INDIRAPURAM INSTITUTE OF HIGHER STUDIES

A PROJECT REPORT

ON

“Globalization and its impact on retail industry in India”

SUBMITTED IN PARTIAL FULLFILLMENT FOR THE AWARD OF

POST GRADUATE DIPLOMA IN MANAGEMENT (PGDM)

(Approved by AICTE, Ministry of HRD, Govt. of India)

BATCH-2018-20

Submitted To: - Submitted by:-

Indirapuram institute of higher studies Chhavi Yadav
Roll No. PGDM/18/07
 INDIRAPURAM INSTITUTE OF HIGHER STUDIES

INDIRAPURAM INSTITUTE OF HIGHER STUDIES (IIHS)

VISHISHTHA SHIKSHA BHOOKHAND, NYAY KHAND-1
INDIRAPURAM, GHAZIABAD (U.P.)-201014
(DELHI, NCR)

STUDENT UNDERTAKING

I Chhavi yadav from PGDM, hereby that the summer internship report titled

“Globalization and its impact on retail industry in India” is submitted

for the partial fulfillment of “Post Graduate in Management (PGDM)” ( Approved by

AICTE, Ministry of HRD, Govt. of India ) at Indirapuram Institute of Higher Studies (IIHS),

Delhi, NCR

This is my original work and has not been submitted to any Institute/University for awarding

any degree/diploma or any professional course. If there will be any violation of IRP, I will be

solely responsible for that and institute has full right to cancel my diploma

Date: (signature)

Place: Vaishali Name: Chhavi

Yadav
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Roll no. :

PGDM/18/07

CONTENTS

SR.NO HEADING PAGE NO.

1 PROBLEM STATEMENT 4-5

2 INTRODUCTION TO THE TOPIC

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3 CONCLUSION
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OBJECTIVES OF THE STUDY

1 To find the impact of globalization on retail industry in India

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INTRODUCTION

Introduction Retail business has been revolutionized in the current century in both

national and inter-national markets. The inherent limitations are no longer a global

challenge as the different marketing routes, online and physical stores, have greatly

changed the way it all is conducted more so at every corporate section in the US.

Generally, the introduction of the Internet has managed to bring the entire world to

a virtually smaller trading environment having companies reach out across borders

to form new job prospects all over the universe. One such massive multi-national

company is the renowned Wal-Mart, which is one of the largest world-wide

retailer, a company deeply rooted in traditions and policies that have generally

made shopping very manageable all under one roof. The idea of globalization in

mass retail gained pace in the early 90s pioneered by such market giants who sore

high in the financial districts up to date.

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2.1 GLOBALIZATION

Globalization is the new buzzword that has come to dominate the world since the

nineties century with the end of the cold war and the break-up of the former Soviet

Union and the global trend towards the rolling ball.

There is increased reliance on the market economy

• renewed faith in the private capital and resources,

• a process of structural adjustment spurred by the studies and influences of the

World Bank and other International organizations

• Globalization has brought in new opportunities to developing countries.

The process of globalization

 Includes opening up of world trade,

 Internationalization of financial markets,

 Population migrations

 More generally increased mobility of persons, goods, capital, data and ideas

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2.2 RETAILING INDUSTRY: AN OVERVIEW OF THE GLOBAL

SCENARIO

Retailing in the modern times is largely perceived as an expression of consumer

consciousness in society. As societies, differ so do the responses of consumers and
their consciousness. However, retailing has helped a great deal in generating an
international flavour in business activities by way of closer interactions between
different countries of the world.

World over, there have been sweeping changes in the retailing businesses over the
last two decades or so. In some parts of the world, relatively smaller family-run or
regionally targeted stores dominate retailing business. However, as a general trend,
it can be observed that more and more of this market is increasingly being captured
by the large MNCs. These include, billion dollar MNCs like, Wal-Mart, Sears, and
Carrefour and so on. Such big MNCs have many comparative advantages, like,
huge supply/distribution chains, excellent inventory management and financing
systems as well as strong marketing infrastructure.

Trend and Pattern of Indian Retail Industry and Its Future Growth Prospects
In the emerging scenario, there is excellent growth potential for Indian retail,
because of the sizeable and growingly affluent upper middle class population. The
growth rate works out to 23.09 per cent CAGR, for the period FY 2000- FY 2020;
as the market size grows from USD 204 Billion (FY 2000) to USD 13000 Billion
(FY 2020). (Table I)

Table-I: Growth Pattern of Retailing Industry in India (FY 2000 to FY 2020)

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Financial Year Market Size of Retail Remarks / Notes

Industry (USD Billion)

2000 204 CAGR for the period FY

2002 238 2000 to
2004 278 FY 2020 is 23.09%
2006 321 [CAGR is
2008 368 Compounded Average
2010 424 Growth Rate]
2012 518
2013 490
2015 (ESTIMATED) 600
2020 (PROJECT 1300

Over the last few years, Indian retailing industry has witnessed a number of
sweeping changes. Eventually, India’s attempt to go
Global in retailing business has been a success largely. The industry has reached
the threshold of some major developments and all the prominent players are
equipping themselves to face the challenge.

