M21MKS122 - RETAIL MANAGEMENT

Unit-1: Syllabus

Retailing: - Meaning, Nature, Growing Importance of Retailing, Factors Influencing Retail

growth, Functions of Retailing. Retailing in India: Organized Retiling Vs Unorganized
Retailing, Emergence of online retailing in India, FDI in retailing.

Retailing

Retailing is a set of activities performed in selling the goods and services directly to the end
users. The goods and services sold to the consumers are meant for their personal use and not
for resale or business activity. Retailing is the last activity conducted in the chain of product
distribution.

Definitions

 American Marketing Association – outlined “Retailing consists of activities involved

in selling directly to ultimate consumer for personal or non-business use. It embraces
the direct to customers sales activities of the producer, whether through his own store,
by house-to-house counselling or mail order business”.

-Philip Kotler:

 The marketing guru has said all activities in selling goods or service directly to final
consumer for personal or non-business use is retailing or retail marketing.

Trends impacting retail in India

 Contactless engagements (mobile payments, no-contact deliveries, virtual tours,

AR/VR-led consultations, and home visits).
 Growth in select sub-sectors driven by increased spend on essentials, nutrition,
wellness, and hygiene (discretionary spending has been deprioritised).
 Digital as a platform not just for sales, but for inspiration, social affirmations, and
brand building.
 Shift to D2C as brands understand the importance of staying close to the consumer
amidst intense competition. The focus will be on building consumer awareness and
feeding insights back into new product development and e-commerce strategies.
  Increased investments in home nesting as homes become the centre of all activities
(work, leisure, study, and comfort).
 The rise of local and private labels, thanks to increasing consumer experimentation
(e.g., lounge-wear), expectations, and choice, as well as the limited availability of
specific products (e.g., a certain sanitizer brand or packaged staples).
 The importance of local kiranas in fulfilment and last mile delivery/servicing.

NATURE OF RETAILING

1. Part of Marketing:

 Retailing is a part of marketing activity. It helps the product to reach the final customer.
This is also the goal of marketing. Thus, retailing facilitates marketing activities by
targeting a wide variety of customers.

2. Customer Centric:

 The whole concept of retailing revolves around the customer. Due to increased
competition, all the retailers want to attract the customers. Retailers use various sales
promotion methods such as discounts, etc., to lure the customers.

3. Multi-Dimensional:

 Retailing has many dimensions. They vary from local kirana shops and kiosks to super
malls selling multiple branded products. These days there is a manifold increase in the
use of internet for buying and selling the goods.

4. Varying Geographical Locations:

 The geographical area of reach of retailers varies widely. It may vary from a local area
market selling goods to local customers only to super malls who have a large variety of
customers from different areas and even different cities. These days due to the increased
use of internet, the retailers have customers from all over the country and even from
abroad.

5. Transformational:

 Since the start of retailing as a full-fledged business, there have been huge
transformations in it. These transformations generally are in the form of objectives of
 retailing (earlier profit driven, now customer focused), methods of retailing (from
simple retail shops earlier to multi brand malls), the areas covered (earlier small areas
now whole country or even other countries), the customers (from simple local
customers to customers from all walks of life) etc.

6. Complex Management Process:

 Retailing seems like a simple process. But in reality it is a complex management

process. Retailing involves retail stores being located in convenient places, arranging
goods according to different price bands, selling goods in the quantities convenient to
the customers, proper after sale services and a wide range of sales promotion measures
to attract the customers. Thereafter, there should also be proper Customer Relationship
Management (CRM) programmes to maintain long healthy relationships with the
customers.

7. Assortment of Products and Services:

 Retailing involves a combination of goods and services. It is not at all possible for a
retailer to survive in today’s world by offering just a single product. In order to be
successful, a retailer needs to offer an assortment of goods and services. For example,
a baker cannot survive just by selling a few cakes and biscuits. In order to survive in
the competitive market, firstly, a baker needs a proper environment called ambience
which is pleasing to the eyes of the customer. Secondly, he needs a variety of cakes and
biscuits and other products. Along with that he also needs to keep some confectionery
items which people are likely to buy along with the main products such as chocolates,
cookies, chips, cold drinks, patties, burgers, hot dogs, etc. Apart from these items
people may expect him to keep a few items such as birthday and anniversary candles,
party poppers, decoration items etc. After these products, people may also expect him
to take the orders on phone and home-deliver the items purchased. Thus, it can be easily
said that retailing is an assortment of various goods and services.

8. Studying Demand Pattern:

 A retailer is required to study the current demand pattern of the products being offered
by him in the market. By studying the demand pattern, he can ascertain the quantity of
goods he needs to buy in bulk from the wholesaler. In case he buys a huge quantity of
goods without studying the demand pattern, he may have to face the risk of
 obsolescence of goods. Moreover, large stocks need large areas for storage. All these
have to be arranged by the retailer.

9. Creation of Utilities:

 A retailer helps in creation of time and place utilities. Time utility is created when goods
are made available at a particular time. The retailer creates time utility by storing the
goods with himself and makes them available to the customers as and when needed.
Place utility means making the goods available at different places away from the place
of manufacture. Retailers make the goods available to the customers at various locations
away from their manufacturing locations.

10. Private Branding and Labeling:

 The spurt in the retailing activity as resulted in creation of private brands. Private
branding or labeling means buying products directly from the manufacturer and giving
them own brand name by the retailer. With the increase in retailing there has been an
increase in the exclusive retail stores selling products of particular brands only. For
example, Big Bazaar, Food Bazaar of Future Group; Reliance Trends, Reliance
Footprints, Reliance Fresh, etc., are some of the divisions of Reliance Retail Ltd. which
is a subsidiary of Reliance Industries. According to a Neilson study food continues to
dominate the private label market at 76 per cent of total sales. Packaged grocery
dominates this market with about 53 per cent share of total sales.

Reasons behind the growth of the retail sector in India

India is not only one of the fastest growing economies in the world but also ranks first in the
Global Retail Development Index (GRDI). The GRDI ranks the top 30 developing countries
for retail investment worldwide by analysing 25 macroeconomic and retail-specific variables.
Moreover, it not only identifies the most attractive markets today but also identifies those that
offer potential in the future. Although the sheer market size of China still makes it a strong
competitor for foreign investment, the waning of its working population in comparison to the
working population of India gives India an edge over China. The main factors responsible for
the growth of the retail industry are:
1. Increase in per capita income:

 Per capita Income means how much an individual earns, of the yearly income that is
generated in the country through productive activities. India has marked growth in per
capita income by 10.5% which shows tremendous increase in GNP (Gross National
Product) of the country. Increase in per capita income reflects hike in income of
Households which in turn will consume more, thus leading to growth of retail sector.
Household prefer to shop from big giants as compare to their Kirana store.

