INTRODUCTION

The Indian retail industry has experienced high growth over the last decade with a
noticeable shift towards organised retailing formats. The industry is moving towards a
modern concept of retailing. The size of India's retail market was estimated at US$ 435
billion in 2010. Of this, US$ 414 billion (95% of the market) was traditional retail and
US$ 21 billion (5% of the market) was organized retail. India's retail market is expected
to grow at 7% over the next 10 years, reaching a size of US$ 850 billion by 2020.
Traditional retail is expected to grow at 5% and reach a size of US$ 650 billion (76%),
while organized retail is expected to grow at 25% and reach a size of US$ 200 billion by
2020. The US-based global management consulting firm, A T Kearney, in its Global
Retail Development Index (GRDI) 2011, has ranked India as the fourth most attractive
nation for retail investment, among 30 emerging markets. As Indias retail industry is
aggressively expanding itself, great demand for real estate is being created. The
cumulative retail demand for real estate across India is expected to reach 43 million
square feet by 2013. Around 46 per cent of the total estimated demand between 2009 and
2013 will be come from Tier-1 cities. For instance, Pantaloon Retail added 2.26 million
square feet (sq. ft.) of retail space during the fiscal 2011 and booked over 9 million sq. ft
of retail space to fructify its expansion plans in future. Some of the key players in the
Indian retail market, with a dominant share are: 1) Pantaloon Retail Ltd, a Future group
venture: Over 12 mn sq. ft. of retail space spread over 1,000 stores, across 71 cities in
India. 2) Shoppers Stop Ltd: Over 1.82 mn sq. ft. of retail space spread over 35 stores, in
15 cities. 3) Spencers Retail, RPG Enterprises: Retail footage of over 1.1 mn sq. ft. with
approx 250 stores, across 66 cities. 4) Lifestyle Retail, Landmark group venture: Has
approximately 15 lifestyle stores and 8 Home centres. Other major domestic players in
India are Bharti Retail, Tata Trent, Globus, Aditya Birla More, and Reliance retail.
Some of the major foreign players who have entered the segment in India are -
Carrefour which opened its first cash-and-carry store in India in New Delhi. - Germany-
based Metro Cash & Carry which opened six wholesale centres in the country. - Walmart
in a JV with Bharti Retail, owner of Easy Day storeplans to invest about US$ 2.5
billion over the next five years to add about 10 million sq ft of retail space in the country.

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- British retailer Tesco Plc (TSCO) in 2008, signed an agreement with Trent Ltd.
(TRENT), the retail arm of Indias Tata Group, to set up cash-and-carry stores. - Marks &
Spencers have a JV with Reliance retail. FINANCE AND ASSISTANCE The Indian
retail sector accounts for 22 per cent of the country's gross domestic product (GDP) and
contributes to 8 per cent of the total employment. India continues to be among the most
attractive investment propositions for global retailers. Cumulative foreign direct
investment (FDI) inflows in single-brand retail trading, during April 2000 to June 2011,
stood at US$ 69.26 million. Till now FDI up to 100 per cent was allowed for cash and
carry wholesale trading and export trading under the automatic route, and FDI up to 51
per cent was allowed in single-brand products, with prior government approvals.
However, the Government recently passed a cabinet note and permitted FDI upto 51% in
multibrand retailing with prior Government approval and 100% in single brand retailing
thus further liberalizing the sector. This policy initiative is expected to provide further
fillip to the growth of the sector.

This research is basically done to find out the training needs of the sales people in the
retail industry and how they are being fulfilled. The retail industry in our country is at
boom and getting organized day by day, the demands of customers are not just great
products but also great shopping experience and to make this possible a retail outlet
should have well trained sales people. This study is made to know how well the sales
people of retail industry in INDIA are trained to meet the customer expectations and
global standards.

The retail sales people demonstrate how items work and explain details of items to
customers; they give information about various models, colors, and brands of an item.
Sometimes they give special information about very expensive or complex items. They
help customers to find items in the store, they try to convince customers to buy those
items. Retail sales people compute the amount of the total sale and received cash, cheque
or credit card payments. Sales people also handle returns or exchanges of items.

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The above mentioned are the very basic and important duties of sales people and they
require great skills and knowledge to perform well. And this high level performance can
only be seen if the sales people are provided with training as and when required.

Retailers are increasingly stressing the importance of providing courteous and efficient
service in order to remain competitive. The direct link between the customers and the
company is the sales people who are expected to provide this courteous and efficient
service to the customers. Sales people are periodically given training to update and refine
their skills for providing the best customers.

A sales persons gain experience and seniority; they usually move to positions of greater
responsibility and may be given their choice of departments. This often means moving to
areas with potentially higher earnings and commissions. The highest earnings potential is
usually found in big-ticket items. This type of positions often requires the most
knowledge of the product and the highest talent for persuasion. So training is the most
important aspect in recent trend which increases the potential of sales people to meet the
organizational and personal objectives

The retail industry in INDIA has changed its face and approach. Sales people working in
this industry play major role in handling the customers effectively. This study is done to
evaluate the training system used by the retail industry in INDIA and also to understand
training aspects which keeps the sales force of retain industry fit and ready to face any
kind of challenges, particularly due to increasing domestic and international competition.

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 THE INDIAN RETAIL MARKET

Indian market has high complexities in terms of a wide geographic spread and distinct
consumer preferences varying by each region necessitating a need for localization even
within the geographic zones. India has highest number of outlets per person (7 per
thousand) Indian retail space per capita at 2 sq ft (0.19 m2)/ person is lowest in the world
Indian retail density of 6 percent is highest in the world. 1.8 million households in India
have an annual income of over 4.5 million (US$66,870.00).

The organised retail market has a share of 8% as per 2012. While India presents a large
market opportunity given the number and increasing purchasing power of consumers,
there are significant challenges as well given that over 90% of trade is conducted through
independent local stores. Challenges include: Geographically dispersed population, small
ticket sizes, complex distribution network, little use of IT systems, limitations of mass
media and existence of counterfeit goods.

A number of merger and acquisitions have begun in Indian retail market. PWC estimates
the multi-brand retail market to grow to $220 billion by 2020.

India retail reforms

Until 2011, Indian central government denied foreign direct investment (FDI) in multi-
brand Indian retail, forbidding foreign groups from any ownership in supermarkets,
convenience stores or any retail outlets, to sell multiple products from different brands
directly to Indian consumers.

The government of Manmohan Singh, prime minister, announced on 24 November 2011

the following:

India will allow foreign groups to own up to 51 per cent in "multi-brand retailers", as
supermarkets are known in India, in the most radical pro-liberalisation reform passed
by an Indian cabinet in years;

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 single brand retailers, such as Apple and Ikea, can own 100 percent of their Indian
stores, up from the previous cap of 51 percent;
both multi-brand and single brand stores in India will have to source nearly a third of
their goods from small and medium-sized Indian suppliers;
all multi-brand and single brand stores in India must confine their operations to 53-
odd cities with a population over one million, out of some 7935 towns and cities in
India. It is expected that these stores will now have full access to over 200 million
urban consumers in India;
multi-brand retailers must have a minimum investment of US$100 million with at
least half of the amount invested in back end infrastructure, including cold chains,
refrigeration, transportation, packing, sorting and processing to considerably reduce
the post harvest losses and bring remunerative prices to farmers;
the opening of retail competition will be within India's federal structure of
government. In other words, the policy is an enabling legal framework for India. The
states of India have the prerogative to accept it and implement it, or they can decide
to not implement it if they so choose. Actual implementation of policy will be within
the parameters of state laws and regulations.

