A

RESEARCH REPORT

ON

“Retail Sector in India”

SUBMITTED TO,

The Bharati Vidyapeeth Deemed University, Pune

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR THE AWARD OF

MASTERS IN BUSINESS ADMINISTRATION

BY

VATSLA SINGH

Under the guidance of

PROF. RACHITA DIXIT

THROUGH

THE DIRECTOR
IMED

BHARATI VIDYAPEETH DEEMED UNIVERSITY, INSTITUTE OF MANAGEMENT

AND ENTREPRENURSHIP DEVELOPMENT
PUNE-38
2009-11
 GUIDE’S CERTIFICATE

This is to certify that the present study “Retail Sector in India” has
been carried out by VATSLA SINGH, batch 2009-2011, under my
direct supervision. I am glad to forward this for the fulfillment of
MBA.

Place: Pune Prof. Rachita Dixit

Date: Project Guide

2
 ACKNOWLEDGEMENT

Any accomplishment requires the effort of many people and this

work is not different. I would like to express my heartfelt gratitude and
thanks to all the panelists who took active part in accomplishing my
project.
At the very outset, I wish to thank Prof. Rachita Dixit, who helped
me to choose such an interesting topic to work upon as a fully fledged
project and guiding me at each step, interacting with her gave me a
completely different view to look at a subject, throughout its completion.

I am also thankful to all the faculty of my institute, who helped me

in giving all the required information in a very cooperative manner. The
project would not have been possible without the support of my family,
friends and colleagues who have been patient enough with me.

Vatsla Singh

3
 DECLARATION

I, the undersigned, hereby declare that the Project Report entitled

“RETAIL SECTOR” written and submitted by me to the IMED, in
the fulfillment of the requirements for the award of MBA degree
under the guidance of Prof. Rachita Dixit. It is an original work and
the conclusions drawn therein are based on the material collected by
myself.

Place: Pune Vatsla Singh

Date: Research Student

4
 TABLE OF CONTENTS

CHAPTER 1:
I. Background of the topic
II. Objective of the study
III. Scope of the study
IV. Profile of the industry
V. Traditional retail scene in India
VI. Scenario of retail in India
VII. Key challenges
VIII. Types of retail
IX. Major industry players

CHAPTER 2:
I. Research methodology
II. Sources of data
III. Collection of data
IV. Limitation of the project
V. Analysis
VI. Conclusion

CHAPTER 3:
I. Bibliography
II. appendices

5
Background:

The Indian retail industry is divided into organized and unorganized

sectors. Organized retailing refers to trading activities undertaken by
licensed retailers, that is, those who are registered for sales tax, income
tax, etc. These include the corporate-backed hypermarkets and retail
chains, and also the privately owned large retail businesses. Unorganized
retailing, on the other hand, refers to the traditional formats of low-cost
retailing, for example, the local kirana shops, owner manned general
stores, paan/beedi shops, convenience stores, hand cart and pavement
vendors, etc. India’s retail sector is wearing new clothes and with a three-
year compounded annual growth rate of 46.64 per cent, retail is the fastest
growing sector in the Indian economy. Traditional markets are making
way for new formats such as departmental stores, hypermarkets,
supermarkets and specialty stores. Western-style malls have begun
appearing in metros and second-rung cities alike, introducing the Indian
consumer to an unparalleled shopping experience. The Indian retail sector
is highly fragmented with 97 per cent of its business being run by the
unorganized retailers like the traditional family run stores and corner
stores. The organized retail however is at a very nascent stage though
attempts are being made to increase its proportion to 9-10 per cent by the
year 2010 bringing in a huge opportunity for prospective new players.
The sector is the largest source of employment after agriculture, and has
deep penetration into rural India generating more than 10 per cent of
India’s GDP.

India is the 4th largest economy as regards GDP (in PPP terms) and is
expected to rank 3rd by 2010 just behind US and China. On one hand
where markets in Asian giants like China are getting saturated, the AT
Kearney's 2006 Global Retail Development Index Corporate Catalyst
India (GRDI), for the second consecutive year Placed India the top retail
investment destination among the 30 emerging markets across the world.
Over the past few years, the retail sales in India are hovering around 33-
35 per cent of GDP as compared to around 20 per cent in the US. The
table gives the picture of India’s retail trade as compared to the US and
China.

6
The last few years witnessed immense growth by this sector, the key
drivers being changing consumer profile and demographics, increase in
the number of international brands available in the Indian market,
economic implications of the Government increasing urbanization, credit
availability, improvement in the infrastructure, increasing investments in
technology and real estate building a world class shopping environment
for the consumers. In order to keep pace with the increasing demand,
there has been a hectic activity in terms of entry of international labels,
expansion plans, and focus on technology, operations and processes.
This has lead to more complex relationships involving suppliers, third
party distributors and retailers, which can be dealt with the help of an
efficient supply chain. A proper supply chain will help meet the
competition head-on, manage stock availability; supplier relations, new
value-added services, cost cutting and most importantly reduce the
wastage levels in fresh produce. Large Indian players like Reliance,
Ambanis, K Rahejas, Bharti AirTel, ITC and many others are making
significant investments in this sector leading to emergence of big retailers
who can bargain with suppliers to reap economies of scale. Hence,
discounting is becoming an accepted practice. Proper infrastructure is a
pre-requisite in retailing, which would help to modernize India and
facilitate rapid economic growth. This would help in efficient delivery of
goods and value-added services to the consumer making a higher
contribution to the GDP. International retailers see India as the last
retailing frontier left as the China’s retail sector is becoming saturated.
However, the Indian Government restrictions on the FDI are creating
ripples among the international players like Walmart, Tesco and many
other retail giants struggling to enter Indian markets. As of now the
Government has allowed only 51 per cent FDI in the sector to ‘one-
brand’ shops like Nike, Reebok etc. However, other international players
are taking alternative routes to enter the Indian retail market indirectly via
strategic licensing agreement, franchisee agreement and cash and carry
wholesale trading (since 100 per cent FDI is allowed in wholesale
trading).

