Indian Retail Industry

Submitted By Deepika Borgoankar MMS B Roll No 54

Introduction
Retail Concept

The word retail is derived from the French work retailer, meaning to cut a piece off or to break bulk. The distribution of consumer products begins with the producer and ends at the ultimate consumer. Between the producer and the consumer there is a middleman---the retailer, who links the producers and the ultimate consumers. Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use. It is responsible for matching individual demands of the consumer with supplies of all the manufacturers.

A retailer is a person, agent, agency, company, or organization which is instrumental in reaching the goods, merchandise, or services to the ultimate consumer. Retailers perform specific activities such as anticipating customers wants, developing assortments of products, acquiring market information, and financing. A common assumption is that retailing involves only the sale of products in stores. However, it also includes the sale of services like those offered at a restaurant, parlour, or by car rental agencies. The selling need not necessarily take place through a store. Retailing encompasses selling through the mail, the Internet, door-to-door visits any channel that could be used to approach the consumer. For example: When manufacturers like Dell computers sell directly to the consumer, they also perform the retailing function.

Traits of Retailing

Direct Interaction with Customers Retail businesses have a direct interaction with end-users of goods or services in the value chain. They act as intermediaries between end-users and suppliers such as wholesalers or manufacturers. Therefore, they are in a position to effectively communicate the response and changing preferences of the consumers to the suppliers or sales persons of the company. This helps the manufacturers and markets to redefine their product and change the components of its marketing strategy accordingly. For example: Customers can interact directly to retailers through telephone and can order the list of items through free home delivery.

 Lower Average amount of sales transaction

The average amount of sales transaction at retail point is much less in comparison to the other partners in the value chain. Many consumers buy products in small quantities for household consumption. Due to lower disposable incomes, some consumer segments in India even buy grocery items on a daily basis rather than a weekly or a monthly basis. Inventory management becomes a challenge for retailers as a result of the many minor transactions with a large number of customers. Hence, retailers must take care of determining average levels of stock, order levels and the retailer has to keep a tight control on costs associated with each transaction in the selling process. Credit verification, employment of personnel, value-added activities like bagging, gift-wrapping and promotional incentives all add up to the costs. One way to resolve this is for the retail outlets to be able to attract the maximum possible number of shoppers.

 Point-of-purchase Display and Promotions

A significant relevant chunk of retail sales comes from unplanned or impulse purchases. Studies have shown that shoppers often do not carry a fixed shopping list and pick up merchandise based on impulsive or situational appeal. Many do not look at ads before shopping. Since a lot of retail products are low involvement in nature, impulse purchases of the shopper is a vital area that every retailer must tap into. Therefore, display, point-of-purchase merchandise, store layou8t and catalogues become important. Impulse goods like chocolates, snack foods and magazines can sell much more quickly if they are placed in a high visibility and high traffic location.
For example: In Big bazaar, hyper city or any in mall, chocolates, Cadbury and other snacks are kept near counter so that people can take it easily.

 Larger Number of Retail Business Units Location of retail store plays an important role compared to other business units. Manufacturers decide the location on the basis of availability of factors of productions and market. Similarly, retailers consider factors like potential demand, supply of merchandise and store image-related factors in locating the retail outlet. The number of operation units in retail is the highest compared to other constituents of the value chain, primarily to meet the needs for geographic reach and customer accessibility.

Structure of Retail Industry

Organized
Supermarkets

Unorganized
Kiranas Traditional Mom & Pop Stores

Hypermarkets

Kiosks

Department Stores Specialty Chains

Street Markets

Company Owned Company operated

Exclusive/ Multiple brand Outlets

Organized retail sector:

Organized retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc Organized retail sector includes: Supermarkets Hyper marts Departmental stores.

Unorganized Retail Sector :

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, etc.

The unorganized sector is still dominant in India, Since retailing is the process of connecting the supplier and consumer, pricing of products is very important in a price conscious market like India. Unorganized retailers play an important role in this regard and are a vital part of the supply chain. If unorganized retail segment positions itself correctly, it can carve a niche for itself in India's booming retail sector.

This sector constitutes about 98% of the total retail trade. As 70% of the employment is generated in Agriculture sector, hence this form of retailing is widely seen in those areas and of course to some parts of the urban.

Retailing Formats in India

Malls: Discount stores: Department stores: MBO:

Hyper marts/Supermarkets:
Convenience Stores:

Present India Retail Scenario

The present value of the Indian retail market is estimated by the India Retail Report to be around Rs. 12,00,000 crore($270 billion) and the annual growth rate is 5.7 percent. Retail market for food and grocery with a worth of Rs. 7,43,900 crore is the largest of the different types of retail industries present in India. Furthermore around 15 million retail outlets help India win the crown of having the highest retail outlet density in the world. India is rated the fifth most attractive emerging retail market: a potential goldmine. As per a report by KPMG the annual growth of department stores is estimated at 24% Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney.

Present India Retail Scenario

Organized retailing in India has been largely an urban phenomenon with affluent classes and growing number of double-income households. Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market across most categories of consumption ITC is experimenting with retailing through its e-Choupal and Choupal Sagar rural hypermarkets. HLL is using its Project Shakti initiative leveraging women self-help groups to explore the rural market.