The opening of retail industry to global competition is expected to spur a retail rush to
India. It has the potential to transform not only the retailing landscape but also the
nation's ailing infrastructure.

A Wall Street Journal article claims that fresh investments in Indian organised retail will
generate 10 million new jobs between 20122014, and about five to six million of them
in logistics alone; even though the retail market is being opened to just 53 cities out of
about 8000 towns and cities in India.

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Indian retail reforms on hold

According to Bloomberg, on 3 December 2011, the Chief Minister of the Indian state of
West Bengal, Mamata Banerjee, who is against the policy and whose Trinamool
Congress brings 19 votes to the ruling Congress party-led coalition, claimed that Indias
government may put the FDI retail reforms on hold until it reaches consensus within the
ruling coalition. Reuters reports that this risked a possible dilution of the policy rather
than a change of heart.

Several newspapers claimed on 6 December 2011 that India parliament is expected to

shelve retail reforms while the ruling Congress party seeks consensus from the opposition
and the Congress party's own coalition partners. Suspension of retail reforms on 7
December 2011 would be, the reports claimed, an embarrassing defeat for the Indian
government, suggesting it is weak and ineffective in implementing its ideas.

Anand Sharma, India's Commerce and Industry Minister, after a meeting of all political
parties on 7 December 2011 said, "The decision to allow foreign direct investment in
retail is suspended till consensus is reached with all stakeholders.

On 19 Feb 2013 Tamil Nadu became the first state in the country to stoutly resist MNC
'invasion' into the domestic retail sector. In Chennai, Tamil Nadu CMDA authorities
placed a seal on the massive warehouse spreading across 7 acres that had reportedly been
built for one of the worlds leading multinational retail giants, Wal-mart.

In February 2014, Vasundhara Raje led newly elected Rajasthan Government reversed
the earlier Government's decision of allowing FDI in retail in the state. It reasoned that
the sources of domestic retail are primarily local whereas international retail affects
domestic manufacturing activity and hence reduces employment opportunities.

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 GROWTH OF RETAIL SECTOR

Retail and real estate are the two booming sectors of India in the present times. And if
industry experts are to be believed, the prospects of both the sectors are mutually
dependent on each other. Retail, one of Indias largest industries, has presently emerged
as one of the most dynamic and fast paced industries of our times with several players
entering the market. Accounting for over 10 per cent of the countrys GDP and around
eight per cent of the employment retailing in India is gradually inching its way toward
becoming the next boom industry.

As the contemporary retail sector in India is reflected in sprawling shopping centers,

multiplex- malls and huge complexes offer shopping, entertainment and food all under
one roof, the concept of shopping has altered in terms of format and consumer buying
behavior, ushering in a revolution in shopping in India. This has also contributed to large
scale investments in the real estate sector with major national and global players
investing in developing the infrastructure and construction of the retailing business. The
trends that are driving the growth of the retail sector in India are

Low share of organized retailing

Falling real estate prices
Increase in disposable income and customer aspiration
Increase in expenditure for luxury items

Another credible factor in the

prospects of the retail sector in
India is the increase in the
young working population. In
India, hefty pay-packets, nuclear
families in urban areas, along
with increasing working-women
population and emerging
opportunities in the services sector. These key factors have been the growth drivers of the

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organized retail sector in India which now boast of retailing almost all the preferences of
life - Apparel & Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home &
Office Products, Travel and Leisure and many more. With this the retail sector in India is
witnessing a rejuvenation as traditional markets make way for new formats such as
departmental stores, hypermarkets, supermarkets and specialty stores.

The retailing configuration in India is fast developing as shopping malls are increasingly
becoming familiar in large cities. When it comes to development of retail space specially
the malls, the Tier II cities are no longer behind in the race. If development plans till
2007 is studied it shows the projection of 220 shopping malls, with 139 malls in metros
and the remaining 81 in the Tier II cities. The government of states like Delhi and
National Capital Region (NCR) are very upbeat about permitting the use of land for
commercial development thus increasing the availability of land for retail space; thus
making NCR render to 50% of the malls in India.

India is being seen as a potential

goldmine for retail investors
from over the world and latest
research has rated India as the
top destination for retailers for
an attractive emerging retail
market. Indias vast middle
class and its almost untapped retail industry are key attractions for global retail giants
wanting to enter newer markets. Even though India has well over 5 million retail outlets,
the country sorely lacks anything that can resemble a retailing industry in the modern
sense of the term. This presents international retailing specialists with a great opportunity.
The organized retail sector is expected to grow stronger than GDP growth in the next five
years driven by changing lifestyles, burgeoning income and favorable demographic
outline.

Another cap to the retailing industry in India is allowing 51% FDI in single brand outlet.
The government is now set to initiate a second wave of reforms in the segment by

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liberalizing investment norms further. This will not only favor the retail sector develop in
terms of design concept, construction quality and providing modern amenities but will
also help in creating a consumer-friendly environment. Retail industry in India is at the
crossroads but the future of the consumer markets is promising as the market is growing,
government policies are becoming more favorable and emerging technologies are
facilitating operations in India. And this upsurge in the retail industry has made India a
promising destination for retail investors and at the same time has impelled investments
in the real estate sector. As foreign investors cautiously test the Indian Markets for
investments in the retail sector, local companies and joint ventures are expected to be
more advantageously positioned than the purely foreign ones in the evolving India's
organized retailing industry.

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 INDIAN RETAIL SCENARIO

The word retail is derived from the French word retailer, meaning to cut a piece off or
to break bulk. Retailing involves a direct interface with the customers and the
coordination of business activities from end to end.

The retail scenario in India is unique. Much of it is in the unorganized sector. With over
12 million retail outlets of various sizes and formats. Almost 96% of these retail outlets
are less than 500sq.ft. In the size and the percapita retail space in India being 2 sq.ft
compared to the U.S. figure of 16sq.ft. Indias percapita retailing space is the lowest in
the world.

With more than 9 outlets per 1000 people, India has the largest number in the world.
Most of them are independent and contribute as much as 96% to total retail sales. There
is an incredible amount of activity in terms of creation of retail-oriented space across
India. As per some estimates, there are over 200 retail mall projects under construction or
under active planning stage spanning over 25 cities. This may translate into over 25
million sq. ft. of new retail space in the market within next 24 months.

Present Indian Scenario

Unorganized market: Rs. 583,000 crores
Organized market: Rs.5, 000 crores
5X growth in organized retailing between 2000-2005
Over 4,000 new modern retail outlets in the last 3 years
Over 5,000,000 sq. ft. of mall space under development
The top 3 modern retailers control over 750,000 sq. ft. of retail space
Over 400,000 shoppers walk through their doors every week
Growth in organized retail on par with expectations and projections of the last 5
Years on course to touch Rs. 35,000 crores (US$ 7 Billion) or more by 2005-06

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 ORGANIZED RETAIL FORMATS IN INDIA

Each of the retail stars has identified and settled into a feasible and sustainable
business model of its own:

Shoppers' Stop Department store format

Westside
Giant and Big Bazaar
Food World and Nilgiris
Pantaloons and The Home Store
Tanishq
Marks & Spencer model of 100% private
label
Hypermarket/cash & carry store
Supermarket format
Speciality retailing
High quality organized retail business

The retail business in India in the year 2000 was Rs. 4000,000 crore and is estimated to
go to Rs. 800,000 crore by the year 2005,an annual increase of 20%. The contribution of
the organized retail industry in the year 2000 was Rs.20, 000 crore and is likely to
increase to Rs. 160,000 crore by 2005.