Current Status
India’s retail industry accounts for 10 percent of its GDP and 8 percent of
the employment to reach $17 billion by 2010. The Indian retail market is
estimated at US$ 350 billion. But organized retail is estimated at only
US$ 8 billion. However, the opportunity is huge-by 2010, organized retail

7
is expected to grow at 6 per cent by 2010 and touch a retail business of $
17 billion as against its current growth level of 3 per cent which at
present is estimated to be $ 6 billion, according to the Study undertaken
by The Associated Chambers of Commerce and Industry of India
(ASSOCHAM). Indian retailing is clearly at a tipping point. India is
currently the ninth largest retail market in the world. And it is names of
small towns like Dehradun, Vijayawada, Lucknow and Nasik that will
power India up the rankings soon. Organized retail in India has the
potential to add over Rs. 2,000 billion (US$45 billion) business by the
Year 2010 generating employment for some 2.5 million people in various
retail operations and over 10 million additional workforces in retail
support activities including contract production & processing, supply
chain & logistics, retail real estate development & management etc.
It is estimated that it will cross the $650-billion mark by 2011, with an
already estimated investment of around $421 billion slated for the next
four years.

Objective:

Scope:

Profile of the organization:

Retailing consists of the business activities involved in selling goods and

services to consumers for their personal, family or household use. It
includes every sale of goods and services to the final consumer – ranging
from automobiles to ………meals at restaurants to movie theatre tickets.
Retailing is the last stage in the distribution process.

Indian retail industry is going through a transition phase. Most of the

retailing in our country is still in the unorganized sector. The spread out
of the retails in US and India shows a wide gap between the two
countries. Though retailing in India is undergoing an exponential growth,
the road ahead is full of challenges.

8
TRADITIONAL RETAIL SCENE IN INDIA

India is the country having the most unorganized retail market.

Traditionally the retail business is run by Mother and Father having Shop
in the front and house at the back. More than 99% retailers function in
less than 500Sq.Ft of area. All the merchandise was purchased as per the
test and vim and fancies of the proprietor also the pricing was done on ad
hock basis or by seeing at the face of customer. Generally the accounts of
trading and home are not maintained separately. Profits were accumulated
in slow moving and non-moving stocks which were to become redundant
or consumed in-house. Thus profits were vanished without their
knowledge. The Manufactures were to distribute goods through C & F
agents to Distributors and Wholesalers. Retailers happen to source the
merchandise from Wholesalers and reach to end-users. The merchandise
price used to get inflated to a great extent till it reaches from
Manufacturer to End-user. Selling prices were largely not controlled by
Manufacturers. Branding was not an issue for majority of customers.
More than 99% customers are price sensitive and not quality or Brand
Sensitive at the same time they are Brand conscious also. Weekly Bazaar
in many small towns was held and almost all the commodities were on
the scene including livestock. Bargaining was the unwritten law of
market. Educational qualification level of these retailers was always low.
Hence market was controlled by handful of distributors and/or
Wholesalers. Virtually there was only one format of retailing and that
was mass retail. Retailer to consumer ratio was very low, for all the
categories without exception. Varity in terms of quality, Styles were on
regional basis, community based and truly very low range was available
at any given single place. Almost all the purchases / (buying) by mass
population was need oriented and next turn may be on festivals,
Marriages, Birthdays & some specific occasions.

Impulsive buying or consumption is restricted to food or vegetables etc.

Having extra pair of trousers or shirts or casuals, formals, leisure wear,
sportswear and different pair of shoes for occasions is till date is a luxury
for majority population except for those living in Metros. Purchasing
power of Indian urban consumer is very low and that of Branded
merchandise in categories like Apparels, Cosmetics, Shoes, Watches,
Beverages, Food, Jewellery, are slowly seeping into the lifeline of Indian
City folks. However electronic and electrical home appliances do hold

9
appropriate image into the minds of consumers. Brand name does matter
in these white goods categories. In the coming times also majority of
organized retailers will find it difficult to keep balance with rest of the
unbranded retail market which is very huge.

SCENERIO OF RETAIL IN INDIA

• Retailing is the most active and attractive sector of last decade.
• Retailing is increasing because of the increasing purchase power of
consumers.
• Increase in economies of scale, with the aid of modern supply and
distributions solution.
• The scope of the Indian retail market is very vast. And for it to
reach its full potential the government and the Indian retailers will
have to make a determined effort.
• The India retail industry contributes 10% of the country’s GDP and
its current growth rate is 8.5%.

KEY CHALLENGES:
1) LOCATION:
"Right place, Right choice"
Location is the most important ingredient for any business that relies on
customers, and is typically the prime consideration in a customer’s store
choice. Locations decisions are harder to change because retailers have to
either make sustainable investments to buy and develop real estate or
commit to long term lease with developers. When formulating decision
about where to locate, the retailer must refer to the strategic plan:

* Investigate alternative trading areas.