2. Demographical changes:

 India is having huge young age working population which is generating huge income
and high savings. For any developing country young age group, income, savings are
key factors for its growth. Presence of these key factors has helped in attracting big
retail giants to India

3. High standard of living:

 Standard of living in India has improved. Earlier Shopping in India always had an
emotional tag attached to it, along with that people use to have myth that shopping from
shopping complexes or Malls is costlier and it suits only to rich class. But now things
have changed, people have changed their misconception and have adopted Mall culture.
This shows that standard of living has increased.

4. Change in consumption pattern:

 Consumption patterns among various classes have changed over the years. Earlier
customers were brand loyal due to which they were allowing new brands to enter the
market. But now customers are showing good response to new product entering the
market because they have realised that they are paying for quality. This drastic change
in customers' perception has opened ways for many new entrants.

5. Availability of low-cost consumer credit:

 It is rightly said that sales generated on credit are more as compare to cash sales. With
the change in credit policies, many new customers have entered the market. Purchasing
on credit basis with good credit worthiness gives both seller and buyer flexibility to
transact. Earlier due to lack of cash many buyers use to postpone their purchases, but
now with modernisation they are carrying it on credit basis as it is cheaper to repay.
6. Improvements in infrastructure:

 With many infrastructural changes taking place right from metro rails to Bandra-worli
sea link in the country, retail is also expanding its wings. With huge infrastructure
spending which has entered the country in form of FDI (Foreign Direct investment),
more retail giants have proposed to enter Indian market.

7. Entry of foreign retailers:

 The main factors responsible for the growth of the retail industry are the foreign
retailers and the income structure of the working population. Foreign retailers enter the
market and provide good quality products and services which not only expand the
market but give local retailers incentives to improve the quality of their own products.
Meanwhile, the income structure of the working population determines the demand for
products. Other factors include the size of the working population, entry of the retail
industry into rural markets or the involvement of a corporate sector to provide quality
products at reasonable prices.

8. Make in India reaping dividends:

 The Make in India campaign, started with the aim to make India a global manufacturing
hub, encouraged multinational and domestic companies to manufacture their products
in India. To achieve that aim, the government has been working towards creating a
conducive environment for investment, development of modern and efficient
infrastructure and opening up new sectors for foreign investments. Under this
campaign, the government also took steps to improve India's rank in the Ease of Doing
Business Index, an index that measures how easy it is to do business in a country.
Developments of the manufacturing sector and an increase in the number of businesses
have facilitated job creation leading to higher incomes for an increasing middle-class
population. Due to the higher incomes, the population is moving away from the trend
of buying only essential commodities, thus leading to a consumption boom in India

9. Impact of FDI and e-commerce:

 Recognising the importance of foreign investment in the growth of any industry, the
government has initiated lucrative methods to attract foreign investors. These methods
include relaxing FDI regulations in certain areas of the retail sectors and are expected
to result in a boost to the organised retail sector.
Importance of Retailing

1) Sales to Ultimate consumers of the products

 In a retail transaction, the goods and services are sold to ultimate or final consumers.
The products don’t get resold after this transaction. Goods and services sold at this point
can be used for various purposes such as for domestic use, household use or for
industrial use.
 Hence, at this point manufacturer can interact with his consumers through retailer and
know about their views.

2) A convenient form of selling quantity-wise

 The meaning of word retail is to break down the goods in small pieces and reselling
them. the goods are bought by the retailer in large quantities from the middleman or
manufacturer and bulk is divided into small quantities and sold to consumers as per
their requirements.
 To do this, the retailer can repack goods in various quantities and shapes so that it is
convenient for consumers to choose and carry them to their homes.

3) Convenient Place and Location

 Retailer stores are generally set up at locations which are convenient for consumers to
reach. A retail store can be of various forms such as it could be a small shop, small
store, or a multiplex. Goods can be sold through internet and mobile apps as per the
convenience of consumers.
 Moreover, shopping online is becoming a new trend because of the advancement in
technology and courier services. Therefore, more and more companies are taking their
business online where customers can view products at the comfort of their home and
buy them.

4) The lifestyle of the people is shaped by retailing

 Retailing is an integral part of modern society. People highly depend on retail stores to
lead a comfortable life. in the past time, goods and service were made available through
the process of trading.
  But in present times trading is replaced by buying and selling goods which makes retail
stores an important part of the society.

5) Retail businesses contribute to the economy

 In many countries, the retail business is one of the biggest contributors to the Gross
Domestic Product (GDP) and its contribution has increased as compared to past and is
also increasing by leap and bounds. Retailing is a driving force of the economy and
its ambition is to encourage sustained growth.

6) Retail dominates the supply chain

 In a supply chain, goods and services flow from the manufacturer or a service provider
to final consumers and when there is a huge number of consumers and they are
distributed worldwide then the role of retail stores become much more important.
Retailers play the role of a connecting link between a manufacturer and final
consumers.

Because of their crucial importance in the supply chain the structure of retail stores has
improved gradually over the years. In modern times, retailing is categorized by large multiple
chains and not by small scale independent retail stores. The increasing importance and
formalization of retailing have made it a powerful part of the supply chain.

Moreover, the comparison of retailers is being made with manufacturers which shows the
increasing dominance of retailers in the distribution channel. In addition to this, the annual
turnover of a few retailers such as Wal-Mart is much more than the annual turnover of
companies.

7) Retail is interdisciplinary

 Retailing has developed from a number of interrelated disciplines such as economics,

geography, management and marketing. Economics is useful to manage the finances
of a store. the good knowledge of geography is important to make the right choice of
location to open a store.
 Management plays an important role in managing your staff and inventory and
similarly, right marketing helps you to penetrate in the market.
8) Retailers provide maximum employment

 At the present time, the retail world employs maximum people. As per an estimation,
one in nine of the workforces is employed in the retail industry. Moreover, two
third of the total workforce in the retail world is women and more than half
employees in retailing are part-time employees, which provides flexibility to workers
to adapt to the particular needs of any employer
 In the past, the salaries paid to employees were very low. Therefore, people worked on
a temporary basis in the retail sector. But as the work conditions and salaries paid in
the retail sector are improving more and more people are considering retail jobs as a
permanent career.

9) Retailing is an important subject area of study

 Because of the importance of retailing more and more emphasis is being paid to the
area of retailing. Retailing is a separate subject of studies like management and
marketing. researches have been conducted and professionals being hired to make this
sector flourish.
 In addition to this, academic journals concentrating on retailing are being published
worldwide.

10) Retailing offers scope for expansion in other countries

 Retail provides a great opportunity to expand in international markets. A retailer

who wants to extend their business by selling their goods in other countries opens stores
in different countries to increase the number of consumers of their products.
 However, it is not easy to expand your business as it requires a lot of paperwork and
formalities to be done to be able to get clearance to take your business to other countries.

11) Retailers rule the channel of distribution

 Retailers are becoming the rulers of a channel of distribution. In past times, the
power was in the hand of suppliers because of a limited number of suppliers in the
market. Retailers had no other option than getting goods from the supplier to sell in
their stores. But in present times there are many suppliers for a single type of product.
Therefore, a retailer can make a decision for which brand to stock in their stores and consumers
buys products stock provided by the retailers. Therefore, retailers play an important role in
shaping the demands of consumers.