According to the survey conducted by Federation Of Indian Chambers Of Commerce &

Industry [FCCI] and price water house coopers indicates that the Indian retail sector will
under go a sea change in size as well as formats in the next 10 yrs. It also expects that by
2010 the countrys top retailers will operate at least 3 to 4 format, all scalable to size,
location and providing value to their target customers.

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Change Accelerators
The following factors will be significant in driving growth in the retail sector:
Consumer factors
Increase in income
Workingwomen
Changes in lifestyle demand for global trends
Supply side factors
Growing importance of retailing in political and economic agenda
Real estate reforms to be undertaken in the next 24 months
Major restructuring of the manufacturing sector easing product supply constraints for
efficient retailing
Reduction in import duties-offering more global sourcing options

Human Resource Issues And Concerns In Retail Industry:

Manpower planning
Recruitment
Motivation and retention and building reward system that ensure performance
orientation.

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 UNDERSTANDING THE INDIAN RETAIL SCENARIO

Retail is Indias largest industry, accounting for over 10 per cent of the countrys GDP
and around eight per cent of the employment. Retail industry in India is at the crossroads.
It has emerged as one of the most dynamic and fast paced industries with several players
entering the market. But because of the heavy initial investments required, break even is
difficult to achieve and many of these players have not tasted success so far. However,
the future is promising; the market is growing, government policies are becoming more
favorable and emerging technologies are facilitating operations.

Retailing in India is gradually inching its way toward becoming the next boom industry.
The whole concept of shopping has altered in terms of format and consumer buying
behavior, ushering in a revolution in shopping in India. Modern retail has entered India as
seen in sprawling shopping centres, multi-storeyed malls and huge complexes offer
shopping, entertainment and food all under one roof. The Indian retailing sector is at an
inflexion point where the growth of organized retailing and growth in the consumption by
the Indian population is going to take a higher growth trajectory. The Indian population is
witnessing a significant change in its demographics. A large young working population
with median age of 24 years, nuclear families in urban areas, along with increasing
working-women population and emerging opportunities in the services sector are going
to be the key growth drivers of the organized retail sector in India.

Retailing today is not only about selling at the

shop, but also about surveying the market,
offering choice and experience to consumers,
competitive prices and retaining consumers as
well.

The Indian retail industry is no more nascent today. There has been a significant change
in retail trading over the years, from small kiranawalas in the vicinity to big super

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markets; a transition is happening from the traditional retail sector to organized retailing.
The unorganized sector still holds a dominant position in this industry. The organized
segment holds just about 1.2% of the current US$ 245 billion retail market, which is
expected to reach about US $ 385 billion by the middle of this decade.

With consumers looking at convenience with multiplicity of choice under one roof and
expectations evolving over time, consumer demand is truly the driving force for
organized retailing in the country. Food and beverages form the main chunk of the retail
market. They are followed by apparel and footwear.

The Indian textile industry, the backbone of the apparel segment, has a large share of the
Indian economy, accounting for over 20% of industrial production as well as providing
direct and indirect employment to around 65 million people.

Despite the retail store density in India with regard to population being the largest, it is
estimated that over 90% of the stores are less than 500 sq. ft in size. Industry estimates
put the number of retail outlets at 12 million. This is clearly indicative of small-shop
ownership crowding the unorganized segment of retailing. While this fragmented market
structure does pose significant challenges for organized retailing, potential does exist if
modern information and supply chain management systems are deployed to support the
development of convenience shops that match customer expectations.

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Growth in Organized Retailing

The organized segment of the retail industry has grown past the 1% share during the year,
from 0.6% of the market three years back. The establishment of supermarkets and
convenience stores has been a great effort to communicate the advantages of organized
retailing to customers. With supermarkets like Apna Bazaar, Sahakari Bhandar, 9 to 9,
Food World and Margin Free shops providing easy access to goods at reduced prices,
with few even providing a constant supply of foreign goods, the organized sector does
attract the bargain hunter's attention.

Food and clothing still account for the largest proportion of consumer spending. Together
they account for about 60% of the estimated US$ 275 billion household expenditure.
With the hospitality sector expected to grow at a compounded annual growth of about
13% during the next three years, the food retailing ventures can certainly be looked at to
spread further across cities.

Apart from the food segment, home improvement stores are the upcoming segment.
Outlets like Gautier, Wonder Living, Bombay Bazaar, etc. have penetrated across
metropolitan areas and leading Class A cities of the country. Research estimates that the
total space for shopping malls is likely to go up from 50 lakh sq ft to 75 lakh sq ft during
the year. India's per capita retail space is the lowest in the world at just about 2 sq. ft.
Compare this with the US figure of 16 sq. ft. Therefore, the industry's need for real estate,
which is on the rise, could well be justified. A significant fallout of the emergence of
malls will be the trend of smaller retailers upgrading their establishments and emulating
practices from the `mall experience'.

The growth in the organized segment is evident from the plans of the current players.
Ventures like Food World and Music World are set to more than double their network,
while Shoppers' Stop is gearing up for an expansion of 15 to 17 outlets all over the
country. Pantaloon is expected to build about 11 super stores, moving ahead of its current
store and franchise model of business. Regional retailers like Vivek's too are planning to

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expand the network across their region. Players like Crossword, Nilgiris, Vitan, Kemps
Chain and Landmark are also planning expansions.

Though there exists adequate opportunities for organized retailing, the unorganized sector
does cash in on the tax advantage. The fragmented and unstructured segment makes it
difficult, if not impossible, to administer the tax system. The other hurdle is to change the
mind block of customers, who tend to perceive organized retailers to be far more
expensive than unorganized ones with no specific distinction between the two in terms of
the apparent value. While the former is a macro issue, the latter is being addressed by
organized retailers through relationship marketing, where customer preference and
customer satisfaction play a key role.

Customer relationship management tracks down loyal customers and focuses on their
satisfaction. A rapid transformation from traditional to organized retailing would occur
only on account of a change in consumer expectation and behaviour. To tackle this factor,
retailers are focusing on retaining customers through various marketing strategies.

Payment through card facilities is now available in most supermarkets and multi-storied
shopping arcades, providing convenience and comfort to customers. Multi-brand outlets
like Cross Roads, Globus and Shoppers' Stop have membership cards for frequent
customers providing special offers and discounts.

The demand perspective in India highlights some key changes in consumer demographics
driving organized retailing. These include:

Income and consumption growth

Increasing literacy levels
Changes in family structure and womens role in the family
Growing role of children as influencers
Gradual acceptance of frozen goods as a viable alternative to fresh produce
Growing influence of TV.

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Household income levels are expected to rise, with the lowest income group to comprise
only 24% in 2004 from its current level of 31.5%. The cumulative growth of the other
income groups is likely to be about 7%, meaning growth in consumers who favour the
emerging trends in retailing.

Households in the top 4 income categories (over a lakh of annual income) account for
about 53% of the total household consumption expenditure. On an average the
expenditure on consumables - food, clothing and consumer durables, by the lower income
category is as high as 74% while in the higher income category this forms only 57% of
their expenditure. Though the percentage contribution of consumables is relatively higher
by the lower class, the purchase location is predominantly traditional outlets, as compared
to the higher income category, which prefer to shop through organized outlets to a greater
extent.

Technology Advantage

Technology in the retailing industry has provided a new dimension. The introduction of
point of sale equipment, bar codes and huge storage capacity for billing and payment
database has facilitated the management of large set-ups with ease. Operations can be
recorded in a structured and systematic manner, providing detailed analysis of the sales
and volume of transactions. Electronic transactions have increased the volume of sales in
the country. Flexibility in the mode of payment and cashless transactions have helped in

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driving sales. Communication assists in maintaining a competitive advantage in retaining
and attracting customers.

