GLOBAL RETAILING SCENARIO AND THE

INDIAN RETAIL
Introduction - 

Retail means selling goods and services in small quantities directly to customers.
Retailing consists of all activities involved in marketing of goods and services directly
to consumer for their personal, family and household use.
The Indian retailing industry is becoming intensely competitive, as more and more
players are vying for the same set of customers. Although still at a nascent stage,
organized retailing in India is witnessing a radical transformation. The increase in
the number of retail chains across the country is an indication that organized
retailing is emerging as an industry and will boom in a big way in the near future.
Retailing is one of the biggest sectors and it is witnessing a revolution in India. The
new entrant in retailing in India signifies the beginning of retail revolution. The
Windows of Opportunity shows that Retailing in India was at opening stage in 1995
and now it is in peaking stage in 2006. India shows a retail market of US$330 billion
that is expected to grow 10% a year, with modern retailing just beginning.

The Indian Retail Scene

India is a country having one of the most unorganized retail markets. Traditionally it
is a family’s livelihood, with their shop in the front and house at the back, while they
run the retail business. More than 99% retailers function in less than 500 square feet
of shopping space. The Indian retail sector is estimated at around Rs 900,000 crore,
of which the organized sector accounts for a mere 2 per cent indicating a huge
potential market opportunity that is lying in the waiting for the consumer-savvy
organized retailer. Purchasing power of Indian urban consumer is growing and
branded merchandise in categories like Apparels, Cosmetics, Shoes, Watches,
Beverages, Food and even Jewellery, are slowly becoming lifestyle products that are
widely accepted by the urban Indian consumer. Indian retailers need to take
advantage of this growth and aim to grow, diversify and introduce new formats and
have to pay more attention to the brand building process. The emphasis here is on
retail as a brand rather than retailers selling brands. The focus should be on branding
the retail business itself. In their preparation to face fierce competitive pressure,
Indian retailers must come to recognize the value of building their own stores as
brands to reinforce their marketing positioning, to communicate quality as well as
value for money. Sustainable competitive advantage will be dependent on translating
core values combining products, image and reputation into a coherent retail brand
strategy. There is no doubt that the Indian retail scene is booming. A number of large
corporate houses — Tata’s, Raheja’s, Piramals’s, Goenka’s — have already made their
foray into this arena, with beauty and health stores, supermarkets, self-service music
stores, new age book stores, every-day-low-price stores, computers and peripherals
stores, office equipment stores and home/building construction stores. Every retail
category has been attacked, by the organized players today. The Indian retail scene
has witnessed too many players in too short a time, crowding several categories
without looking at their core competencies, or having a well thought out branding
strategy. To illustrate, the Indian lifestyle/fashion retail scene is already exhibiting
the following characteristics, which do not augur well for its future.

Lack of store differentiation: Leading retail stores like Shoppers Stop, Lifestyle,
Ebony, Globus, and Pyramid, offer common brands, similar ambience, and a
commitment to improved service. Where is the scope for differentiation and brand
building? 

Merchandising muddle: Some retailers have still been able to maintain their
ground in the market in spite of the arrival of new entrants. This is because these
retailers exploit what they know best — what the customer wants with regard to
product, selection and price — and ensure their customers do not go back
disappointed. Consumer insights built over their years of Experience in business is
helping them to hold the fort against the onslaught of the new players on the horizon.
India’s cultural diversity poses additional challenges to the merchandisers requiring
them to be aware of local tastes and to be able to compete with the local retailer in
terms of market knowledge and speed of response. While technology and systems are
no doubt enablers, there can be little substitute for experience and insight.

Lack of labels/suppliers: Organized Indian retailing has to face the situation of

lack of professional suppliers who are accustomed to deadlines, systematic in their
production and consistent with their quality. Often, the local suppliers do not have
financial strength or production infrastructure or discipline. Indian merchandisers
are forced to compromise due to a true lack of choice — which leads to huge unsold
stocks and reduced profitability to the retailers.