* Determine the type of desirable store location
* Evaluate alternative specific store sites

2) MERCHANDISE:
The primary goal of the most retailers is to sell the right kind of
merchandise and nothing is more central to the strategic thrust of the
retailing firm. Merchandising consists of activities involved in acquiring
particular goods and services and making them available at a place, time

10
and quantity that enable the retailer to reach its goals. Merchandising is
perhaps, the most important function for any retail organization, as it
decides what finally goes on shelf of the store.

3) PRICING:
Pricing is a crucial strategic variable due to its direct relationship with a
firm's goal and its interaction with other retailing elements. The
importance of pricing decisions is growing because today's customers are
looking for good value when they buy merchandise and services. Price is
the easiest and quickest variable to change.

4) TARGET AUDIENCE:
"Consumer the prime mover"
"Consumer Pull", however, seems to be the most important driving factor
behind the sustenance of the industry. The purchasing power of the
customers has increased to a great extent, with the influencing the retail
industry to a great extent, a variety of other factors also seem to fuel the
retailing boom.

5) SCALE OF OPERATIONS:
Scale of operations includes all the supply chain activities, which are
carried out in the business. It is one of the challenges that the Indian
retailers are facing. The cost of business operations is very high in India.

Scope of the Indian Retail Market

The scope of the Indian retail market is immense for this sector is poised
for the highest growth in the next 5 years. The India retail industry
contributes 10% of the country’s GDP and its current growth rate is
8.5%. In the Indian retail market the scope for growth can be seen from
the fact that it is expected to rise to US$ 608.9 billion in 2009 from US$
394 billion in 2005.

The organized retailing sector in India is only 3% and is expected to

rise to 25- 30% by the year 2010. There are under construction at present
around 325 departmental stores, 300 new malls, and 1500 supermarkets.
This proves that there is a tremendous scope for growth in the Indian
retail market.

The growth of scope in the Indian retail market is mainly due to the
11
change in the consumer’s behavior. For the new generation have
preference towards luxury commodities which have been due to the
strong increase in income, changing lifestyle, and demographic patterns
which are favorable.

Major Retail players

• Wal-Mart
• Shoppers' Stop
• Planet M
• Westside (Trent)
• Pantaloon(Big bazaar)
• Subhiksha
• Lifestyle
• Music World
• Adani- Rajiv's
• Pyramid
• Crossword
• Globus
• Life spring
• Nirma-Radhey

CATEGORIES
footwear & sportswear,
jewelry & watches,
health & beauty (including services),
food & grocery, consumer electronics,
mobile handsets & books, music & gifts, home, entertainment

Market Share
Retail is clearly the sector that is poised to show the highest growth in the
next five years. The sector is set for a revolution, as both the present
players and new entrants are gearing up to explore the market. This sector
contributes 10% of India's GDP and the current growth rate is 8.5%. The

12
present size of the organized retailing sector is approximately 3% and is
expected to grow to 25-30% by the year 2010. There are about 300 new
malls, 1500 supermarkets and 325 departmental stores currently under
construction. Many players are coming up with huge investments, due to
which the present 12 million mom-and-pop shops and kirana stores fear
losing their business. Most predictions say that the sector might reach to
US$ 400-600 billion by the year 2010.

Government Policies
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.

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 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.

Industry Overview
Industry analysis of the Indian retail sector:

Modern retailing has entered India in form of malls and huge complexes
offering shopping, entertainment, leisure to the consumer as the retailers
experiment with a variety of formats, from discount stores to
supermarkets to hypermarkets to specialty chains. However, kiranas still
continue to score over modern formats mostly due to the convenience
factor i.e. near to their house.

13
This organized segment typically comprises of a large number of
retailers, greater enforcement of taxation mechanisms and better labor
law monitoring system. It's no longer about just stocking and selling but
about efficient supply chain management, developing vendor relationship
quality customer service, efficient merchandising and even the labor class
is also in the working process timely promotional campaigns. The
modern retail formats are encouraging development of well-established
and efficient supply chains in each segment ensuring efficient movement
of goods from farms to kitchens, which will result in huge savings for the
farmers as well as for the nation. The government also stands to gain
through more efficient collection of tax revenues. Network marketing has
been growing quite fast and has a few large players today. Gas stations
are seeing action in the form of convenience stores, ATMs, food courts
and pharmacies appearing in many outlets.

In the coming years it can be said that the hypermarket route will emerge
as the most preferred format for international retailers stepping into the
country. Estimates indicate that this sector will have the potential to
absorb many more hypermarkets in the next four to five years

List of retailers that have come with new formats:

Retailer Current Format New Formats

Shoppers’ Stop Department Store Quasi-mall

Crossword Large Bookstore Corner shop

Pyramid Departmental Store Quasi-mall, Food retail

Pantaloon Own brand store Hypermarket

Subhiksha Supermarket Considering moving to

self service

Globus Department Store Small fashion stores

Traditionally, the kirana retailing has been one of the easiest ways to
generate self-employment, as it required minimum investment in terms of
14
land, labor and capital. These stores are not affected by the modern
format of retailing. In order to keep pace with the modern formats,
kiranas have now started providing more value-added services like
stocking ready to cook vegetables and other fresh produce. They also
provide services like credit, phone service, home delivery etc.

The organized retailing has helped in promoting several niche categories

such as packaged fruit juices, hair creams, fabric bleaches, shower gels,
depilatory products and convenience and health foods, which are
generally not found in the local kirana stores. Looking at the vast
opportunity in this sector, big players like Reliance has announced its
plans to become the country's largest modern retainers by establishing a
chain of stores across all major cities.