12) Provides Comfort and facilities for shopping

 Shopping has become a pleasant experience because of all the facilities and comfort
provided by chain stores, shopping malls, multiplexes, etc. people now don’t think
shopping as work but they look forward to it and consider it as a stress releasing and
family activity.
 The giant retailers provide various facilities such as air conditioning, parking,
entertainment, kids play section, lifts, trolleys to carry goods, and food facilities, etc.
and retailing through mobile phones ensures doorstep delivery on all orders placed
through the website or mobile apps.

13) Provide services to the manufacturer

 The retailer is the end part of the supply chain and he is the one who interacts with the
customers. therefore, he has the opportunity to know about the views of customers and
their likings and disliking. Retailer gathers this information from his customers and
shares it with the manufacturer.
 This helps the manufacturer to make the required changes in the quality of the product
and improve its services to satisfy their customers. Therefore, a retailer plays an
important role in helping the manufacturer to increase his revenue generation.

14) Provision of warehousing and storage

 Warehousing is a big problem for a manufacturer. A retailer buys goods in advance

from the manufacturer and reduces the problems of warehousing and storage for the
manufacturer.
 In addition to this, the retailer helps in increasing the sales of goods by displaying them
nicely in the retail store.

15) Advantage of an expert and specialist

 Retailers are experts and have experience in selling products to customers. he has a
better understanding of customers and their likes and dislikes because of this regular
 contact with them. He stores products as per the need of customers and sells them to
customers in different sizes and shapes.
 In addition to this, with their experience of selling and knowledge about the product
they assist customers to choose the right product for them.

16) Creates utilities and value

 Retailer increases the value of the product by creating a place, time, and utility in
the distribution of goods. Retailers buy products in bulk and break them in small
quantities and sell them in small packs. In this way, he creates form utilities.
 Goods manufactured in one corner of the world are consumed in other parts of the
world. he buys products from manufacturers and sells them in the local market thereby
creating place utility.
 The retailer buys products in advance and place them in his store and sell them to
the consumers whenever the need arises. By creating these three utility value of goods
is increased. The retailer makes sure the regular production and consumption of goods.

Factors Responsible for the Growth of Organised Retailing in India

The major factors responsible for the growth of organised retailing in India are as
follows:

Organised retailing is a recent development. It is the outcome of socio-economic factors. India

is standing on the threshold of retail revolution.

Retailing in India

Retail Industry, one of the fastest changing and vibrant industries that, has contributed to the
economic growth of our country. Within a very sport span of time, Indian retail industry has
become the most attractive, emerging retail market in the world.

Healthy economic growth, changing demographic profile, increasing disposable incomes,

changing consumer tastes and preferences are some of the key factors that are driving growth
in the organised retail market in India.
Factors responsible for the growth of organised retailing are as under:

1. Growth of middle-class consumers:

 In India the number of middle-class consumers is growing rapidly. With rising

consumer demand and greater disposable income has given opportunity of retail
industry to grow and prosper.
 They expect quality products at decent prices. Modern retailers offer a wide range of
products and value-added services to the customers. Hence this has resulted into growth
of organised retailing in India.
 Growing consumerism would be a key driver for organized retail in India. Rising
incomes and improvements in infrastructure are enlarging consumer markets and
accelerating the convergence (meeting) of consumer tastes.

2. Increase in the number of working women:

 Today the urban women are literate and qualified. They have to maintain a balance
between home and work. The purchasing habit of the working women is different from
the home maker.
 They do not have sufficient time for leisure and they expect everything under one roof.
They prefer one-stop shopping Modern retail outlets therefore offers one store retailing.

3. Value for money:

 Oganised retail deals in high volume and are able to enjoy economies of large-scale
production and distribution. They eliminate intermediaries in distribution channel.
 Organised retailers offer quality products at reasonable prices. Example: Big Bazaar
and Subhiksha. Opportunity for profit attracts more and more new business groups for
entering in to this sector.

4. Emerging rural market:

 Today the rural market in India is facing stiff competition in retail sector also. The rural
market in India is fast emerging as the rural consumers are becoming quality conscious.
 Thus due to huge potential in rural retailing organised retailers are developing new
products and strategies to satisfy and serve rural customers. In India, Retail industry is
proving the country’s largest source of employment after agriculture, which has the
deepest penetration into rural India.
5. Entry of corporate sector:

 Large business tycoons such as Tata’s, Birla’s, and Reliance etc. have entered the retail
sector. They are in a position to provide quality products and entertainment.
 As the corporate – the Piramals, the Tatas, the Rahejas, ITC, S.Kumar’s, RPG
Enterprises, and mega retailers- Crosswords, Shopper’s Stop, and Pantaloons race to
revolutionize the retailing sector.

6. Entry of foreign retailers:

 Indian retail sector is catching the interest of foreign retailers. Due to liberalisation
multinationals have entered out country through joint ventures and franchising. This
further is responsible for boosting organised retailing.

7. Technological impact:

 Technology is one of the dynamic factors responsible for the growth of organised
retailing. Introduction of computerization, electronic media and marketing information
system have changed the face of retailing. Organized retailing in India has a huge scope
because of the vast market and the growing consciousness of the consumer about
product quality and services.
 One of the major technological innovations in organised retailing has been the
introduction of Bar Codes. With the increasing use of technology and innovation
retailers are selling their products online with the help of Internet.

8. Rise in income:

 Increase in the literacy level has resulted into growth of income among the population.
Such growth has taken place not only in the cities but also in towns and remote areas.
 As a result the increase in income has led to increase in demand for better quality
consumer goods. Rising income levels and education have contributed to the evolution
of new retail structure. Today, people are willing to try new things and look different,
which has increased spending habits among consumer.

9. Media explosion:

 There has been an explosion in media due to satellite television and internet. Indian
consumers are exposed to the lifestyle of countries. Their expectations for quality
 products have risen and they are demanding more choice and money value services and
conveniences.

10. Rise of consumerism:

 With the emergence of consumerism, the retailer faces a more knowledgeable and
demanding consumer. As the business exist to satisfy consumer needs, the growing
consumer expectation has forced the retail organizations to change their format of retail
trade. Consumer demand, convenience, comfort, time, location etc. are the important
factors for the growth of organised retailing in India.
 The retail industry is divided into organised and un-organised sectors. Organised
retailing refers to trading activities undertaken by licensed retailers, that is, those who
are registered for sales tax, income tax, etc.
 These include the corporate-backed hypermarkets and retail chains, and also the
privately owned large retail businesses. Un-organised retailing, on the other hand, refers
to the traditional formats of low-cost retailing, for example, the local kirana shops,
owner manned general stores, paan/beedi shops, convenience stores, hand cart and
pavement vendors.

It is important to understand how retailing works in our economy, and what role it plays in the
lives of its citizens, from a social as well as an economic perspective. India still predominantly
houses the traditional formats of retailing, that is, the local kirana shop, paan/beedi shop,
hardware stores, weekly haats, convenience stores, and bazaars, which together form the bulk.