Discounting: Given widespread availability of the same brands, large retailers have
to cope with the phenomenon of discounts offered by the smaller retailers. In a
middle class dominated, price-sensitive market like India, price manipulation is a
strong weapon in the arsenal of the small independent retailer. The large retailers
themselves further dilute the strength of the retail market. Deep price cuts may not
be the answer to maintain their relevance against the small retailers nor does it auger
well for the brand building of the store.

Limited margins and high real estate costs: Cost of prime land for the retail
store is prohibitive. Land prices in prime localities across the metros have themselves
become a major deterrent to sustaining a profitable retailing model for organized
players. A number of the new chains have therefore preferred to spread in smaller
metros, hoping to offset lower revenue potential with lower real estate costs.

‘Time abundant’ consumers: In recent years, it would seem that the consumer
has thrown the adage ‘time is money’ to the winds. The customer is willing to spend
more time if he/she is getting a better deal. Scarcity of time seems to be the
prerogative only of a few consumers. 

Challenges of Retailing in India

In India the Retailing industry has a long way to go, and to become a truly flourishing
industry, retailing needs to cross the following hurdles.
* The first challenge facing the organized retail sector is the competition from
unorganized sector.
* In retail sector, Automatic approval is not allowed for foreign investment.
* Taxation, which favours small retail businesses.
* Developed supply chain and integrated IT management is absent in retail sector.
* Lack of trained work force.
* Low skill level for retailing management.
* Intrinsic complexity of retailing- rapid price changes, threat of product
obsolescence and low margins.

Growth drivers in India for retail sector 

o Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes. 
o Liberalization of the Indian economy 
o Increase in spending Per capita Income. 
o Advent of dual income families also helps in the growth of retail sector. 
o Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc. 
o Consumer preference for shopping in new environs 
o The Internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains. Reach of satellite T.V.
channels is helping in creating awareness about global products for local markets. 
o About 47% of India's population is under the age of 20; and this will increase to
55% by 2015. This young population, which is technology-savvy, watch more than 50
TV satellite channels, and display the highest propensity to spend, will immensely
contribute to the growth of the retail sector in the country. 
o Availability of quality real estate and mall management practices 
o Foreign companies' attraction to India is the billion-plus population. 
Different Forms of Retailing: Emergence of new formats of retailing in India
Popular Formats
o Hyper marts
o Large supermarket
o Mini supermarkets
o Convenience store
o Discount/shopping list grocer
o Traditional retailers trying to reinvent by introducing self-service formats as well as
value-added services such as credit, free home delivery etc.

RETAILING FORMAT IN INDIA

Malls:
The largest form of organized retailing today. It is 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,
Piramyd, 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:

Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer
needs. It is further classified into localized departments such as clothing, toys, home,
groceries, etc.

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.

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

MBO:

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.

The Indian retail sector can be broadly classified into:

a) Food Retailers
b) Health and beauty Products
c) Clothing and Footwear
d) Home Furniture & Household goods
e) Durable goods
f) Leisure & Personal Goods

Malls in India: 
Over the last 2-3 years, the Indian consumer market has seen a significant growth in
the number of modern-day shopping centres, popularly known as ‘malls’. There is an
increased demand for quality retail space from a varied segment of large-format
retailers and brands, which include food and apparel chains, consumer durables and
multiplex operators.