Challenges faced by Retail Industry

The industry is facing a severe shortage of talented professionals, especially at the middle-management level. Chains more efficient in order to deliver the levels of quality and service those consumers are demanding. Long intermediation chains would increase the costs by 15%. Lack of adequate infrastructure with respect to roads, electricity, cold chains and ports has further led to the impediment of a pan-India network of suppliers. Due to these constraints, retail chains have to resort to multiple vendors for their requirements, thereby, raising costs and prices. The available talent pool does not back retail sector as the sector has only recently emerged from its nascent phase. Further, retailing is yet to become a preferred career option for most of India's educated class that has chosen sectors like IT, BPO and financial services.

 Even though the government is attempting to implement a uniform value-added tax across states, the system is currently plagued with differential tax rates for various states leading to increased costs and complexities in establishing an effective distribution network. Stringent labor laws govern the number of hours worked and minimum wages to be paid leading to limited flexibility of operations and employment of part-time employees. Further, multiple clearances are required by the same company for opening new outlets adding to the costs incurred and time taken to expand presence in the country. The retail sector does not have 'industry' status yet making it difficult for retailers to raise finance from banks to fund their expansion plans.

Government restrictions on the FDI are leading to an absence of foreign players resulting into limited exposure to best practices. Non- availability of government land and zonal restrictions has made it difficult to find a good real estate in terms of location and size. Also lack of clear ownership titles and high stamp duty has resulted in disorganized nature of transactions

Growth Drivers in Retail Sector

Double Incomes: Increasing instances of Double Incomes in most families coupled with the rise in spending power. Plastic Revolution: Increasing use of credit cards for categories relating to Apparel, Consumer Durable Goods, Food and Grocery etc.

Urbanization: increased urbanization has led to higher customer density areas thus enabling retailers to use lesser number of stores to target the same number of customers. Aggregation of demand that occurs due to urbanization helps a retailer in reaping the economies of scale.

 Covering distances has become easier: With increased automobile penetration and an overall improvement in the transportation infrastructure, covering distances has become easier than before. Now a customer can travel miles to reach a particular shop, if he or she sees value in shopping from a particular location.

Top leading Companies

Pantaloon
Pantaloon is the most popular and biggest retailers in India with more than 450 stores across the country. Headquartered in Mumbai, it has more than 5 million sq. ft retail space located across the country. It has the following retail segments: Food & Grocery: Big Bazaar, Food Bazaar Home Solutions: Hometown Furniture Bazaar Consumer Electronics: e-zone Shoes: Shoe Factory Books, Music & Gifts: Depot Health & Beauty Care: Star, Sitara E-tailing: Futurebazaar.com Entertainment: Bowling Co.

Tata Group
Tata group established in 1998 is another major player in Indian retail industry with its subsidiary Trent, which operates Westside and Star India Bazaar. The group also has acquired the largest book and music retailer in India 'Landmark' in 2005. Trent owns over 4 lakh sq. ft retail space across the country.

RPG Group
RPG Group is one of the earlier entrants which were started in the year 1996 in the Indian retail market, with the food & grocery retailing. Later it also opened the pharmacy and beauty care outlets 'Health & Glow'.

Reliance
Reliance is one of the biggest giant players in Indian retail industry. More than 300 Reliance Fresh stores and Reliance Mart are quite popular in the Indian retail market. It is expected that in the year 2013 its sales would reach to Rs. 90,000 crores.

AV Birla Group
AV Birla Group has a strong presence in Indparelian app. retailing with brands like Louis Phillipe, Allen Solly, Van Heusen, Peter England are quite popular.

Prospects of FDI in Retail Sector

Economies of scale : Economies of scale and perfect cost cutting providing the consumer the best at lowest price Brand name : They bring with them world class products which have high quality and a highly valued brand name . The domestic brands dont have that charm and attracting power as of global brands. Technology : Global players are highly advanced in technology . The tools, equipments, kind of warehouses they use, their way of performing processes are highly advanced and cannot be compared with those used by Indian retail firms , they provides better services and better quality products even in categories like perishable food etc.

 Attract skilled employees : They believe in earning profits by cutting costs as much as possible and at the same time are conscious towards career of their employees . Attractive salary and high incentives can also attract skilled employees towards global players which is also a threat for big Indian retail firms. Better infrastructure : Better storage facilities, better transportation medium and high investment can pose another threat to Indian retail firms which can hardly match the capabilities of giants on their own. Joint ventures : Global players may not prefer to enter into joint ventures with Indian firms and may also close down the existing ventures in wholesale and single brand which may adversely affect the Indian firms . This is possible when 100% FDI is allowed in multi-brand retail.

Problems of FDI in Retail Sector

Impact on MOM-AND-POP STORES: FDI is often opposed on the grounds that it will put mom-and-pop stores out of business. Impact on FARMERS : so politicians argue that FDI in retail will harm farmers most as most of the retail gaints may import goods globally.

Employment problem may INCREASE: Another major concern about FDI in retail is that it will leave many people job less as more than 97% of the retail sector is unorganized .

Conclusion
The retail sector has played a phenomenal role throughout the world in increasing productivity of consumer goods and services. It is also the second largest industry in US in terms of numbers of employees and establishments. There is no denying the fact that most of the developed economies are very much relying on their retail sector as a loco motive of growth. The India Retail Industry is the largest among all the industries, accounting for over 10 per cent of the countrys GDP and around 8 per cent of the employment. The Retail Industry in India has come forth as one of the most dynamic and fast paced industries with several players entering the market. However, all of them have not yet tasted success because of the heavy initial investments that are required to break even with other companies and compete with them. The India Retail Industry is gradually inching its way towards becoming the next boom industry

Thank You