The introduction of new technology may be intricate for retailers, but the convenience
and cost effectiveness create the need for new advancements. Large stores need to
monitor inventories and expenses of establishments. With automated machines and high-
end computers making the task simpler, the focus of retailers can stay on retaining
customers with new strategies. Security systems also do help for a safer shopping, for
retailers as well as customers, providing immense mental relief. Such technological
advancements are only now coming into India and the need for it has been
acknowledged. The point of sale (POS) applications will provide for quicker consumer
check-out and multiple payment options like credit cards.

Solutions ranging from simple Point of Sale (PoS) systems to complex retail ERPs have
been implemented mainly by large, mid-sized and manufacturer-retailers in India. Using
ERP packages and solutions like Retail Pro, higher-end solutions like JDA, SAP IS Retail
or Retek facilitate backend operations.

Along with business optimization software, mobile computing and B2C concept assist
retailers to cut cost and increase efficiency, but these solutions are mainly targeted at big

18
retail stores with chains in India. Though these solutions have been implemented, returns
on these investments take a longer period.

The emphasis of retailers are now in utilizing IT solutions like CRM, OLAP, CPFR tools
to carryout the behavioral analysis to stay in the competitive market. Retail ERP
packages have been implemented by large retailers but today they are experiencing
difficulty in utilizing it fully, one of the key reasons could be the lack of adequate
training. But it is expected that the demand and utilization of these packages will grow in
the near future.

It is estimated that about 400 to 500 mega bytes of data are transmitted daily between
point-of-sales counters and corporate headquarters of retail chains in developed countries.
Relay of transaction data in such volumes helps to maintain a close working relationship
between retailers and vendors to predict consumer demand, shorten lead times, reduce
inventory holding and thereby save cost. Retailing database also helps in tracking
purchase behaviour through demographic and psychographic information. This clearly is
an indication of technology serving as an effective means to build the retail business and
not just restricted to supporting and improving the operational efficiency.

Use of electronic communication like e-marketing could well be a cost-effective form of

attracting and retaining customers. With internet penetration and awareness on the rise in
the country, e-marketing does prove to be a good communication tool. Use of technology
could further be extended to home shopping, direct mails and telemarketing. It can also
facilitate growth in newer applications like kiosks, intelligent vending machines, PC net
shops, etc.

Retail as an Investment Option

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Despite the huge presence of the unorganized sector, the Indian retail industry is
attractive for international players. It is favoured over China's among the developing
countries due to a slew of laws in the communist country at various levels. Though the
market hasn't seen big time players of the developed nations yet, the fact that Indian per
capita retail space is among the lowest, is expected to provoke people to look at retail as a
potential business arena. The growth of integrated shopping malls, retail chains and
multi-brand outlets is evidence of consumer behaviour being favourable to the growing
organized segment of the business. Space, ambience and convenience are beginning to
play an important role in drawing customers.

With the Indian per capita income on the rise and the distribution of consumption
expenditure expected to remain fairly stable, the current segments of food and apparel is
likely to remain attractive. Upgradation of traditional grocery stores to present quality
food products in ways and methods adopted in North America and Europe can help in
communicating value and attracting customers.

Though the Indian retail industry is still a "protected industry" from the stand point of
foreign direct investment (FDI), the government is expected to provide some flexibility
on this front. Though FDI can help generate employment in this sector, it is likely to pose
stiff competition for existing small businesses. Unlike the country's FDI investment
objective of technology transfer and export promotion of the 1980s, today's infusion of
capital - specifically in the retail segment -- can bring to the table issues on size of
investment, actual inflows and domestic company take-overs. Given the constraints, FDI
should be viewed as a developmental resource that can help in restructuring the industry.
It should be aimed at filling up the resource and technology gaps in the retail segment.

While the differing tax and licensing systems across states could raise some issues when
organized retailers expand nationally, this could well protect the interests of regional
retailers. But the key to success is to build a fairly extensive network of stores across the
country to enable e-commerce transactions. This in the emerging scenario would help
retailers to target a wider audience and maximize returns. Strength in physical

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distribution will remain the backbone of any retail arrangement; however, ongoing
investment in bandwidth, development of internet facilities, and increasing awareness of
IT among the literate and educated population is expected to create a large base of
shoppers.

The minimal contribution of the organized sector is a profitable direction for potential
investors. The movement of more and more people up the income brackets also indicates
a good market potential. Labour cost differential, the removal of investment restrictions
and the rationalization of the tax structure can bring about best practices and the latest
offerings to the Indian retail industry. Growth opportunities for the organized sector can
be propelled through land reforms as well as uniformity in tax structure, which reduces
the cost advantage of the unorganized sector. These measures, if rightly implemented,
would provide a competitive environment for the Indian retail industry.

MEASURING UP Managing any business, whether brick-and-mortar, catalogue, or on

the Web, requires measuring what matters - the business performance. From these, one
derives key metrics to measure and analyze the firm's business performance. The need for
the measurement of these metrics stems from three primary sources:

Sales and revenue targets.

Simply put, retail, like any other business, must make a profit. Retail performance
measures not only aid in analyzing the sales performance in greater detail but also
are an invaluable aid in defining sales and revenue targets.

Historic performance.

The ability to compare a retail store's present performance relative to its past
performance provides valuable trend information.

Benchmarking.
It is not enough to know your own business' performance; it is also critical to

21
 know the performance of your competitors. Revenues may be less than expected,
but if competitors have faired worse, it may change your interpretation of the
situation. Apart from comparison within a sector, structured performance
measurement also enables across-sector comparisons and learning..

The following are some of the performance measures in the retail sector:

Walk-ins and Conversion

Walk-ins is the measure of number of people who walk into the stores within a pre-
determined period of time (daily, hourly, monthly). Conversion is the percentage of
customers who actually buy from the store.

Conversion = (No. of Customers who make a transaction) * 100/ walk-ins

The conversion figure is the benchmark of stores performance when evaluated along with
the Average Transaction Value. There could be a scenario wherein due to high value of
merchandise in a store, the conversion is low but the average transaction value is high.
Eg: jewelry stores

Average Transaction Value

Average Transaction Value means the value worth of goods purchased by the customers.
It is calculated as:

Avg. Transaction Value= Avg. Sales per day/ (Avg.daily walk in * Avg.
Conversion %)

The ratio gives an indication of how much each customer on an average spends in the
store. Useful for comparison and analysing if this needs to be increased.

Display to stock ratio

22
The display to stock ratio means the amount of backroom inventory maintained as a
backbone to that displayed in the store. It is calculated as follows:

Display to stock ratio = No of pcs of an SKU on display/ No of pcs of the

SKU in backroom stock

Typically this ratio is maintained higher for the "Fast-moving" SKUs(those with higher
sales and experience more stock outs). This ratio should be kept at an optimum level after
considering the sales trend of the SKU, the minimum coverage levels required for an
item, display rules, so that unnecessary investment in Inventory is avoided. It should also
not be kept too low or else there would be a scenario of frequent stock outs for the SKU

Sales per sq. ft.

Sales per square foot is a very important retail performance benchmarking ratio. It is the
sales revenue generated per square foot of Retail space.
It is calculated as:

Sales per Sq.ft = Gross Sales/ Retail space in sq. ft

Since cost of Retail space is a significant cost element in the retail business, this ratio is
instrumental in gauging the store sales performance.

Sales per employee

Sales per employee is indicative of the performance of the sales staff. This would in turn
enable the decision making for their appraisals and further training. It would further
indicate whether or not the store is adequately staffed.