Retail as an Employment Generator

The retail sector can generate huge employment opportunities, and can lead to job-
led economic growth. In most major economies, ‘services’ form the largest sector for
creating employment. The retail sector in India employs nearly 21 million people,
accounting for roughly 6.7% of the total employment. However, employment in
organized retailing is still very low, because of the small share of organized retail
business in the total Indian retail trade. The share of organized retailing in India, at
around 2%, is abysmally low, compared to 80% in the USA, 40% in Thailand, or 20%
in China, thus leaving the huge market potential largely untapped. A modern
retail/retail services sector has the potential of creating over 2 million new (direct)
jobs within the next 6 years in the country (assuming only 8-10% share of organized
retailing), according to Arvind Singhal, CMD, KSA Technopak. Retail can create as
many new jobs as the BPO/ITES sector in India. A strong retail front-end can also
provide the necessary fillip to agriculture & food processing, handicrafts, and small &
medium manufacturing enterprises, creating millions of new jobs indirectly.
Through its strong linkages with sectors like tourism and hospitality, retail has the
potential of creating jobs in these sectors also. 
The Global Retail Scenario
Retail has played a major role world over in increasing productivity across a wide
range of consumer goods and services .The impact can be best seen in countries like
U.S.A., U.K., Mexico, Thailand and more recently China. Economies of countries like
Singapore, Malaysia, Hong Kong, Sri Lanka and Dubai are also heavily assisted by
the retail sector. Retail is the second-largest industry in the United States both in
number of establishments and number of employees. It is also one of the largest
world-wide. The retail industry employs more than 22 million Americans and
generates more than $3 trillion in retail sale annually. Retailing is a U.S. $7 trillion
sector. Wal-Mart is the world’s largest retailer. Already the world’s largest employer
with over 1million associates, Wal-Mart displaced oil giant Exxon Mobil as the
world’s largest
Company when it posted $219 billion in sales for fiscal 2001. Wal-Mart has become
the most successful retail brand in the world due its ability to leverage size, market
clout, and efficiency to create market dominance. Wal-Mart heads Fortune magazine
list of top 500 companies in the world. Forbes Annual List of Billionaires has the
largest number (45/497) from the retail business.

Global Retail V/s Indian Retail

Large format retail businesses dominate the retail landscape in the United States and
across Europe, in terms of retail space, categories, range, brands, and volumes.
Indian retail industry cannot hope to learn much by merely looking at the Western
success stories in retail. Their scales of operations are very huge, the profit margins
that they earn are also much higher and they operate in multiple formats like
discount stores, warehouses, supermarkets, departmental stores, hyper-markets,
convenience stores and specialty stores. The economy and lifestyle of the West is not
in line with that of India and hence the retailing scene in India has not evolved in the
same format as the West nor can we learn valuable lessons from their style of
operations. In retailing, the conventional wisdom used to be, that, the critical success
factor was location. But precise location no longer matters and geo-demographics are
increasingly becoming irrelevant. The leading multiple chain retailers, superstores
and malls create their own centres of gravity, attracting customers by car, bus, train
or even by plane to wherever they are located. The following factors still pose a
challenge for the Indian retailers:

Geographic saturation
The end of the nineties has signified a turning tide of retailer power. The limit to
retail ambition is geographic saturation. Many retailers have started postponing their
store expansion plans. The track record of some of their international store
expansions is also not promising.

Category killer competition

The threat of saturation is accompanied by a new competition from the low cost
category killers. Specialist competition is eating away at the market share and forcing
down the prices and gross margins of the multiple chains. 

Alternative shopping channels

The internet which is the newest retail format is showing growth and is more
frightening for retailers than for consumers. The potential for on-line shopping
which is growing questions retailers’ investments in more physical sites and stores
and makes it imperative that they too explore the new agenda of ‘E-retailing’ or ‘e-
tailing’.

Conclusion

Many agencies have estimated differently about the size of organized retail market in
2010. The one thing that is common amongst these estimates is that Indian
organized retail market will be very big in 2010.The current need of the hour in
Indian Retail is developing a sound distribution channel and infrastructure. The
status of the retail industry will depend mostly on external factors like Government
regulations and policies and real estate prices. Besides the activities of retailers,
demands of the customers will also impact the retail industry. By keeping these
various parameters, it can be surely predicted that in the upcoming years, India will
be the place to watch out for!! .