Apart from metro cities, several small towns like Nagpur, Nasik,
Ahmedabad, Aurangabad, Sholapur, Kolhapur and Amravati has seen the
expansion of modern retails. Small towns in Maharashtra are emerging as
retail hubs for large chain stores like Pantaloon Retail because many
small cities like Nagpur have a student population, lower real estate costs,
fewer power cuts and lower levels of attrition.

However, retailers need to adjust their product mix for smaller cities, as
they tend to be more conservative than the metros. In order for the market
to grow in modern retail, it is necessary that steps are taken for rewriting
laws, restructuring the tax regime, accessing and developing new skills
and investing significantly in India.

India is rated as the most attractive retail markets

15
 Country Market Market Time
Risk Attractiveness Saturation Pressure Rank

Country 25% 25% 30% 20%

India 62 34 91 80 1st
Russia 52 58 71 92 2nd

China 68 40 53 90 4th

Turkey 51 56 66 65 9

Thailand 64 41 59 71 12

Malaysia 70 49 58 40 18

Egypt 51 35 85 30 25

Brazil 52 56 57 20 29
India’s
Rank 24th 14th 1st 7th 1st

Socio demographic factors will lead to faster growth of

organized retail in India:
100% 9% 10% 11%
9% 12%
80% 19% 19% 20% 22% 23%

60% 25% 24% 24% 26% 27%

40%

20% 47% 47% 45% 42% 39%

0%
1991 1996 2001 2006E 2010E
16
0-19 Yrs 20-34 Yrs 35-54 Yrs 55+ Yrs
 Pharma
Entertainment Durable 2%
1% 10%
Home
3%
Clothing and
Textile
36%
Food & Grocery
14%

Health & Beauty

1%

Books, Music &

Gifts
3% Footwear
Watch &
13%
Jewellery
17%

17
The Indian retail
• Organized retail
• Unorganized retail

Organized Retail Sector

• Size ~ USD 7.8 bn in 2004 – 05
• 3.5% of total retail industry
• Projected growth at 25–30% p.a.
• Size ~USD 25 bn by 2010.

Unorganized retail

• 96.5 % of Indian retail industry.

• Size~210 bn
• Pop& mom stores.
• Weekly Markets.
• Village Fairs.
• Melas.
• Convenience Stores
• Kiranas
• Kiosks

18
Organized Retailers

ORGANIZED RETAIL:

19
Emerging Retail Markets:

India, Russia, China and Vietnam top the list of the most attractive
emerging markets for retailers' investment in 2007, While India and
Russia have held the top two spots since 2004, China's booming
consumer spending, together with retailers moving into second-tier cities,
helped it rise to No. 3 from its No. 5 spot last year, according to the 2007
Global Retail Development Index from management consultant firm A.T.
Kearney.

The study based its results on four variables: 'country risk', measuring
political risk, debt and credit ratings; 'market attractiveness',
encompassing retail sales per capita, population, infrastructure and
regulations; 'market saturation'; and 'time pressure'.

The higher the ranking, the more urgency for retailers to enter the market,
according to the study, which ranks the top 30 emerging countries for
retail development and focuses on mass-merchant and food retailers.

"If you want to be an international player in retail, these are the markets
that demonstrate the characteristics (where) you can be successful," said
Laura Gurski, a co-author of the study and partner in A.T. Kearney's
consumer and retail practice.

India has already attracted the attention of global retailers like Wal-Mart
Stores Inc., which is working with India's Bharti Enterprises to set up a
joint venture for a cash-and-carry business. In India, foreign multiple-
brand retailers, which sell diverse brands under one roof, are limited to
cash-and-carry and franchise or license operations.

"India's window of opportunity continues to be wide for retail investment

and development," the report said. "Once India's window closes for
grocery retailers, there will be little opportunity for market domination in
the main cities."

The country's growing population of young urban professionals with

disposable incomes and the nouveau riche has also made India attractive
for luxury retailers. India has attracted "the low end and the high end
because of the breadth of the consumer segments that are available," said
Gurski.

20
When variables stay constant, Gurski said, do-it-yourself, apparel and
electronics retailers usually enter emerging markets some two years after
international grocers establish themselves. Middle Eastern countries are
also represented on the list, with Saudi Arabia ranking No. 10

India has emerged as the world's most attractive destination for mass
merchant and food retailing, maintaining its 2005 position in an annual
study of retail investment attractiveness among 30 emerging markets.

India was given the top ranking in management consulting company AT

Kearney's 2006 Global Retail Development Index (GRDI). "The Indian
retail market is gradually but surely opening up, while China's market
becomes increasingly saturated," said Fadi Farra, a principal in AT
Kearney's Consumer Industries and Retail Practice and leader of the
GRDI study. Much to the surprise of market observers, China was ranked
fifth in this year's tally, declining one more place since 2005. While
China remains very attractive, the market is becoming increasingly
saturate as and United Arab Emirates No. 18. Gap Inc announced last
week it had struck a deal with two franchisees to open Gap stores in
Saudi Arabia starting at the end of this year. Dubai has capitalized on
consumer desire for a more Western lifestyle and has established itself as
a retail mecca, Gurski said. Despite its focus on luxury, Dubai is "just
beginning to be populated by the bread-and-butter retailers of the United
States and the Western world," she said. Retailers that have already
established a presence in major Chinese cities like Shanghai and Beijing,
or those that have been slow to gain a foothold there, are now looking at
less developed markets in second-tier cities, the study found. "If the
markets are saturated, they're looking to make profits in the second-tier
cities," Gurski said.

But she cautioned that a separate strategy is needed for the smaller
markets since consumer tastes, ability to spend and willingness to
embrace new formats may be different than in larger urban areas.