Sales per employee = Gross Sales / Strength of sales staff

23
A motivated sales team is one of the keys to better conversion in the outlet. This ratio
therefore benchmarks the sales team performance and also aids in fixing their sales
targets.

Inventory turnover rate

Inventory Turnover: The inventory turnover ratio measures the number of times during
a year that a company replaces its inventory. The turnover is only meaningful when
comparing other firms in the industry or a company's prior inventory turnover.
Differences in turnover rates result from product characteristics and differing operating
characteristics within an industry. The inventory turnover rate is calculated as follows:

Inventory Turnover = Cost of goods sold/ (Average inventory at cost

OR = Sales / Average inventory at sales

The higher the inventory turnover rate means the more efficiently a company is able to
grow sales volume. There are several things to keep in mind when calculating turnover
rates:

1) Only consider cost of goods sold from stock sales filled from warehouse inventory. Do
not include on-stock items and direct shipments. Sure, these sales are important, but don't
involve your warehouse stock (your investment in inventory). 2) The cost of goods sold
figure in the formula includes transfers of stocked products to other branches and
quantities of these products used for internal purposes such as repairs and assemblies.

3) Inventory turnover is based on the cost of items (what you paid for them) not sales
dollars (what you sold them for).

Inventory turnover depends on the average value of stocked inventory. To determine your
average inventory investment: 1) Calculate the total value of every product in inventory
(quantity on hand times cost) every month, on the same day of the month. Be consistent
in using the same cost basis (average cost, last cost, replacement cost, etc.) to calculate
both the cost of goods sold and average inventory investment.

24
2) If your inventory levels fluctuate throughout the month, calculate your total inventory
value on the first and 15th of every month.

3) Determine the average inventory value by averaging all inventory valuations recorded
during the past 12 months.

Gross margin per sq. ft.

Gross Margin per square ft is indicative of the profitability of the Retail space. It is
calculated as:

Gross margin per sq ft = Gross margin / Area of retail space

GMROI
In simple terms GMROI(Gross Margin Return On Inventory) tells us how many times
over a year we get our stock investment returned with a given margin . In simple terms it
may be defined as 'how hard the inventory is working for the profitability of the
business'. It is calculated as follows:

GMROI = (Gross MArgin% / (100% -Gross Margin%)) x (52/weeks cover)

So a product with a gross margin of 50% and an average 26 weeks cover would give us a
G.M.R.O.I of 2.0

(50/50) x (52/26) = 1 x 2 = 2.0

If we compare this with a product with a gross margin of 40% but an average of 17 weeks
cover we see that the G.M.R.O.I. is also 2.0
(40/60) x (52/17) = 2/3 x 3.01 = 2.0

Simple gross margin measurement would indicate that the first of these products was a
better investment. GMROI shows us a fuller picture that shows that the second product
provided an equal return on stock invested. We can see from this that we can use

25
G.M.R.O.I. as a powerful measure of historical performance, but it has an equally
powerful application in merchandise planning.

In this instance we might well apply the measure at a summary level, perhaps sub product
group by branch, to give us an indication of those sub product groups that have greater
potential than others in specific branches. From this we can make better informed
decisions as to which should have more space allocated to them, be better supported by
stock or have ranges expanded or contracted. For example, products with low cover and
high gross margin will probably have experienced stock outs and fragmentation of
ranges, and were therefore not fully exploited in terms of their ability to generate profit.
This combination would result in a relatively high G.M.R.O.I.. Assuming that this
performance were not the result of a fashion "blip", it would make sense to increase the
stock support for this area and maybe increase the space allocated to it. We might also
look at increasing the number of options available.

Conversely a product with high cover and a low gross margin was obviously over
supported with stock, and failed to generate a reasonable return in spite of this. It would
therefore make sense to reduce its space allocation ,and to channel the stock investment
to a more appropriate area, maybe reducing range width at the same time. In extreme
cases we might decide to remove the product area from the range altogether.

Conclusion The adoption and analysis of the illustrated measures enable in-depth sales
analysis not only at the overall level but also at the category and sub-category levels. This
"drill-down" analysis can be effectively used to evaluate the performance of retail outlets,
product categories, promotions as well as the human resources thereby assessing the
performance at a micro level

26
Organized retail formats prevalent globally

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

focused on regular groceries, household goods and personal care products. Tesco, Ahold
and Safeway are key players in this format.

Hypermarkets: Huge stores over 40000 sq ft situated outside the town with ample
parking space aimed for bulk purchases stocking electronics, furniture and clothing.
Carrefour is the global major in this format.

Mass merchandisers: Large destination stores that sell everything at competitive prices.
They have cross-country chain operations with centralized sourcing and a hub-and-spoke
distribution. Makro and Sam's Club are leading players in this format.

Discounters: Aimed at bargain buyers offering less choice but deep discount on bulk
sourcing deals through controlled inventory. Aldi is the world leader in this format.

Convenience Stores: Small stores located at convenient points like petrol stations
working round the clock.

Specialties Stores: These stores offer consultative shopping experience with skill that
cannot be duplicated.

Mom-and-Pop Stores: Traditional small family owned format. Indian Retail Sector:
Business Analysis

During the last 10 years, many retail start-ups promised a lot. A few folded up even
before they really got started, a few others struggled and then burnt out before they could
develop a sustainable business model and others are still evolving. However, a significant
number of new (and some not so new) retail businesses have broken rank and seem
poised to surge ahead with renewed vigor, optimism, confidence and capability.

27
Shoppers' Stop, Lifestyle, Westside, Giant and Tanishq are the current torch-bearers of
the modern Indian retail sector, flanked creditably by FoodWorld, Nilgiris, Big Bazaar
and Pantaloon, and The Home Store.

Business Opportunities in the Indian Retail Sector

The current players have just touched the tip of the total potential of over Rs 8, 50,000
crore of annual consumer spending in India through various retail channels. There is an
outstanding opportunity in other product categories, in new formats, and in new
geographical territories. For example, let us consider new product categories that are
under-represented in India in terms of reach of efficient, organized retail channels.

Market Trends
Change in consumer behavior

The whole concept of shopping has altered in terms of format and consumer buying
behavior, ushering in a revolution in shopping in India. Rising income levels, falling
real estate costs and a greater exposure to media and international trends have fuelled
retail growth. Consumer spending in India is estimated to have grown at an average rate
of 11.5% per year over the past decade. While retailers have improved their offerings,
many attribute their better fortunes to a change in consumer behavior.

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Forces that could make or break the industry

1. Challenges facing the industry

The unorganized nature of retailing had stunted its growth over several years. Lack of
industry status affects financing prospects and stunts growth of the industry. In the
current scenario, only players with deep pockets have been able to make it big. In
addition to the advent of Internet, there are many other challenges that retailers have to
address.

Human Resources

Availability of trained personnel and retaining the human resources is a major challenge
for these big retailers. The bigwigs like Crossroads offer high compensation and create a
cohesive environment that makes an employee proud to be a part of such big retail
chains.

Space and Infrastructure

To establish a retail shop / mall, the real estate and the infrastructure are very vital. The
expenditure and availability on both the accounts do hinder the growth of the retail chain.
The lack of secondary infrastructure also affects the logistics and supply chain
management for retail companies.

Labor Laws

Existing labor laws in India forbid employment of staff on contractual basis that makes it
difficult to manage employee schedules especially 365-day operations.

30
Types of retailers:

Departmental store: Several product lines with each line operated as a separate
department managed by specialist buyers or merchandisers.

Specialty store: These stores usually stock narrow product lines with a deep assortment.

Supermarket: Relatively large, low cost, low margin, high-volume, self services
designed to serve total needs for food, laundry, and household maintenance products.