Functions of Retailing

Retail trade performs many valuable functions for the trade and commerce as a whole. Some
of them are as follows:

1) Delivery of the goods to the end consumer

 This makes shopping for all requirements quite hassle-free for the consumers. This also
facilitates consumption and maximizes consumer satisfaction. Because the company
cannot take responsibility of delivery to every single customer, it appoints retailers. One
of the functions of retailing is immediate delivery.
2) Is an essential part of the distribution chain

 Because the retailer takes over the cumbersome task of distribution of goods
manufactured to the target market, the manufacturer is relieved of this responsibility
and can divert his resources to manufacturing activities.

3) Finances the wholesaler

 While booking his order of goods with the wholesaler, the retailer pays some percentage
or the whole of the order price in advance. This helps the wholesaler to carry on with
his operations seamlessly. In some industries, it is the retailer who pays cash to maintain
stock and in others the wholesaler has to carry the stock as paid capital. Nonetheless,
financing is one of the major functions of retailing. A retailer who does not contribute
to financing will bring down the effectiveness of the supply chain.

4) Stores the goods according to market requirement

 The retailer invests his working capital in building a gamut of inventory reflecting
market requirements. He also sells the requisite quantity, however small or big, to the
final consumers satisfying their needs. The retailers know the complete demand and
supply potential due to their years of experience. Hence it is one of the functions of
retailing to balance the demand and supply as per external market conditions.

5) Lends a hand in manufacturer’s marketing initiative

 Retailer plans and executes many advertising and promotion activities at the point of
purchase i.e. right in his store. This leads to gain in popularity of and favorable market
conditions for the product of the manufacturer.

6) Assumes storage and credit risks

 When the retailer orders and stores a large quantity of goods from the manufacturer, he
makes sufficient provisions to store it safely for some days. This involves costs. Also,
there is also a risk of loss of these goods on account of destruction, theft, spoilage etc.
The retailer assumes these risks while storing goods.

7) Extends credit facilities to the consumers and assumes credit risk

 The retailer does so to encourage shopping. This adds to the vigor of commercial
activities in the economy. But there is also a risk that the customers won’t pay for the
 goods bought or may return damaged goods to the retailer. This inherent risk in trade
is assumed by the retailer.

8) Offers wide variety of customers and enticing price range in a product line

 In order to attract more customers, a retailer offers a wide range of merchandise at

attractive prices. This results in higher consumer satisfaction and higher standards of
living in any economy.

9) Provides convenience in shopping

 Retailers try to set up their shops nearby housing areas or near parks, schools – the areas
where the customer finds it very convenient to shop. This enhances the consumer
welfare.
 10) Offers after sale services, differentiated packaging, giving more information about
the use of the product
 All these activities add value to the retail transaction and cater to various requirements
of the consumers suitably.

11) Hears the voice of the market

 The retailer measures the pulse of the market by listening to the consumer feedback,
expectations, complaints, and by observing a shift in the tastes and preferences of the
consumers. This arms him with very critical market intelligence enabling the entire
commercial fraternity to gear up for the changing economic scenario.

12) Generating employment for masses

 Retail trade, especially the brick-and-mortar models, are human resource-centric

establishments. They require many employees for numerous functions such as stock
taking, over the counter selling, packaging, after sales services, floor management etc.
Thus, retail sector thrives with lots of lucrative employment opportunities for all the
talented job aspirants.
Challenges of Retailing:

Growth of organised retail in India is affected due to following limitations:

1. Poor Logistic and Infrastructure:

 Well-developed transport and communication, facility of warehousing are pre-requisite

for the growth of organised retail. India has poor infrastructure, road connectivity
between rural and market centers is not developed. Warehouse facility is poor and it is
dismal in case of cold storage.
 Due to poor warehousing, large amount agricultural products are damaged, that neither
benefits consumer or farmer. Banking and insurance is growing but growth is not
enough to cover the rural India which is the supplier of inputs and raw- materials for
retail industry.

2. Low Per Capita Income:

 Around 30% of Indian Population in middle- and rich-income category. Rest 70% is
poor, approximately 30% is classified as below poverty line i.e., they do not have
income to buy a day’s meal. People in rural India lack liquidity; they do not have
adequate cash to enjoy luxuries.
 Organised retail will have limited scope of growth when large percentage of population
is kept outside the system Indian economy is growing at 6% (GDP) at this level of GDP
touch poverty cannot be removed. GDR should constantly touch 10% to ensure faster
economic growth, that in turn increase income levels of people and help for better
consumption habits.

3. FDI Policies:

 India needs huge Investment in Retail Logistics like Warehouse, Transportation and
Management. It is not only money but also necessary technology that can only come in
the form of FDI (Foreign direct investment) Politicians and policy makers are not
unanimous for entry of FDI in retail sector.
 Some section say FDI in retail will kill small retailer and other says growth in retail
infrastructure is possible through FDI only. There is confusion in the states regarding
100% FDI in retail, FDI in multi brand and single brand unless clear policies are laid
down at the center and state, growth of organised retail is difficult.
4. Education and Training:

 Organised retail is described as semi hospitability Industry. A Customer must be well

treated to ensure repeat sale. (A study says that labour productivity in Indian retail
sector is only 6% of its counterpart in America). CRM that is customer relationship
management can ensure systematic growth of organised retail.
 The salesmen who come in personal touch with customer must have the art of managing
and satisfying the customer. There are no adequate number of institutions in India that
educate and train people to handle customers at retail.

5. Real Estate Prices:

 Real estate prices in India for land and building is exorbitant cities like Mumbai, Delhi
and Bangalore have high land value. Since organised retail needs large area for
amenities like parking, amusement and also to accommodate big building, major
portion of investment is tied up in land and building. This may increase cost of
operation. It may be difficult to operate the store economically and profitably.

Classification of Retailers:

The retail sector can be primarily classified as:

1. Unorganized and
2. Organized retailing

1. Unorganized Retail:

 The Indian retail industry was traditionally dominated by small family run kirana stores
or neighbourhood mom-and-pop store. These shops are characterized by very small
area and limited assortment and varieties stacked in a small place, inefficient upstream
processes, poor infrastructure and lack of modern technology, inadequate funding, and
absence of skilled manpower. This traditional way of retailing is known as unorganized
retailing.
 In India, unorganized retailing includes units whose activity is not registered by any
statute or legal provision, and/or those that do not maintain regular accounts. Hence,
this sector is characterized by small and scattered units that sell products or services out
of a fixed or mobile location.
  It consists of unauthorized small shops—conventional kirana shops, general stores,
corner shops, among various other small retail outlets—but these small shops remain
as the radiating force of Indian retail industry. These traditional units generally include
haats, mandis, melas, and the local baniyas/kiranas, paanwalas, and others like cobblers
and vegetable/fruit vendors and are termed as the unorganized retailers.