International retailers rush to establish a presence and build market share,

the study reveals. According to the study, Asia with a large 40 per cent of
the top 20 markets has surpassed Eastern Europe as the 'dominant region
for global retail expansion.'

"The learning is that timing is the most important source of competitive

advantage for global and regional retailers in the globalization race.

21
Knowing when to enter emerging retail markets is the key to success,"
said Farra. Powering Asia's charge are Vietnam, which has risen five
places to third place, and countries like Thailand, South Korea and
Malaysia, all of which are in the top 15, After topping the ranking for two
consecutive years in 2003 and 2004, Russia slipped to second place
behind India last year and remained there in 2006 too.

Origin of Retail Sector:

Early Trade:

When man started to cultivate and harvest the land, he would

occasionally find himself with a surplus of goods. Once the needs of his
family and local community were met, he would attempt to trade his
goods for different goods produced elsewhere. Thus markets were
formed. These early efforts to swap goods developed into more formal
gatherings. When a producer who had a surplus could not find another
producer with suitable products to swap, he may have allowed others to
owe him goods. Thus early credit terms would have been developed. This
would have led to symbolic representations of such debts in the form of
valuable items (such as gemstones or beads), and eventually money.

HOW RETAIL DEVELOPED:

Peddlers and Producers:

The Retail Trade is rooted in two groups, the peddlers and producers.
Peddlers tended to be opportunistic in their choice of stock and customer.
They would purchase any goods that they thought they could sell for a
profit. Producers were interested in selling goods that they had produced.

General Store:

This division continues to this day with some shops specializing in

specific areas, reflecting their origins as outlets for producers (such as
22
Pacific Concord of Hong Kong), and others providing a broad mix,
known as General Store (such as Casey's in the Midwest of the U.S.A.).
Although specialist shops are still with us, over time, the general store
has increasingly taken on specialist products. Customers have found this
to be more convenient than having to visit many shops - thus the term
"Convenience Store" has also been applied to these shops. As the
popularity of general stores has grown, so has their size. This combined
with the advent of Self-Service has lead to the Supermarket, or
Superstore.

Early Markets:

Over time, producers would have seen value in deliberately over-

producing in order to profit from selling these goods. Merchants would
also have begun to appear. They would travel from village to village,
purchasing these goods and selling them for a profit. Over time, both
producers and merchants would regularly take their goods to one selling
place in the centre of the community. Thus, regular markets appeared.
The First Shop: Eventually, markets would become permanent fixtures
i.e. shops. These shops along with the logistics required to get the goods
to them were, the start of the Retail Trade.

The Birth of Distance Retailing:

Defined as sales of goods between two distant parties where the deliverer
has no direct interest in the transaction, the earliest instances of distance
retailing probably coincided with the first regular delivery or postal
services. Such services would have started in earnest once man had
learned how to ride a camel, horse etc.

When individuals or groups left their community and settled elsewhere,

some missed foodstuffs and other goods that were only available in their
birthplace. They arranged for some of these goods to be sent to them.
Others in their newly adopted community enjoyed these goods and
demand grew. Similarly, new settlers discovered goods in their new
surroundings that they dispatched back to their birthplace, and once
again, demand grew. This soon turned into a regular trade. Although such
trading routes expanded mainly through the growth of traveling salesmen
and then wholesalers, there were still instances where individuals

23
purchased goods at long distance for their own use. A second reason that
distance selling increased was through war. As armies marched through
territories, they laid down communication lines stretching from their
home base to the front. As well as garnering goods from whichever
locality they found themselves in, they would have also taken advantage
of the lines of communication to order goods from home.

Origins of Retail

It is likely that, as markets became more permanent fixtures they evolved

into shops. Although advantageous in many respects, this removed the
mobility that a peddler or traveling merchant may still have enjoyed. For
some shopkeepers, it made sense to obtain extra stock and open up
another shop, most probably operated by another family member. This
would recover business from peddlers and create new business and the
greater volume would allow the shopkeeper to strike a better deal with
suppliers. Thus the retail chain would have started. It’s thought that this
process would have started in china over 2200 years ago with a chain of
shops owned by a trader called Lo Kass.

The First Self-Service Store:

This all changed in 1915 when Albert Gerrard opened the Groceteria in
Los Angeles, the first documented self-service store. This was soon
followed a year later by the Piggly Wiggly® self-service store, founded
by Clarence Saunders in Tennessee in the U.S.

Growth:

This new type of shopping was more efficient and many customers
preferred it. Although personal service stores remain to this day, this new
concept started a rapid growth of self-service stores in the United States.
Other countries were slow to take up the idea, but there has been a steady
rise in the global amount of self-service stores ever since.

Efficiency

These entrepreneurs noticed that their staff had to spend a great deal of
time taking grocery orders from customers. The groceries were stacked
on shelves allowing customers to walk around and browse, collecting
24
their shopping in a basket that was supplied. The shopkeeper would only
need to tot up the final bill at the end of the process and transfer the
goods from the basket to the customer and receive payment.

From Family Business to Formal Structure:

Although retail chains would have been mostly run by families, as some
chains grew, they would have needed to employ people from outside of
their family. This was a limiting factor as there would have been a limit
to the amount of trusted non family members available to help run the
chain. Another, even more definite limiting factor was the distance the
furthest shop would have been from the original shop. The greater the
distance, the more time and effort would have been needed to effectively
manage outpost shops and to service them with goods. There was,
therefore, a natural barrier to expansion. That was the case until transport
and communications became faster and more reliable. When this
happened towards the end of the 19th century, chains became much
bigger and more widespread. Many of these businesses became more
structured and formalized, leading to the retail chain that we see today.