Convenience store: Relatively small store located near residential area, open long hours
seven days a week, and carrying a limited line of high-turnover convenience products at
slightly higher price.

Discount store: Standard merchandise sold at lower prices with lower margins and higher
volumes.

Off-price retailers: Merchandise bought at less than regular wholesale prices and sold at
less than retail often leftover goods, overruns, and irregulars obtained at reduced prices
from manufacturers or other retailers.

Superstore: It is traditionally aimed at meeting consumers total needs for routinely

purchased food and nonfood items.

Catalog showroom: Broad selection of high-markup, fast moving, brand name goods at
discount prices. Customer order goods from a catalog in the showroom then pick these
goods up at a merchandise pickup area in the store.

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Push and pull strategy:

The promotional mix is heavily influenced by whether the company

chooses a push or pull strategy to create sales. A push strategy involves the manufacturer
using sales force and trade promotion to induce intermediaries to carry, promote, and sell
the product to end users. Push strategy is especially appropriate where there is low brand
loyalty in a category, brand choice is made in the store, the product is an impulse item,
and product benefits are well understood.

A pull strategy involves the manufacturer advertising and using consumer

promotion to induce consumers to ask intermediaries for the product, thus inducing the
intermediaries to order it. Pull strategy is especially appropriate when there is high brand
loyalty and high involvement in the category, people perceive differences between
brands, and people choose the brand before they go to the store. Companies in the same
industry may differ in their emphasis on push or pull.

Communicating to the customers:

Consumer marketers spend on sales promotion, advertising, personal

selling, and public relations in that order, to communicate to the customers.

Whereas advertising offers a reason to buy, sales promotion offers an

incentive to buy. Personal selling can also make a strong contribution in consumer goods
marketing. An effectively trained consumer company sales force can make four important
contributions: increased stock position, enthusiasm building, and missionary selling, key
account management.

Manufacturers also use a number of trade-promotion tools. A decade ago,

the advertising-to sales promotion ratio was about 60:40. Today in many consumer-
packaged- goods companies, sales promotion accounts for 65 to 75 percent of the

32
combined budget. Surprisingly, a higher proportion of the promotion pie is devoted to
trade-promotion tools than to consumer promotion, with media advertising capturing the
remaining.

Manufacturers award money to the trade for four reasons:

1. To persuade the retailer or wholesaler to carry the brand: Shelf space is so scarce
that manufacturers often have to offer prices off, allowances, buyback guarantees,
free goods, or outright payments (called slotting allowances) to get on the shelf, and
once there, to stay on the shelf.

2. To persuade the retailer or wholesaler to carry more units than the normal amount:
Manufacturers will offer volume allowances to get the trade to carry more in
warehouses and stores. Manufacturers believe the trade will work harder when they
are loaded with the manufacturers product.

3. To induce retailers to promote the brand by featuring, display, and price

reductions: Manufacturers might seek an end-of-aisle display, increased shelf
facings, or price reduction stickers and obtain them by offering the retailers
allowances paid on proof of performance.

4. To stimulate retailers and their sales clerks to push the product: Manufacturers
compete for retailer sales effort by offering push money, sales aids, recognizing
programs, premiums, and sales contests.

33
Major trade promotion tools:

Price-off (off-invoice or off-list): A straight discount off the list price on each case
purchased during a stated time period. The offer encourages dealers to buy a quantity or
carry a new item that they might not ordinarily buy. The dealers can use the buying
allowance for immediate profit, advertising, or price reductions.

Allowance: An amount offered in return for the retailers agreeing to feature the
manufacturers products in some way. An advertising allowance compensates retailers
for advertising the manufacturers products. A display allowance compensates them for
carrying a special product display.

Free goods: Offers of extra cases of merchandise to intermediaries who buy a certain
quantity or who feature a certain flavor or size. Manufacturers might offer push money or
free space-advertising items to retailers that carry the companys name.

Manufacturers spend more on trade promotion than they want to spend.

The growing power of large retailers has increased their ability to demand trade
promotions at the expense of consumer promotion and advertising. These retailers depend
on promotion money from the manufacturers. No manufacturer could unilaterally stop
offering trade allowances without losing retailer support.

34
 Profile
Introduction to the FMCG industry:

The Fast Moving Consumer Goods (FMCG) sector is the fourth largest
sector in the economy with a total market size in excess of Rs. 60,000 crores. This
industry essentially comprises Consumer Non Durable (CND) products and caters to the
everyday need of the population.
The fast moving consumer goods business is characterized by two pillars -
strong brand equity and a wide distribution network. Brand equities are built over a
period of time by technological innovations, consistent high quality, aggressive
advertisement and marketing. Availability near the consumer through a wide distribution
network is another crucial success factor, as products are of small value, frequently
purchased daily use items.

Product Characteristics:
Products belonging to the FMCG segment generally have the following characteristics:
They are used at least once a month
They are used directly by the end-consumer
They are non-durable
They are sold in packaged form
They are branded

Industry Segments:

The main segments of the FMCG sector are:

Personal Care: Oral care, hair care, skin care, personal wash (soaps), cosmetics
and toiletries, deodorants, perfumes, paper products (tissues, diapers, sanitary),
shoe care.
Major companies active in this segment include Hindustan Lever, Godrej Soaps,
Colgate-Palmolive, Marico, Dabur and Procter & Gamble.

35
 Household Care: Fabric wash (laundry soaps and synthetic detergents),
household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air
fresheners, insecticides and mosquito repellants, metal polish and furniture
polish).
Major companies active in this segment include Hindustan Lever, Nirma and
Reckitt & Colman.
Branded and Packaged Food and Beverages: Health beverages; soft drinks;
staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates;
ice cream; tea; coffee; processed fruits, vegetables and meat; dairy products;
bottled water; branded flour; branded rice; branded sugar; juices etc.
Major companies active in this segment include Hindustan Lever, Nestle,
Cadbury and Dabur.
Spirits and Tobacco: Major companies active in this segment include ITC,
Godfrey Philips, UB and Shaw Wallace.

An exact product-wise sales break up for each of the items is difficult. The
size of the fabric wash market is estimated to be Rs 4500 crore, of household cleaners to
be Rs 1100 crore, of personal wash products to be Rs 4000 crore, of hair care products to
be Rs 2600 crore, of oral care products to be Rs 2600 crore, of health beverages to be Rs
1100 crore, of bread and biscuits to be Rs 8000 crore, of chocolates to be Rs 350 crore
and of ice cream to be Rs 900 crore.
In volume terms, the production of toilet soap is estimated to have grown
by four per cent in 1999-2000 from 5,30.000 tonnes from 5,10,000 tonnes in 1998-99.
The production of synthetic detergents has grown by eight per cent in 1999-2000 to 2.6
million tonnes. The cosmetics and toiletries segment has registered a 15 per cent growth
in 1999-2000 as against an annual growth of 30 per cent recorded during the period 1992-
93 to 1997-98.
In the packaged food and beverage segment, ice cream has registered a
negligible growth and the soft drink industry has registered a six per cent growth in 1999-
2000.