2. Organized Retail:

 Organized retailers are those who are licensed for trading activities and registered to
pay taxes to the government. Organized retail is nothing but a retail place where all the
items are classified and segregated according to their utility, form, and nature and
brought under one roof. They are placed in different departments and displayed very
systematically with their price points. These items are then selected by the customer
and billed at point of sale (POS) with a computerized receipt of payment.
 Meanwhile, the customer is assisted by the sales staff with a professional approach.
Organized retailing thus provides merchandise with wide variety and deep assortment
with a large number of stock-keeping units (SKUs). An SKU is a single item of
merchandise for which separate stock and records of sales are maintained.
 Organized retail deals with multiple formats, which is typically a multi-owner chain of
stores or distribution centers run by professional management. Today, organized
retailing has become an experience characterized by comfort, service assistance,
convenience, style, and speed. It is something that offers a customer more pleasure,
brand association, variety and choice for selection, loyalty benefits, entertainment, and,
hence, a complete shopping experience.

Organized Retail – Meaning, Advantages and Examples

Organized retail is a sector which consists of the companies which are associated with
production or sales of goods and services that operates as private limited organizations which
are governed by companies act. The organized retail sector can be characterized as follows

 The retail setups are owned by companies.

 Few of the employees on the payroll of the organization with others are on contract.
 The employees are governed under the act of minimum wages.
Organized retail is associated with customers walking into the stores for the showrooms and
buying their necessary products. Huge quantities of goods are stocked up in the retail store and
huge discounts which are gained by the company are passed down to the customers.

Many retailers like Walmart, IKEA, Costco, and Target have been an attraction for customers
for a long time because of their discounted pricing structure. There has been an increasing retail
store establishment in North American countries Canada with stores like Target and Nordstrom
which have been establishing their bases from some time.

Advantages of the organized retail sector

1) An economic win for customers

 The prominent advantage of having organized retail for customers is that they get a
wider selection of goods along with more convenience and an enhanced shopping
environment. The organized retailer has several formats and presence write from a
small neighbourhood in small towns or cities to a high air-conditioned mall where the
real estate is cheaper.
 Therefore, it caters many customers going to its wide presence. For example, Walmart
is present even in the tier two cities as well as the major areas of tier one cities thereby
reaching all the kinds of customers.
 Apart from these advantages, a major advantage for customers is that these retail
formats have huge discounts which unorganized retail formats may not be able to
provide. Since organized retailers buy goods in huge quantities, they also able to reap
the benefits of huge discounts.
 This discount is passed on to the customer on all the goods that are purchased over there
and thus the customer is at the gain and it is a Win-Win situation for both retailer as
well as a customer. Presence of 7-eleven in small cities and big cities has benefited the
customers in both retailers and customers equally.

2) Big gains for farmers

 Another advantage of the organized retail sector is that it provides a big gain for
farmers. Since these retail formats buy in bulk from the farmers themselves it is
beneficial for farmers to deal with one customer rather than hundred customers and also
it provides greater convenience and ease of trade along with better profits for both the
 customer as well as the farmer. The retail sector has given a huge push to the farming
sector.
 This also leads to an increase in the use of modern equipment and tools in farming along
with more employment opportunities for unskilled laborers to work on a farm thereby
providing employment opportunities.

3) Growth of Mid-level customers

 Because of the organized retail number of middle-class people or middle-income group,

people are increasing and having a better lifestyle. These mid-level customers indirectly
help the industry and the economy to grow and prosper which is why it turns out to be
a cycle which benefits each other.

The retail sector benefits the customers who intern benefits the retail sector.

The middle-income level group expects the products to be at a decent and affordable price and
the number of such people is increasing every day which is the reason why the retail sector has
to focus on such customers. As their bank capacity increases the organized retail sector will
benefit from them.

4) Economies of scale for Organized Retailers

 All of the organized retail players preferred to buy the products in bulk at having a
discounted price. The purchases are frequent and masking is done in order to fulfil the
needs of the customers. This helps the players to achieve economies of scale and a part
of the discount is passed on to the customers as well. Apart from that they also enjoy
cost advantage on many factors such as advertising expenditures purchases and a few
other recurring costs.
 Organized retailers tend to have multiple branches of their stores in different locations
which is why one purchase. Is preferred it to conduct business. The processing is done
at one point because the distribution is done at every store so that the product reaches
every customer.
 In terms of customer, it is advantages to have one store with which they can conduct
business and make their purchases.
5) Minimization of risks

 Another advantage of organized retailing is that there are multiple stores present and
this reduces the distribution cost. This also minimizes the risks associated and the
possibility of losses is reduced.
 This is advantages to the retailer’s sunset also avoids unnecessary costs which are
levied. Even in case of taxation, it is easier for the retailers to files for a tax from one
point rather than having multiple stores.

6) Employment Opportunities

 The need for organized retail chains is increasing all over the market in every country.
More and more people are preferring to work for a discounted organized retail store
other than purchasing it is a local vendor who might have different and increase price
consumer products.
 This has resulted in retail stores opening branches in multiple locations. This, in turn,
has affected and generated employment for many local people. Retail stores have
constant job opportunities for people from different backgrounds.
 Right from Cashier to store manager people from various backgrounds can apply in a
retail store without age restriction and get employed and start earning daily wages have
the employment opportunities increase more and more people get employed and this
results in the betterment of the economy overall.
 As more and more retail store is open more and more job opportunities are surfaced.
Thus organized retail has opened and expanded opportunities of the job for many
people.

Disadvantages of organized retail

1) Monopolistic Approach

 A major downfall of having a chain of retail stores is that they may have a monopoly
for a particular product. This monopolistic approach can affect the customers severely
and can compel them to buy the products at a higher price.
 The monopolistic approach can affect the competition and can impact the customers
economically in a negative way.
2) Lower prices may be a Myth

 Not every retail store can afford to give all the products at a low price. Also, it is true
that the products are purchased by the retailers to having a discounted price but there is
no surety that the discount is passed on to the customers.
 Discounted price may or may not justify the actual price and sometimes the products
are charged higher than the price of discount and inertia case the customers are the ones
who have to pay the additional price thereby causing negativity to customers.
 There may be certain products which are discounted are sold at a lower price but the
reason behind them may not be justified. It might be that the retail stores intend to finish
the existing stock which is why they might price those few products at a discounted
price or the product might be nearing the expiry which may cause them to give it on
offers.

3) Quality compromise

 Owing to the advantage of having economies of scale there may be a compromise on

quality terms. The storage of the products may present a big problem and storage of
department stores which is why that may be a compromise on quality.
 Owing to the fact of getting more and more business the stocks are piled up and not
taken care of which may cause the damage in the product internally and the customer
may realize this after the purchase and this may affect the brand image of the store.

4) Stock Maintenance and Stock losses

 From the point of view of the retailer, maintaining such a huge stock is costly. Of
course, the retailer gets an enormous discounted price but stock maintenance and
storing and warehousing charges reduced the discount and add up to the cost of the
retailer.
 There may be times when the product is kept in stock but it is not required by the
customer and in such cases, there is also expiry of the product. In such cases, the stock
loss has to be Borne by the retailer. This also reduces profitability and increases the
cost.
 Sometimes this cost is passed on the reducing the discount of the product to the
customer and thus the idea of bargain price is nullified in such cases.
How to Manage Organized retail?