25
26
UNORGANISED RETAIL SECTOR:

Today, retailing doesn’t involve just dealing or marketing from shops, it

includes analyzing the market in an effort to provide reasonable prices
together with an array of options and experience to customers. The sole
purpose of all this is retaining the brand loyalty of customers. Indian
retail is currently a US$ 245 billion market and is anticipated to extend to
almost US$ 385 billion mark by the next five years. The Indian retail
sector is currently sporting a brand new look and together with a 46.64
per cent three-year Compounded Annual Growth Rate (CAGR),
Conventional marketplaces are paving way for new shopping malls, the
likes of superstores, shopping plazas, supermarkets and brand label
stores. International style shopping centers have started dotting the
skyline of cities and smaller towns, acquainting the Indian customer to a
unique shopping experience. The retail industry in India is split up into
the unorganized and organized retail segments.

The unorganized retail sector includes the big, average and modest
grocery stores and the chemist shops. A changeover is taking place from
the conventional retail sector to organized retailing. But the unorganized
segment still dominates and leads the industry. By 2010, the Indian
retailing sector is anticipated to become an Rs12.5 trillion market. The
share of organized retailing is supposed to jump to about 10 per cent from
the existing three per cent. The anticipated staggering growth in
organized retailing provides an opportunity to expand the market for both
established and new players. According to the latest report India Retail
Sector Analysis (2006ñ07)I by RNCOS, the total retail market is
primarily focused in rural regions, which makes up 55 per cent or US$
165 billion of the overall retail market as opposed to urban segment,
which represents 45 per cent or US$ 135 billion of the gross retail
market. The rural market is spread over 627,000 villages, even though its
centre of attention is focused around a core group of 100,000 villages that
makes up 50 per cent of the rural population.

India represents the most compelling international investment opportunity

for mass merchant and food retailers looking to expand overseas,
according to management consulting firm AT Kearney's 2005 Global

27
Retail Development Index (GRDI), an annual study of retail investment
attractiveness among 30 emerging markets. India is rated as the fifth
largest emerging retail market and is seen as a potential goldmine.
Driving global brands into India is the greatly improved investment
climate due to the recent relaxation of direct ownership restrictions on
foreign retailers. The country's retail market totals $330 billion, is vastly
underserved and has grown by 10 per cent on an average over the past
five years. The message for retailers on India is clear – move now or
forego prime locations and market positions that will soon become
saturated. Global retailers that missed opportunities to capture first-mover
advantage in China will make up for it in India.

Though India has more than five million retail outlets, they are greatly
unorganized. There is no supply chain management perspective. In fact,
out of the entire retail sector in India, the organized sector is only 25 per
cent and the rest is unorganized. 96 per cent of the retail outlets are
smaller in area than the standard norms. The retail industry is divided into
organized and unorganized sectors. Organized retailing refers to trading
activities undertaken by licensed retailers who are registered for sales tax
and income tax. These include corporate backed hypermarket and retail
chains and so on. Unorganized retailing is the traditional low-cost shops,
handcarts and pavements and is by far the prevalent form of trade in
India. The efficiency of organized sector in retailing is manifested in
some of the newer supermarkets in urban/metropolitan India – the
produce is cleaner, fresher, well packed and often cheaper than the local
shopkeeper. This is possible because of the far more efficient distribution
system, which organized retail chains are employing, by cutting the
layers of middlemen involved. There are other benefits too, of
transforming the unorganized retail sector into an organized sector.
Firstly, a number of new jobs will be created, far better paid than the
underage labor working in the local shops. Secondly, the benefits to the
producer and consumer through better prices and lesser wastage;
throwing up exportable surpluses, which will also benefit the economy as
a whole. Thus one can see that allowing FDI in retailing is beneficial to
all the stakeholders involved.

The Big Bazaars and Spencer’s, the huge unorganized retail sector is
finally beginning to see the merit of logging on, even if at a model scale.
Taxation policies also push you to automate and the push is even harder
for those looking to expand beyond their single store existence.
28
Though it’s early days yet to measure it penetration in the unorganized
retail industry, interest levels are surely raising fast. “It’s good to at least
answer their questions. Though the interest is more with retailers who
register good sales and volumes.

Software available to the retailers is ShawMan’s RetailMagiK, which

takes care of the front-end store needs, as well as the back-end warehouse
requirements. “It would surely help the unorganized sector to get into
technologies like bar-coding, which will make their operations more
efficient. Some other features are a user-defined billing screen and
discount with control mechanism from the head-office, delivery order
management, batch control and quick information search, among others.
The product is a simple to use. The screen design and the functionality
are designed in such a way that the user need not press too many keys to
get things done,” says Khushroo Bagwadia, business development
manager, Shawman Software.

To begin with, most retailers look at decent entry-level solutions starting

at Rs 25,000. However, there are cheaper quick-fix solutions available
too. One can even deploy a computer and start with financial accounting
programmers like Microsoft Excel, FoxPro and Tally.

Small retailers seem next in line and vendors are also warming up to the
opportunity. At the low-end however, smart inexpensive solutions are the
need of the hour. And solutions providers like Microsoft, Polaris and
Shawman are now working on developing smart tools for the retail
enthusiasts. For small players with just one store, the investment on retail
solutions go really low, anywhere between Rs 10,000 to Rs 25,000. Most
of the time these solutions are developed by local firms, who at times
compete with the big names in the industry.