Sensing the favourable business environment in India characterized by a huge

share of affluent upper middle class population, high GDP growth rates and stable
macroeconomic environment many multi-national companies (MNCs) are eagerly
looking into the Indian market.

Figure 1. Growth Pattern of Retailing Industry in India since Inception– Major

Phases
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As shown in Figure-I, there are four distinct phases in the history of retailing
industry in India. Since 2010, it is passing through the fourth phase and is
characterized by the liberal policy towards foreign direct investment (FDI). The
high growth rate of the
Retailing industry during the ongoing post-2010 regime (fourth phase) at rates
double that of the GDP growth rates of the nation is an indicator of the immense
potential of FDI.

Figure2.Growth Pattern of Indian Retail Industry since inception

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In spite of the commendable growth in retailing industry over the years,

particularly during the ongoing fourth phase (post-2010 era), the organized retail
penetration (ORP) is still at about 8 per cent (2014) which may reach 10 per cent
by 2020 if the present growth of the industry continues.

A CGGR of 13 per cent for FY 2014 – FY 2019 period for retailing industry is
double the estimated GDP growth rate of 6.5 per cent (Figure II). An ORP of about
8 per cent for India as of 2014 (Figure II), is one of the lowest in the whole world if
other nations, both developed and developing, are considered. This fact points to
the immense untapped potential of the organized

Figure 3. Organized Retail Penetration (ORP) in India Vs Other Major

Countries

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Current Government Policy on FDI in Retailing and Its Implications

Following the global trend in this regard, retailing in India has been picking up
momentum over the last few years. India’s attempt to go international in retailing
has been generally successful and India’s retailing industry could maintain a
growth of roughly double that of the GDP growth rate during the corresponding
period. (Figure II). During the third phase (2005-2010) (Figure I), there was
substantial investment in retailing, and the industry could outperform its global
average growth (e.g. FY 2006) and a ‘Retail Revolution’ emerged. The recent
developments in India have given another dimension to the fast growth prospects
of retail industry in India. Some of the major policy developments that could
enhance the prospects of retail sector in India in the days to come are as follows:

 FDI upto 100 per cent in single brand retail is allowed.

 FDI upto 51 per cent in multi-brand retail is allowed.
 Introduction of Goods and Services Tax (GST) as a single unified tax system
from FY 2016-17 onwards

Because of the favorable governmental policy towards retailing, particularly FDI

into retailing, foreign retailers are growingly attracted to enter the Indian retaining

market. Cumulative FDI inflow into retail sector as of March 2015 has been as

high as USD275.38 Million. This is expected to grow further as the new FDI

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policies as above (viz. up to 51 per cent in multi-brand, 100 per cent in single brand

retail etc.) become operational. India ranks first in FDI inflows into Greenfield

investments in terms of estimated capital expenditure. India is ahead of China, US,

UK etc., as per the recent projections by FDI Markets, under financial Times data

services (Table II). This indicates immense growth potential retailing industry in

India in the days to come primarily triggered by the large FDI inflows into the

country. This is because of the fact that retail sector accounts for a sizeable s hare

of the total FDI inflows into India over the years.

Table-II: FDI Inflows in Greenfield Capital Investments (First Half of 2015)

As per the records of M/s. FDI Markets, in respect of India totally 1225 projects
are recorded. The capital expenditure and job created (including estimates) are
respectively USD 69,039.30 Million and 292595 because of huge FDI investments
as above in India. The number of companies / investors interested in FDI
investments in India is 894. The leading FDI destinations in India are Bangalore,
Mumbai, Pune, Chennai and Hyderabad in that order with number of projects of
187, 101, 80, 72, and 67 respectively (M/s. FDI Markets, 2015) [7].

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IMPLICATIONS OF THE NEW POLICY OF THE GOVERNMENT ON FDI IN

RETAIL SECTOR

The major benefits of attracting FDI into retail sector are as follows:

 Influx of FDI would boost the economic life of the country;

 FDI would help to get rid of the intermediaries between farmers and the
retailer. and this in turn would help the farmers to obtain better returns for
their produce;
 FDI would help to reduce prices at the retail level and suppress inflationary
pressures
 Big and established retail chains would make sizeable investments in supply
chains, and hence help to reduce wastage. Such wastages are as high as 40
percent for fruits and vegetables;
 Small and medium enterprises (SMEs) in retailing can enjoy such benefits as
bigger market, advanced technology, modern management techniques,
global best practices etc. with FDI inflows. Besides, they get better branding
also in the new FDI regime;
 FDI can generate large number of jobs and helps to relocate people engaged
in smaller stores into better organized and professionally managed modern
retail shops;
 FDI would induce greater competition in the market resulting in enhanced
competitiveness of products and services, and reduced wastage. This would
benefit the consumers by way of better quality goods and producers through
competitiveness.