Due to increasing competition and the retail industry, it is very crucial that you manage your
business properly and effectively in order to get more and more customers and their experience
and convert them to reduce our customers.

There are plenty of retail stores in every neighbourhood nowadays and to bring the customer
back to your retail store these are some following tips that you can follow:

1) Customer Experience

 A couple of years back many of the industries used to say that customer service was a
crucial part of the business but it is not only about service today but also about the
experience of the customer. Customer experience is the memorability of the store in the
mind of the customer so that the customer remembers your store for those certain traits.
 Right from having organized goods for customers to the alphabetical arrangement of
goods, to people to policies and cleanliness and attractive or efficient merchandising,
all of the things matter to customers and address to the customer experience.
 The purchase of the customer may be more or less but it is very crucial that he walks
out with the positive customer experience which is passed on along by him to his circle
of acquaintances. Positive customer experience also adds up to the brand value and the
image of the retail and plays a very important part and customer retention.
 In the organized retail industry it is very easy ensures that the customer has a positive
experience from the retailer.

2) Inventory Management

 A major challenge for organized retail services is the management of inventory.

Displaying the items without any particular categorization or stacking up in piles
haphazardly is no way to manage inventory.
 A constant display of ‘Out of stock’ board of the daily necessities items for making the
shopping experience more difficult for the customers by not categorizing the goods can
make the customer never come back to your retail store. One time organization is not
part of the organized retail, rather constant maintenance of that organization throughout
the day and the next day is inventory management.
 Organized retail shops should get acquainted with technology for this purpose. Use of
technology and upgraded software which are essential for retail stores like checkout
 software or stock management software can make the work that is easy and increase
efficiency amongst the workers ultimately benefiting the customers.

3) Visual Merchandising

Visual merchandising tips to attract more and more new customers and retain the
existing ones.

4) People management and management of people

 These how to separate things altogether which are related to the only one aspect of the
business which is people. People are the first things that customer interact with one then
tell the store right from the security guard up till the cashier.
 It is very essential that people are well trained and able to answer all the queries of
customers like directing to the right spot asking for a particular variant of a product or
any other such inquiry related to the retail store. Having well trained and courteous
people or staff will be beneficial and helpful to the customers and build a good
reputation amongst the customers.
 Most of the companies today focus on internal customers which are nothing but staff
because if the internal customers are happy they will work hard to ensure that the
external customers are happy. It is also essential that in terms of business the employees
have good relations with their supervisors so that information flows freely without any
hindrance from bottom to top and vice versa.

5) Time management and Teamwork

Disadvantages of organized retail

  A well-organized display of products in your store can be a very attractive and
persuasive salesman rather than an actual person. Products come in different colors and
forms and it is essential to strike and appeal those products efficiently source to attract
the customers.
 The sales people can wear color complimenting outfits and stand besides products so
that the customers can easily identify and ask for help when needed. Display of signs
which has categories of products written on them along with the directions makes it
easier for the customers to navigate through the store.
 Time is very important in the case of organized retail where there could be times when
there is information over is old or it could be very difficult for eating managers because
of the huge inflow of customers. That would be numerous problems arising which needs
to be addressed simultaneously and this is where the time management skills of the
retail manager come in handy.
 The problems which need to be solved and priority are to be addressed immediately
without delay and for the rest of the problems the retail manager can send a supervisor
by delegating his authority. Interruptions should be avoided as much as possible and
straight No without delay of time should be given to unreasonable demands.
 Teamwork is a part of time management which means that the work should be done
together with the team so that the time for the work is minimized and the goals are
reached faster and effectively. Having good teamwork also ensure that the store and
smoothly and efficiently and the customers are handled well and within time limits.

Customer Management starts with time management and time management initiates with
teamwork.

Examples of Organized Retailers across the World

1) IKEA

IKEA is a Swedish organized retail share which is the world’s largest retailer in furniture since
2008. It has multiple outlets all over the world. The headquarter of IKEA is in the Netherlands.

2) Walmart

It is an American retail corporation which has multiple hypermarkets and departmental stores
which are discounted along with grocery products.
Compared to other supermarkets was marked as heavily discounted. It is headquartered in
Arkansas and was founded by Sam Walton in the year 1962.

3) Costco, Target, The Home Depot, are a few other major players in Organized retail

The organized retail industry is growing very rapidly and in coming years the growth will be
exponential in order to meet the increased demand from the customers all over the world.

Especially in countries like India and China which have a huge base of customers has a
tremendous scope of organized retail.

ORGANIZED RETAILING UNORGANIZED RETAIL

The Unorganized retail sector is not
The Organized retail sector is regulated by the
regulated by the government and
government and the employment terms and
employment terms and working hours per
working hours per day in this sector are fixed.
day are not fixed in this sector.
The Organized retail sector is governed by
There is no government act to govern the
various acts like Bonus act, factories act,
unorganized retail sector.
minimum wages act, and PF act, etc.
Government rules are strictly followed in the No government rules are followed in the
Organized retail sector. unorganized retail sector.
Regular monthly salary is given to employees
Daily wages are given to employees.
on the monthly basis.
There is job security for employees in the The working hours are not fixed in the
Organized retail sector. unorganized retail sector.
Workers in the organized retail sector are paid Workers in the unorganized retail sector do
additionally for the extra number of working not get paid additionally for the extra
hours. number of working hours.
Employers make a contribution to the Employers do not make any contribution to
provident fund of an employee. the provident fund of an employee.
Salary given to employees is equal to the salary Less salary is paid to employees than the
prescribed by the government. salary prescribed by the government.
The increment is given to employees n regular Very rarely increment is given to
basis (mostly annually). employees.
 Employees working in the organized retail
No benefits or perquisites are provided to
sector get add on benefits such as a pension,
employees working in the unorganized
medical facilities, leave compensation, travel
retail sector.
compensation, etc.