36
Background:

The size of the Indian fast-moving consumer goods (FMCG) sector is

close to Rs 600 bn. The northern and the western regions of the country account for more
than half of the market for consumer goods. Barring the fastest-growing personal care
segment, no other product segment has seen the entry of so many players.
In the past decade, the personal care industry has witnessed a consumer
boom. This has been due to liberalization, urbanization, and an increase in the disposable
incomes, and altered lifestyles, especially a heightened level of awareness among the
rural community, consequent to the onslaught of satellite television. Furthermore, the
boom has also been fuelled by the reduction of excise duties, dereservation from the
small-scale sector and the concerted efforts of personal care companies to woo the
burgeoning affluent segment of the middle class through product and packaging
innovations.
Unlike in the past, when domestic companies were not perceived as
competitive vis--vis multinational corporations (MNCs), the scenario is gradually
changing, with some domestic companies, like Nirma, Marico and Jyothi Labs, standing
up to their MNC counterparts. Also, competition amongst the MNCs has intensified,
leading to shrinkage of margins.
The personal and home care segment has very low entry barriers of
technology and capital requirements. This attracts new players and has resulted in
intensifying competition. Despite this, the strong distribution networks and heavy
investments needed for brand building remain key deterrents to new players.
Low margins and high volumes characterize the industry. While the level
of disposable incomes determines the overall sector growth, the market has already been
segmented and sub-segmented. Companies have launched products at a number of price
points to drive up volumes. New products are being launched in niche segments, and old
products re-launched. Brand equity drives the customers purchase decisions, and is the
key to gaining market share. Also, competitive pressures have hiked the advertising
budgets of most players. Besides, a profusion of promotional schemes are being offered.

37
Most players, including Hindustan Lever Ltd (HLL), are struggling to maintain top line
growth, despite the heavy advertising and sales promotion (ASP) expenditure.
A lower price differential between the organized and the unorganized
sectors from reducing excise duties allows the former to grow at the expense of the latter.
The organized sector also has a superior distribution reach. Although most of the product
categories are still in the growth phase, a few broad categories, like detergents, have
reached a mature phase only in the urban market. According to industry sources, the
affluent segment in the rural sector is growing at a faster rate than the urban one. For the
past three years, the organized sector has been focusing on the rural markets, which are
perceived to drive growth in the industry and which, to a very large extent, are dominated
by unorganized players.

Industry characteristics:

Branding: Creating strong brands is important for FMCG companies and they devote
considerable money and effort in developing bands. With differentiation on functional
attributes being difficult to achieve in this competitive market, branding results in
consumer loyalty and sales growth.
Distribution Network: Given the fragmented nature of the Indian retailing industry
and the problems of infrastructure, FMCG companies need to develop extensive
distribution networks to achieve a high level of penetration in both the urban and rural
markets. Once they are able to create a strong distribution network, it gives them
significant advantages over their competitors.
Contract manufacturing: As FMCG companies concentrate on brand building,
product development and creating distribution networks, they are at the same time
outsourcing their production requirements to third party manufacturers. Moreover, with
several items reserved for the small scale industry and with these SSI units enjoying tax
incentives, the contract manufacturing route has grown in importance and popularity.
Large unorganised sector : The unorganised sector has a presence in most product
categories of the FMCG sector. Small companies from this sector have used their
locational advantages and regional presence to reach out to remote areas where large

38
consumer products have only limited presence. Their low cost structure also gives them
an advantage.
Brand Equity: Brand equities are built over time by technological innovations,
consistent quality, aggressive advertising and marketing.
Key players in the FMCG industry:

There is a strong MNC presence in the Indian FMCG market and out of
the top 10 FMCG companies, four are multinationals while two others have significant
MNC shareholdings. Unlike several other sectors where multinationals have entered after
1991, MNCs have been active in India for a long time. The top five listed FMCG
companies on the basis of their sales turnover in the last financial year (either year ended
December 31, 1999 or March 31, 2000) are:

Company Name Month & year sales Profit After Tax

(finance year) Rs. Crores Rs. Crores
Hindustan Lever Ltd. 12 / 1999 10978.31 1073.73
I T C Ltd. 03 / 2000 7971.94 792.44
Nirma Ltd. 03 / 2000 1717.88 234.1
22Nestle India Ltd. 12 / 1999 1546.43 98.47
Britannia Industries Ltd. 03 / 2000 1169.84 51.02
Colgate-Palmolive (India) Ltd. 03 / 2000 1123.53 51.79
Godfrey Phillips India Ltd. 03 / 2000 1082.63 42.1
Dabur India Ltd. 03 / 2000 1046.28 77.67
Smithkline Beecham Consumer 12 / 1999 743.38 97.61
Healthcare Ltd.
Godrej Soaps Ltd. 03 / 2000 714.74 61.89
Marico Industries Ltd. 03 / 2000 649.05 35.73
Cadbury India Ltd. 12 / 1999 511.08 36.7
Procter & Gamble Hygiene & 06 / 2000 492.85 75.03

39
Health Care Ltd.
Reckitt & Colman Of India Ltd. 12 / 1998 435.33 31.47
I S P L Industries Ltd. 03 / 1999 21.57 0.04

Among the major companies, Hindustan Lever has a strong presence in

the food, personal care and household care (detergents) sectors, ITC is the market leader
in cigarettes, Nirma has a strong presence in the detergent market, Nestle and Britannia
are active in the food sector and Colgate has a strong presence in the oral care segment.

Salient features of the FMCG industry:

The FMCG sector is a key component of Indias GDP and is a significant

direct and indirect employer. It is the fourth largest sector in the economy and is
responsible for five per cent of total factory employment in the country. The sector also
creates employment for three million people in downstream activities, much of which is
disbursed in small towns and rural India.

Unlike the perception that the FMCG sector is a producer of luxury items
targeted at the elite, in reality the sector meets the every day needs of the masses, across
the country. Low-priced products contribute the majority of the sales volume and lower
income and lower middle income groups account for over 60 per cent of the sectors
sales. Moreover, rural markets account for 56 per cent of total domestic FMCG demand
and FMCG outlets reach more villages than any other basic facility such as primary
schools or bus facilities.

The FMCG sector has several other salient features. It has strong links
with agriculture and 71 per cent of sales come from agro-based products, it is a
significant value creator with a market capitalisation second only to the IT sector and it is
a key contributor to the exchequer. In 2000-01, it accounted for eight per cent of total

40
corporate tax, six per cent of central excise revenue and seven per cent of state tax
revenues.

Pricing: The Indian consumer is very price sensitive. In the personal care sector,
branding allows companies to partially pass on the cost increases to the customers. Most
players have introduced products with mass-market pricing, so as to build volumes. The
increased promotional activity that is taking place amongst players has relegated brand
loyalty to the backseat. Moreover, the increased competition has restricted not only
growth rates, but also the ability to absorb frequent price increases, thus benefiting the
consumer. With the rise in disposable incomes of consumers, players in the premium-
product categories will be able to increase volumes.

SWOT analysis of the FMCG industry:

Strengths:
Well-established distribution network extending to rural areas.
Strong brands in the FMCG sector.
Low cost operations
Weaknesses:
Low export levels.
Small scale sector reservations limit ability to invest in technology and achieve
economies of scale.
Several me-too products.
Opportunities:
Large domestic market.
Export potential.
Increasing income levels will result in faster revenue growth.
Threats:
Imports.
Tax and regulatory structure.
Slowdown in rural demand.

41
Fabric wash market:

The fabric wash market has three segments, laundry bars, synthetic
detergents and powders. The 3-mn tonne market, valued at Rs 45 bn, is amongst the
world's largest, after China and USA. Laundry soaps accounts for 20 per cent of the total
volumes and 15 per cent of the value.
Consumer preferences have been changing in the past few years. In the
urban markets, people prefer to use washing powder and detergents, instead of bars, on
account of convenience of usage, increased purchasing power, aggressive advertising and
increased penetration of washing machines. The demand for detergents has been growing
at an annualized growth rate of 10-11 per cent in the past five years, while the laundry bar
market has witnessed a negative growth. In the fabric wash market, the rural growth is at
a higher rate of 13-14 per cent, compared to the urban growth rate of 8-9 per cent. The
major players in the detergent market are HLL (Surf), Nirma (Nirma Super, Nima),
Proctor & Gamble (Ariel, Gain, Tide) and Henkel-Spic (Henko), with the rest of the
market being fragmented amongst a large number of players.