According to Oberoi of Polaris, generally the mom-and-pop stores like to

go for technology, which will get their work done at a reasonable cost.
They avoid the high-end technology, and consider these as frills. “They
are not even bothered about upgrading, so the cheap systems are more
than welcome. These solutions might not work for the mid-sized retailers
with five stores, as then one need to scale it up and take care of inventory
and supply chain management,” he says.

Comparing the case with China, Vedamani suggests India is on the right
track. “In China, we find the organized sector to be 20-23% of the total

29
industry. Here, the technology has advanced in phases, and so is the case
in India.

Convenient location
Convenience Small self-service formats
and extended operating
stores located in crowded urban areas.
hours.
Enclosure having different
Shopping Variety of shops
formats of in-store retailers, all
Malls available to each other.
under one roof.

30
 Formats adopted by the Retail Players in INDIA.

Retailing formats in India:

Retailer Original formats Later Formats
Supermarket Hypermarket (Spencer's)Specialty Store
RPG Retail
(Foodworld) (Health and Glow)
Department Store
Piramal's (Piramyd Discount Store (TruMart)
Megastore)
Small format
Pantaloon outlets (Shoppe) Supermarket(FoodBAZAR)
Retail Department Store Hypermarket (Big Bazaar) Mall (Central)
(Pantaloon)
Department Store
K Raheja (shopper's stop) Supermarket
Group Specialty Store Hypermarket (TBA)
(Crossword)
Department Store
Tata/ Trent Hypermarket (Star India Bazaar)
(Westside)
Landmark Department Store
Hypermarket (TBA)
Group (Lifestyle)
Discount Store (Subhiksha, Margin Free, Apna Bazaar),
Others
Supermarket (Nilgiri's), Specialty Electronics

1. Malls:
The largest form of organized retailing today. Located mainly in metro
cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to
7,00,000 sq ft and above. They lend an ideal shopping experience with
an amalgamation of product, service and entertainment, all under a
common roof. Examples include Shoppers Stop, Pyramid, Pantaloon.

2. Specialty Stores:
31
 Chains such as the Bangalore based Kids Kemp, the Mumbai books
retailer Crossword, RPG's Music World and the Times Group's music
chain Planet M, are focusing on specific market segments and have
established themselves strongly in their sectors.

3. Discount Stores:
As the name suggests, discount stores or factory outlets, offer discounts
on the MRP through selling in bulk reaching economies of scale or
excess stock left over at the season. The product category can range from
a variety of perishable/ non perishable goods.

4. Department Stores:
Large stores ranging from 20000-50000 sq. ft, catering to a variety of
consumer needs. Further classified into localized departments such as
clothing, toys, home, groceries, etc

5. Department Stores:
Departmental Stores are expected to take over the apparel business from
exclusive brand showrooms. Among these, the biggest success is K
Raheja's Shoppers Stop, which started in Mumbai and now has more than
seven large stores (over 30,000 sq. ft) across India and even has its own
in store brand for clothes called Stop!.

6. Hypermarts/Supermarkets:
Large self service outlets, catering to varied shopper needs are termed as
Supermarkets. These are located in or near residential high streets. These
stores today contribute to 30% of all food & grocery organized retail
sales. Super Markets can further be classified into mini supermarkets
typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of
3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and
personal sales.

7. Convenience Stores:
These are relatively small stores 400-2,000 sq. feet located near
residential areas. They stock a limited range of high-turnover
32
 convenience products and are usually open for extended periods during
the day, seven days a week. Prices are slightly higher due to the
convenience premium.

8. MBO’s :
Multi Brand outlets, also known as Category Killers, offer several brands
across a single product category. These usually do well in busy market
places and Metros.

SPECIALITY STORES:

Food retail:

Food dominates the shopping basket in India. The US$ 6.1 billion Indian
foods industry, which forms 44 per cent of the entire FMCG sales, is
growing at 9 per cent and has set the growth agenda for modern trade
formats. Since nearly 60 per cent of the average Indian grocery basket
comprises non-branded items, the branded food industry is homing in on
converting Indian consumers to branded food.

The mobile revolution:

The retail market for mobile phones -- handset, airtime and accessories --
is already a US$ 16.7 billion business, growing at over 20 per cent per
year. In comparison, the consumer electronics and appliance market is
worth US$ 5.6 billion, with a growth rate that is half of the mobile
market.

Kid’s retail:

When it comes to Indian children, retailers are busy bonding--and

branding:
 Monalisa, the Versace of kids is coming to India.
 Global lifestyle brand Nautica is bringing Nautica Kids.
 International brand Zapp tied up with Raymond to foray into kids'
apparel.

33
  Disney launched exclusive chains which stock character-based
stationery.
 Pantaloon's joint venture with Gini & Jony will set up a retail chain
to market kids' apparel.
 Swiss kidswear brand Milou is collaborating with Tirupur-based
Sreeja Hosieries.
 Turner International India Pvt Ltd. will launch Cartoon Network
Townsville and Planet POGO--two theme parks designed around
its channels--in the National Capital Region.
 Sahara One Television has also signed a Memorandum of
Understanding to source content from Spacetoon Media Group,
Middle East's largest kids' entertainment brand for animation and
live action content.

Leading the kids' retail revolution is the apparel business, which accounts
for almost 80 per cent of the revenue, with kids' clothing in India
following international fashion trends. According to research firm KSA
Technopak, the branded segment comprises US$ 701.7 million of the
total kids' apparel market-size of over US$ 3 billion.