EMERGENCE OF ONLINE RETAILING IN INDIA

Integration of Brick and Mortar with E-retailing
 Today‘s shopper expects convenience. Merchants integrating brick-and-mortar stores,
ecommerce sites and catalogues will increase repeat purchase rates and achieve higher
levels of customer satisfaction. In any multi-channel retail consumer interaction, traffic
and sales are being driven from one channel to the other. In “web-to-store” or “store-
toweb” situations, the limitations of one channel are mitigated by the strengths of the
other.
 This calls for greater integration with both these business processes so as to maximize
the revenue opportunities. For this purpose, the retailer needs to focus in the following
business process areas:
i) Centralised Order Fulfilment: The centralised order fulfilment includes:
 Common merchandise data base for item data, hierarchy across channel
 Merchandising operation through integrated platform for pricing, promotions and offers
 Corporate wide CRM
 Offer consistent pricing and promotions
 Choice for customers to order through any channel and pick at any channel
 Distributed Order Management, consolidates all channel order and fulfil from
Distribution centre
 Put away stocks and cross-dock stocks
 Re-allocate & Re-distribute the stocks based on demand in the channels
 Transport planning for courier to customer in web/ mobile/ Store channel sales
 Customer returns on any channel is accepted irrespective of the channel that was the
purchase made on, and is accounted in inventory through POS or Web Payment
gateway
 Customer returns through Web/Mobile, the web/mobile should accept the
 returns as a separate transaction or along with shopping list of purchase
ii) Supply Chain Synchronisation: It includes:
 Integration to store pickup order, inventory and billing
 Vendor to supply for all channels
 Visibility of inventory in all channel
 Near real-time POS data for inventory position for accuracy
 Ability to update channels on stock out items
 Ability to transfer the store pickup orders to delivery order if stock out
iii) Merchandising planning: It includes:
 Demand planning & forecasting for web / mobile / direct store
 Regular Ordering system for different categories
 Category sales planning for all channels and contribution to total financial plan
 New product introduction in all channels
 Inventory planning for all channels based on the sales trends. (min /max/ re order)
 Visual images selection for SKU for display in Mobile and Web
iv) Customer Profile: It includes:
 Single window registration for all channels
 Common Identity for every customer / family across the channel
 All channel bills pertain to customer to integrate in common database
 Schemes on rewards, pre calculated value before merge into common database
v) Metrics and Measurement: It includes:
 Measure across channel for consumer growth & satisfaction
 Effective loyalty program to track across channel
 Surveys to gather additional insight across channels
 Measure by category and not by channels
 Inventory reports on efficiency in utilization of inventory across channels
 Category performance reports across channels
 Marketing analysis reports to add value in all channels & enhance customer experiences
and conveniences.
Opportunities from Integration
i) In-store pick up:
 In-store pick up is a process allowing your customers to order online and pick up in
your physical store. During the process, communication with the customer primarily
happens via email and instructs the shopper the steps necessary to complete the
transaction.
ii) In-store returns:
 Returning a product purchased online can be an extremely frustrating experience.
Between determining if the retailer will pay for the shipping, waiting in line at the post
office and waiting for a refund, the returns process is known for giving consumers
headaches.
iii) Emailed in-store coupons and promotions:
 Email is predominantly used as a mechanism to drive web-store promotions. Multi-
channel businesses, however, are realizing the value of emailing “in-store” or hybrid
promotions to their mail lists.
iv) Store locator:
 Now standard among e-commerce stores, a store-locator function must be able to find
the closest stores based upon pin code while providing door-todoor directions online.

CHALLENGES FOR ADOPTION OF DIGITAL COMMERCE

In a country like India where a large number of semi urban and rural customers exist, they
generally want to see, touch and compare merchandise before purchase. Customers are not
much familiar with internet and digital commerce is a tough task here. Let us learn main
challenges for adoption of digital commerce.
i) Effectively using digital media:
 Overall, retailers are not able to leverage Internet and Mobile as branding as well as
customer acquisition medium. They look at online sales and in-store sales as two
different worlds. Retailers typically consider their online presence as a means to
overcome the physical limitations of offline promotions, particularly catalogue and
newspaper inserts, not as an integrated channel.
ii) Provide complete experience to consumers across digital channels:
 Retailers do not feature all the products available in stores online, and this presents a
cut off to the customers. They are not able to find the products that they are looking for.
 Moreover, consistent product information across all channels of marketing is not
available. The customers do not get all the information about a product like images,
product features, and hence influencing purchase capabilities which are required to
drive sales using digital channels.
iii) Managing technology is not a retailer’s expertise:
 Technology is often a capital-intensive department and retailers are often weary of
getting into an area which they are not experts in. It is important for retailers to be able
to acquire and manage technology without requiring technical expertise or huge
investments.
iv) Showcase products and offers:
 Consumers want to know of all the products and offers available from a retailer. They
also want to be able to quickly find the product or offer that they are interested in. So
product discovery and showcasing is a critical challenge for most retailers.
v) Expensive & difficult to manage Payment systems & logistics:
 Getting a flexible payment solution and logistics solution for retailers’ digital
commerce requirements is a complex job. It is hard to find affordable and reliable
solutions that will take care of such core requirements such as payment and shipping.
vi) A consumer lost online, is a consumer lost:
 Many retailers view online and offline retail sales as different domains. The reality is
that a customer who is looking for a particular retailer and does not find that retailer or
finds a competitor or gets a not-so-good impression about that retailer on the Internet
might choose not to do business with that retailer.

ESSENTIALS OF ONLINE RETAILING

 Retailing over internet is not as simple as running a brick-and-mortar retail store. It is
totally different and challenging task.
 There are some very important points which should be kept in mind while deciding to
go for online for retail. Let us discuss the essential points one by one.
The Commerce Platform:
It is very important to select appropriate platform for digital commerce foray. The choice a
retailer makes at the beginning will have a long-term impact.
 Service Model vs. Owning the platform
 Using a standard platform vs. building your own platform
  Using Open source vs. proprietary platforms
b) Logistics Partner:
 It is very important that orders received get executed within the promised time window.
The logistics partner should be able to integrate his systems with retailers’ systems so
that orders flow through uninterrupted and supply chain visibility is available to the
customers. In certain payment options such as Cash-on-Delivery (COD), the partner
should be able to collect the payment. Reverse logistics includes handling customer
returns and non-delivered goods.
c) Payment Gateway:
 Retail store should be able to accept the customer payments using various methods.
Most common include:
a) Credit Card and Debit Card Payments
b) Net banking
c) Using Digital Gift vouchers
d) Cash on delivery
e) Payment at Store in cash
 d) Digital Marketing Agency: In order to drive customer traffic to retail online store,
retailer needs to engage a Digital Marketing Agency. The scope of work for such
agency includes:
a) Content Creation for catalogue including photographs, videos and detailed
product specifications
b) Writing reviews, blogs
c) Search Engine Optimisation to make easier for customers to find retail store and
merchandise
d) Managing the loyalty programme
e) Running campaigns on leading portals using advertising networks such as
MSN, Google, etc.
 IT Application in Retail
 f. Engaging with customers on social media platforms such as Facebook, Twitter,
Google+ etc.
Model for online retailing
a) Common process models: For online retailing there are some common process models and
these are:
i. Web Store linked to one store: The online store front uses catalogue of the items
available at one particular store in the chain. The orders received are executed through
POS. Integration is in batch mode.
ii. Web Store linked to warehouse: The catalogue exposed on the online store reflects
stocks available at the warehouse. Execution takes place from the warehouse itself.
Integration may be event driven/real time or in batch mode.
iii. Each physical store has a web store front: Here, each Point of Sale (POS) is linked to
the web stores and customers may place order online but pick up from the store. In
some variant, it allows pre-booking of new models/ items on the web front end.
Payments may be online of offline.
b) Models for web stores: For web stores, some models are:
i. EBO on Popular Platforms: Many brands / retailers launch their online
 store on popular portals such as Rediff.com or Indiatimes.com. This gives them shorter
time to launch and get online footfalls due to the traffic delivered by the portal. As a
part of marketing campaigns, highly effective to get noticed but difficult to sustain due
to high investment required to maintain high visibility.
ii) Store at the Marketplace: Many a brands / retailers set up their online stores on E-
commerce Hubs or Marketplaces such as Mart Jack Exchange or Amazon. This gives them
access to technology infrastructure which is very scalable along with advanced tools to manage
the content as well as to run targeted campaigns. The operating costs are moderate
iii) Standalone Stores: Mature retailers prefer to make their own platform a E-Retailing
destination for online shoppers. The technology platform can be on software as-a-service model
or can be owned by the retailer. Integration with the supply chain systems is must.
iv) Pure play: These are the retailers who do not have physical stores. They may have physical
supply chain of their own or it is managed by their suppliers.
v) Social Commerce: The retailer opens his store on social platforms such as Facebook.
FDI Policy in India:
 FDI defined as investment in a foreign country through the acquisition of a local
company or the establishment there of an operation on a new (Greenfield) site. In simple
words, FDI means the capital inflows from abroad i.e. invested in or to enhance the
production capacity of the economy.
 The Ministry of Commerce and Industry, Government of India is the nodal agency for
motoring and reviewing the FDI policy on continued basis and changes in sectoral
policy/ sectoral equity cap. The FDI policy is notified through Press Notes by the
Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and
Promotion (DIPP).
 The foreign investors are free to invest in India, except few sectors/activities, where
prior approval from the RBI or Foreign Investment Promotion Board (‘FIPB’) would
be required.