Personal wash market:

The Indian soap industry is a mature market, which is valued at Rs 45 bn,

and can be classified into popular and premium categories. While the growth rate for the
overall personal wash market is only 7-8 per cent, premium and middle-end soaps are
growing at a rate of 10 per cent. Positioning of the product is very important in this
market. The leading players in this market are HLL (Lux, Lifebuoy, Breeze, Rexona),
Nirma (Nima), Godrej Soaps (Cinthol, FairGlow, Shikakai, Nikhar), and Reckitt &
Colman (Dettol). The rest of the market is highly fragmented, with companies having
strong presence in select segments or a regional presence only. Brand loyalty is very low,
except at the premium end. Key factors to success are distribution (in rural markets) and
advertising (in urban markets).

42
Dish Wash market:

The total size of the dish wash market, estimated at Rs 3.4 bn, recorded a
40 per cent growth over last year. Over 60 per cent of the market is dominated by bars,
while dish wash powders accounts for 32 per cent. The penetration levels are, however,
still very low. Estimates show that nearly 50 per cent of the urban population and 80 per
cent of the rural one still use proxy products like ash and other cheap detergents for
dishwashing purposes. HLL is the leading player, with its Vim Bar.

Repellants market:

The estimated market for insecticides and repellants is around Rs 8 bn,

which is growing at 15 per cent annually. It includes mosquito coils, mats and other
insecticide products. The leading players are Godrej Sara Lee (Goodknight), which has a
38.1 per cent share followed by RCI (Mortein), with a 23.5 per cent market share. Godrej
Sara Lee is the world's largest manufacturer of mosquito mats, with an all-India market
share of 66 per cent. The organized sector is trying to increase penetration levels by
higher brand visibility.

Agarbatti (incense sticks) market:

The agarbatti market is estimated at Rs.1,000 crore (Rs 10 billion). It is an

industry where about 1,000 brands are fighting it out. Cycle, the biggest brand in the
agarbatti industry, has only a 5 per cent market share. The manufacture of agarbattis
(incense sticks) is a traditional cottage industry emanating from the Thanjavur region of
Tamil Nadu. It has increasingly taken on a national character and is now spread over the
states of Karnataka (which is the dominant producer), Andhra Pradesh, Gujarat, Kerala,
Orissa and Bihar.

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Fabric whitener market:

The fabric whitener market is estimated at Rs. 250 crore. Robin Blue
fabric whitener was the dominant market leader in the fabric whitener segment until local
player Jyoti Laboratories stormed the market with the launch of a superior liquid
whitener Ujala. Robin Blue has been unable to regain market share as consumers have
shifted to using liquid whiteners.

FMCG outlook:

The FMCG sector has traditionally grown at a very fast rate and has
generally out performed the rest of the industry. Over the last one year, however the rate
of growth has slowed down and the sector has recorded sales growth of just five per cent
in the last four quarters.
The outlook in the short term does not appear to be very positive for the
sector. Rural demand is on the decline and the Centre for Monitoring Indian Economy
(CMIE) has already down scaled its projection for agriculture growth in the current fiscal.
Poor monsoon in some states, too, is unlikely to help matters. Moreover, the general
slowdown in the economy is also likely to have an adverse impact on disposable income
and purchasing power as a whole. The growth of imports constitutes another problem
area and while so far imports in this sector have been confined to the premium segment,
FMCG companies estimate they have already cornered a four to six per cent market
share. The high burden of local taxes is another reason attributed for the slowdown in the
industry
At the same time, the long-term outlook for revenue growth is positive. Give the large
market and the requirement for continuous repurchase of these products, FMCG
companies should continue to do well in the long run. Moreover

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 Sector's High Growth Potential is Attracting Investors

India has occupied a remarkable position in global retail rankings; the country has high
market potential, low economic risk, and moderate political risk
Indias net retail sales are quite significant among emerging and developed nations; the
country is ranked third (after China and Brazil)
Overall, given its high growth potential, India compares favourably with global peers
among foreign investors
With investment of around US$ 511.76 billion, the first half of 2016 witnessed the
highest annual private equity (PE) in the retail sector, since 2008.

Challenges for Organized Retail

Real estate Availability and high rental costs

The real estate costs for the Indian organized retailers are 8-20% of sales compared to 3-
4% for the retailers in other countries. This adversely affects the economics of organised
retailers, especially the relatively smaller retailers. This is a result of a combination of
several factors including the following: Most Indian cities suffer from poor city planning
that has not provided for enough commercial space, resulting in high speculative real
estate prices. The stamp duty rates in India (5-14%) are among the highest in the world.
For example, stamp duty rates in the UK range from 0-4%. Archaic laws like the Urban
Land Control Ceiling and Regulation Act and the Rent Control Act complicate the usage
of land and reduce transparency in transactions.

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SUGGESTIONS

The retailers should be educated about the various brands ofproduct and about their
use.

The retailers should be taken seriously and the company should give more attention to
them.

The company should work at making a good name for itself in the market.

The company should advertise its products well to keep the customers well informed
about the products.

The newly launched product of the company should be advertised as soon as possible
so that the customers get informed about the product. This would also lead to more
customer enquiries for the product.

Since most of the retailers are buying their stocks from the companys distributors the
company should work at giving better service to the retailers.

The companys distributors should regularly visit the shops and should be courteous
with the retailers.

The companys distributors should work at maintaining better relations with the
retailers.

The company should keep its products in display at the retail shops in order to
increase sales of its products.

There should be more advertisements of products so that the customers are well
informed about the products.

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 For the retailers to start suggesting the products to the customers there should be more
customer enquiries and more sales for these products. For this there should be more
ads for the products.

The company should work at maintaining good quality of its products.

The retailers should be given some incentives in the form of either more profit or
more schemes or better service or cash discounts on huge purchases or schemes or
credit facility or commissions, regular supply etc..

The company should try to do something regarding the imitation to the brands by
shops survey..

The company should continue the sales promotion activities. so it is able to capture a
good market share for itself.

The company should go for poster ads and hoardings in addition to the TV and radio
ads.

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CONCLUSION
Our research this year indicates that the international real estate market is very much
a mixed bag. We received extremely varied reports on levels of activity, availability
of capital, types of investors and lenders and the state of the legal market. Though the
global picture is fractured and there is great variation between and within
jurisdictions, the majority of those we spoke to were keeping busy and remained
hopeful that the year ahead could bring further improvements.

Retailing provides a crucial link between producers and consumers in modern market
economy. Retail in India is most dynamic industry and represents a huge opportunity
both for domestic and international retailers. Modern retailing is not threat to
independent Mom and Pop stores as most of the consumers said that they never
stopped visiting Kirana stores. They strongly agreed on coexistence of both is
requirement of the day. Their frequency of going to kirana stores is reduced but its
kind of opportunities for reorienting Mom and Pop stores for attracting more
customers. So, organized retailing is beneficial for India because its not alarming to
create conflict with unorganized stores but reshaping unorganized stores into
budding/nascent organized stores. Modern retailing has miles to go in India. The
growth of modern formats has been much slower in India as compared to other
countries and the development of this sector is restricted by the presence of regulatory
and structural constraints.
They are as follows:
a. Collaboration with global retailers.
b. Workforce management.
c. Expansion of distribution network.
d. Offering world class services.
e. Relationship with suppliers that drive innovation

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