ENHANCED PERFORMANCE OF INDIAN RETAIL INDUSTRY:

1. SOME STRATEGIES Emphasis on Revenue Generation and Profitability

through Customer Focus:

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Global experiences suggest that revenue growth is increasingly becoming the key

measure of effectiveness of retailing business, and accordingly it enhances the

profitability a nd operational efficiency. This in turn necessitates concerted efforts

aimed at maximization of business revenue through identifying and satisfying

customer needs.

2. Vital Significance of Customer Relationship Management (CRM):

The task of customer attraction and retention, however, is becoming more and

more challenging year after year. In this context effective customer relationship

management (CRM), particularly electronic CRM (or, E-CRM, in brief) assumes

significance.

3. FMCG Focus: Appears Specially Relevant in the Indian Scenario

As per a recent study (by M/s. Deloitte, in Jan 2007) the segment of fast moving

consumer durables (FMCG) has been observed to be the biggest sector by sales

volume among the top 250 retailers across the globe. In India too, FMCG offers

excellent prospects especially because of the fast growing and increasingly affluent

upper middle class population.

4. Diversity in Population: Specialty Formats are Essential in the Indian

Context:

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As cultural and regional differences are quite prevalent in the Indian society, the

need for specialist formats for retailing is of special significance in India. Separate

and tailor made formats catering to the needs of different segments of the

population have to be designed meticulously and effectively delivered. Single

format will not suffice in a diverse society. Specialty boom is a global trend, as

already noted. Major players have already adopted this strategy. Reliance Retail

has at present 11 such formats ranging from footwear to jewels. Likewise, after

launching its e-Choupal retail stores in rural India and hence gaining a foothold in

the retail markets, is currently focusing on urban and semi-urban markets for

enhanced business prospects from the urban market. For the urban customers, it

seeks to develop ‘mass-end’ format through which it offers products of other

companies as well.

5. Innovative Payment Options and Special Schemes:

To attract and retail more customers in a nascent market like India, it is imperative

that innovative and flexible payment options (like, for example, through EMIs viz.

Equated Monthly Installments, which enable the customers to distribute their

financial burden over a period of time) are offered. Similarly, to retain the regular

customers special discounts be offered to customers holding memberships. For

instance, Reliance Retail is planning to offer MFT (Membership Financial services

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and Travel) across all its retailing formats, which include flexi-payment options

like EMI scheme.

6. Hypermarket Format is the Most Suitable Option in the Indian Scenario:

Hypermarket is emerging as the most favorable format for the time being in India.

Further, with the arrival of multinationals, this format will get a further push.

Because, this format offers maximum prospects for the players to compete

effectively with those from the unorganized retailing – currently the most

predominant group within the industry.

7. Aggressive Marketing Strategy:

Last, but not the least, is the utmost significance of aggressive marketing in order

to survive and prosper in a business like retailing. Aggressive marketing strategy,

as an imperative, emanates primarily from the cut-throat competition that is

characteristic of any globalized market. Besides, the unique complexities intrinsic

of retailing business like rapid product obsolescence, very thin profit margins, ever

changing customer tastes and preferences in growingly pluralistic world markets

and above all, constant price changes add to the need for such an approach.

8. Focusing on High Growth Sectors would be more meaningful:

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Focusing on a few high growth categories of business within the retail sector

appears to be quite good. Such sectors include, inter alia, (i) Food and grocery

retailing, (ii) Apparel retailing, and (iii) Luxury retailing.

9. Advances in IT – Maximum Use of IT and IT Enabled Services (ITES):

With the advent of computers and the use of the fast advances in information

technology (IT) in every occupation, no business can survive without effective

utilization of IT. Besides IT, various IT enabled services (ITES) also could be

meaningfully integrated with retailing business too. In fact, use of IT and ITES

could be considered more as an imperative for survival and growth, rather than just

an option.

10. Focus on Fast Growing Online Retailing Market:

Online retail market is fast growing across all goods and services, and across all

market segments. The exponential growth of online retail market needs to be

effectively taken advantage of, by all industry players; because online retailing is

here to stay in this IT era.

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CONCLUSION

Given the immense potential for retail business in India and the very favorable

policy of the Governmental, particularly towards FDI in retail, the prospects of

Indian retailing industry are very bright. Considering the forthcoming fierce

competition in the retailing industry, the domestic players particularly the smaller

ones have to enhance their competitiveness in order to effectively defend against

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competition. In the emerging world order of globalization, there is no other way

out for them than is a part of this competition and face the challenge. Enhancing

competitiveness through effective use of IT is vital.

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