FDI Policy with Regard to Retailing in India

 FDI up to 100% for cash and carry wholesale trading and export trading allowed under
the automatic route.
 FDI up to 51 % with prior Government approval (i.e. FIPB) for retail trade of ‘Single
Brand’ products, subject to Press Note 3 (2006 Series).
 FDI is not permitted in Multi Brand Retailing in India yet.

Entry Options for Foreign Players prior to FDI Policy

Although prior to Jan 24, 2006, FDI was not authorized in retailing, most general players had
been operating in the country. Some entrance routes used by investors have been explained
below: -
A. Franchise Agreements
 It is an easiest way to come in the Indian market. In franchising and commission agents’
services, FDI (unless otherwise prohibited) is allowed with the approval of the Reserve
Bank of India (RBI) under the Foreign Exchange Management Act. This is a most usual
mode for entrance of quick food bondage opposite a world. Apart from quick food
bondage identical to Pizza Hut, players such as addidas, Reebok, Amazon as good as
bennet and coleman, have entered Indian marketplace by this route.
B. Cash and Carry Wholesale Trading
 These is 100% FDI is allowed in wholesale trading which involves building of a large
distribution infrastructure to assist local manufacturers. The wholesaler deals only with
smaller retailers and not Consumers. Metro AG of Germany was the first significant
global player to enter India through this route.
C. Strategic Licensing Agreements
 Some foreign brands give exclusive licences and distribution rights to Indian
companies. Through these rights, Indian companies can either sell it through their own
stores, or enter into shop-in-shop arrangements or distribute the brands to franchisees.
Mango, the Spanish apparel brand has entered India through this route with an
agreement with Piramyd, Mumbai, SPAR entered into a similar agreement with
Radhakrishna Foodlands Pvt. Ltd
D. Manufacturing and Wholly Owned Subsidiaries.
 The foreign brands such as Nike, Reebok, Adidas, etc. that have wholly-owned
subsidiaries in manufacturing are treated as Indian companies and are, therefore,
allowed to do retail. These companies have been authorised to sell products to Indian
consumers by franchising, internal distributors, existent Indian retailers, own outlets,
etc. For instance, Nike entered through an exclusive licensing agreement with Sierra
Enterprises but now has a wholly owned subsidiary, Nike India Private Limited.

FDI in Single Brand Retail

The Government has not defined the meaning of “Single Brand” anywhere neither in any of its
circulars nor any notifications.
In single-brand retail, FDI up to 51 per cent is allowed, subject to Foreign Investment
Promotion Board (FIPB) approval and subject to the conditions which is given below:
a. Only single brand products would be sold (i.e., retail of goods of multi-brand even if
produced by the same manufacturer would not be allowed),
b. Products should be sold under the same brand internationally,
c. Single-brand product retail would only cover products which are branded during
manufacturing and
d. Any addition to product categories to be sold under “single-brand” would require fresh
approval from the government.
FDI in Multi Brand Retail
 The government has also not defined the term Multi Brand. FDI in Multi Brand retail
implies that a retail store with a foreign investment can sell multiple brands under one
roof.
In July 2010, Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce
Need of FDI:
 Domestic capital is inadequate for economic growth of the country;
 Foreign capital is usually essential, at least as a temporary measure, during the period
when the capital market is in the process of development;
 Foreign capital usually brings it with other scarce productive factors like technical
knowhow, business expertise and information about latest business trends at global
level.
Benefits of FDI
 Improves foreign exchange position of the country
 Employment generation and increase in production
 Help in capital formation by bringing fresh capital
 Helps in transfer of new technologies, management skills, intellectual property
 Increases competition within the local market and this brings higher efficiencies
 Helps in increasing exports
 Increases tax revenues

Criticism of FDI
 Domestic companies fear that they may lose their ownership to overseas company
 Small enterprises fear that they may not be able to compete with world class large
companies and may ultimately be edged out of business;
 Large giants of the world try to monopolies and take over the highly profitable sectors;
 Such foreign companies invest more in machinery and intellectual property than in
wages of the local people;
 Government has less control over the functioning of such companies as they usually
work as wholly owned subsidiary of an overseas company;
FDI is prohibited under the Government Route as well as the Automatic Route in the
following sectors:
 Lottery Business
  Gambling and Betting
 Business of Chit Fund
 Nidhi Company
 Agricultural (excluding Floriculture, Horticulture, Development of seeds, Animal
Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. under
controlled conditions and services related to agro and allied sectors) and Plantations
activities (other than Tea Plantations)
 Housing and Real Estate business (except development of townships, construction of
residen-tial/commercial premises, roads or bridges to the extent specified in notification
 Trading in Transferable Development Rights (TDRs).
 Manufacture of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco
substitutes.

Conclusion
The Indian retail sector is highly fragmented with 97 per cent of its business being run by the
unorganized retailers. The organized retail is at a very initial stage. The FDI in retail industry
is likely to create around 10 million jobs in the span of 10 years. Retail sector is the largest
source of employment after agriculture, and has deep penetration into rural India generating
more than 12% GDP of India. Retail industry can improve the condition of agriculture sector
because when goods are purchased by these retailers directly from the farmers, will reduce the
price of vegetables and other commodities as well. Now it’s the requirements of the time that
India should allow FDI in all segments of the retailing in India.

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