turned their attention to retail assets from Sao

Paulo to Macedonia, as mall ownership and management provides attractive

20% plus annualised returns in developing markets. Billionair eChaim

Katzman, at the helm of Gazit Globe, is no exception as he went on acquiring

shopping centers from market to market

Us Retail Major Kroger Plans Entry into Indian Real Estate

The $66-billion US based grocery giant, Kroger is all set to enter into

Real Estate India. According to reports, the company representatives have

already met 3-4 prominent real estate companies of India for joint ventures.

Some prominent sources said that Kroger is primarily interested in jointly

developing new FDI-compliant commercial projects or buying into existing

ones. Interestingly, America No. 3 general retailer behind Wal-Mart and The

Home Depot runs all its nearly 2,500 supermarket stores in the US

 Reliance Retail plans to turn Adani outlets into specialty

Stores

Reliance Retail will be changing the format of its recently purchased

Adani Retail stores into specialty stores for jewelry, medicines, eyeglasses,

home furnishings, telecom and consumer electrical stores. The company has

also taken in some of the executives onto its own team. According to a senior

executive, the stores cannot be converted to Reliance Fresh stores as they are

too small, ranging from 2,000-3,000 sq ft, while most Reliance Fresh stores are

around 4,000 sq ft in size.

Source: The Economic Times

 Pantaloon Retail pulls out from Gini & Jony

Pantaloon Retail India Ltd (PRIL) has officially pulled out of

Gini & Jony, a children’s wear brand and one of the first brands that Kishore

Biyani, MD of Pantaloon had invested in. Sources report that while the

financial arrangement with Gini & Jony will continue, it will break off all

operational ties. Pantaloon had invested in the company with the thought

that it would “drive business on its own” but unfortunately, it has not been

able to work in a cohesive manner with Pantaloon and become dependant on

it. Ultimately Pantaloon had to even depute top management, including the
CFO to take care of its functioning.

Source: The Economic Times

Chapter (4)
MAJOR FINDINGS
(1) The Retail Sector in India can be split up into two, the organized and the

unorganized. The organized sector whose size is expected to triple by 2010

can be further split up into departmental stores, supermarkets, shopping

malls.

(2) In terms of value the size of the retail sector in India is $300 billion. The

organized sector contributes about 4.6% to the total trade.

(3) The retail sector in India contributes 10% to the Gross Domestic Product

and 8% to the employment of the country.

(4) In terms of growth the FMCG retail sector is the fastest growing unit

and the retail relating to household care, confectionery etc, have lagged

behind.

(5) The foreign retail giants were initially restricted from making

investments in India. But now FDI of 51% is permitted in India only

through single branded retail outlets. Multi brand outlets are still beyond

their reach. Again they can only enter the market through franchisees,. This

was how Wal-Mart had entered joining hands with Bharti Enterprises.

(6) On line retailing is still to leave a mark on the customers due to lacunae

that we have already mentioned.

(7) Cultural and regional differences in India are the biggest challenges in

front of retailers. This Factor deters the retailers in India from adopting a

single retail format.

 (8) Hypermarket is emerging as the most favorable format for the time

being in India

 CONCLUSION

For a start, these retailers need to invest much more in capturing more

specific market. Intelligence as well as almost real-time customer purchase

behavior information. The retailers also need to make substantial investment in

understanding/acquiring some advanced expertise in developing more accurate

and scientific demand forecasting models. Re-engineering of product sourcing

philosophies-aligned more towards collaborative planning and replenishment

should then be next on their agenda. The message, therefore for the existing

small and medium independent retailers is to closely examine what changes are

taking place in their immediate vicinity, and analyze Whether their current

market offers a potential redevelopment of the area into a more modern multi-

option destination. If it does, and most commercial areas in India do have this

potential, it would be very useful to form a consortium of other such small

retailers in that vicinity and take a pro-active approach to pool in resources and

improve the overall infrastructure. The next effort should be to encourage

retailers to make some investments in improving the interiors of their respective

establishments to make shopping an enjoyable experience for the customer.

As the retail marketplace changes shape and competition increases, the

potential for improving retail productivity and cutting costs is likely to

decrease. Therefore, it will become important for retailers to secure a distinctive

position in the marketplace based on value, relationships or experience.

Finally, it is important to note that these strategies are not strictly independent

of each other; value is function of not just price, quality and service but can also

be enhanced by Personalization and offering a memorable experience. In fact,

building relationships with customers can by itself increase the quality of

overall customer experience and thus the perceived value. But most importantly

for winning in this intensely competitive marketplace, it is critical to understand

the target customer's definition of value and make an offer, which not only

delights the customers but also is also difficult for competitors to replicate.

3.5 Retail Touches Economy

Chapter (5)
 V S Ramaswamy, S Namakumari “Marketing Management”, Macmillan

Business Book, Delhi

 Philips Kotler “Marketing Management” 11th Edition, Eastern Economy

Edition

 Ramanuj Majumdar “Product Management In India” 2nd Edition, Eastern

Economy Edition.

 Christopher Lovelock “Service Marketing” 5th Edition, Pearson Education

 Dr. S L Gupta “Sales & Distribution Management”, Excel Books

 Business and Marketing Magazine “4ps Business & Marketing”

 Business Magazine “Business Today”

 “Changing Consumer Interface of Market Driven Innovations”- Report

by Tarun Arora, Bharti Retail

 “Retail Industry -Where does India stand?”- Report by Sanjeev Kumar,

Delamore Consulting Ltd.

 “Retail Scenario in India-Unlimited Opportunity”- Report by CII

 “Retail Outlook for China 2005”- Report by KPMG in Hong Kong,

 “Global Powers of Retailing 2006”- Report by Stores Magazine, National

Retail Federation (NRF)

 “The Great Indian Retail Story” –Report by Ernst & Young India

 “Indian Retail Industry”- Report by www.Rocsearch.com

 “Global Retail Industry Facts and Figures”- Report by UNEP

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