Industry experts say kids' retailing will touch annual growth of 30-35 per
cent. Toys, stationary, sportswear, outerwear, tailored clothing, eyewear,
watches, fragrance, footwear, theme parks, TV channels… the segment is
growing rapidly at 10 per cent per annum. Margins are in the range of 20-
25 per cent (for dealers and distributors), while companies enjoy an
average gross margin of about 10 per cent.

Agricultural retail:

Agriculture across India is heralding the country's second Green

Revolution. 14 states, including Maharashtra, Punjab, Andhra Pradesh
and Rajasthan amended the Agricultural Produce Marketing Committee
(APMC) act this year, along the lines of the Model APMC Act, '02,
which allows farmers to sell their produce directly to buyers offering
them the best price.

Agricultural sectors such as horticulture, floriculture, development of

seeds, animal husbandry, pisciculture, aqua culture, cultivation of
vegetables, mushroom under cultivated conditions and services related to

34
agro and allied sectors are open to 100 per cent FDI through the
automatic route.
For its e-Choupal scheme, ITC built internet kiosks in rural villages so
farmers can access latest information on weather, current market prices,
foods-in-demand, etc.

With a US$ 5.6 billion, multi-year investment in agriculture and retail,

Reliance Retail will establish links with farms on several thousand acres
in Punjab, West Bengal and Maharashtra. FieldFresh, planning to become
India's first large-scale exporter of produce, will annually pay farmers
over US$ 30,000 to lease land for vegetables, to hire tractors and to pay
their workers.

Besides a five-year program with the Punjab government to provide

several hundred farmers with four million sweet-orange trees for its
Tropicana juices by 2008, PepsiCo--with agriculture exports worth US$
40 million--also introduced farmers to high-yielding basmati rice,
mangoes, potatoes, chilies, peanuts, and barley for its Frito-Lay snacks.

Export potential and a rapidly growing domestic demand for reliable

produce from new supermarket chains is driving change. With 77 per cent
of India's population relying on agriculture for a living, improved
efficiency and new markets can benefit a large number of people.

International retailers:

The Australian government's National Food Industry Strategy and

Austrade initiated a test marketing food retail in India wherein 12 major
Australian food producers have tied up with India-based distributor AB
Mauri to sell their products directly at retail outlets.
The largest-ever 150-member British business delegation in India
committed investments in the areas of food processing, agri retail and
manufacturing. It is also likely to press for the liberalization of sectors
like financial & legal services and retail.

US-based home delivery and logistics company, Specialized

Transportation Inc, will enter the Indian market through a strategic
alliance with Patel Retail, a subsidiary of Patel Integrated Logistics.

35
Among other big international players, Wal-Mart has announced its plans
for India in partnership with Bharti, Tesco is sure to try again, and
Carrefour too might finally find the right partner.

Supermarkets:

Large self service outlets, catering to varied shopper needs are termed as
Supermarkets. These are located in or near residential high streets. These
stores today contribute to 30% of all food & grocery organized retail
sales. Super Markets can further be classified in to mini supermarkets
typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of
3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and
personal sales.

Supermarkets are relatively new entrants in the market. They are so called
pioneers in organized food retailing and go by the western model in look
and feel and format. This is what everybody means when they say
organized food retailing.

Franchise outlets:

36
Like Tommy Hilfiger and Wal Mart, other US retailers are firming up
their India entry strategies and if they are already in, they are undergoing
rapid expansion. Fashion brands DKNY is also all set to foray into the
Indian fashion Industry through a franchisee agreement with Indian
company, S. Kumar Starbucks recently expressed their interest in
entering Indian company

Like Tommy Hilfiger and Wal-Mart, other US retailers are firming up

their India entry strategies and if they are already in, they are undergoing
rapid expansion. Fashion brand DKNY is also all set to foray into the
Indian fashion Industry through a franchisee agreement with Indian
company, S Kumar’s.Starbucks recently expressed their interest in
entering India through the franchise route, like their AmericanF&B
counterparts Pizza Hut, Subway, and the very successful McDonald’s.
McDonald’s has major expansion plans lined up; in the next 3 years, it
plans to open another 100 outlets in cities across India.

Hypermarket:

A very large commercial establishment that is a combination of

departmental store and a supermarket.
The specific features of a hypermarket are the wide range of goods
offered, quality service, quality display of goods on the shelves and
complex systems providing for customers loyalty.

Hypermarket is known for a wide range of goods offered. It consists of

dozens of thousands of items, while similar goods can be offered in
several forms. In order to work with such an assortment it is necessary to
group it into categories and sub categories that would unite goods
according to this or that criteria.

Shopping Malls:

The new shopping malls that have been expanding their footprint across
Indian cities are well designed, built on international formats of
retailing and integrated with entertainment and restaurants to
provide a complete family experience. Over 300 malls are expected
to be built over the next two years and most Indian cities with over

37
 a million populations will be exposed to this modern method of
retailing.

Shopping malls have existed in India since several decades but were
designed and built to house several shops in a single facility. These malls
also known as Shopping Arcades offered only rows of shops, most of
which were small stores that promised bargains for their various wares.
These Shopping Arcades tried to maximize on their store space and did
not offer any areas for recreation and entertainment.

The present day malls are a creation of the past few years post 2000.
They are designed professionally using a lot of international experience
and combine shopping with a lot of brand building, recreation, food and
entertainment. Malls also have a large format store that serves as their
anchor for shopping and a prominent restaurant that anchors the food
needs of visitors. Most malls also feature a multiplex cinema that offers
entertainment to the visitors of the mall. Finally the mall has large atria
and open spaces to allow visitors and families to hang-out.

Product Segments:
The organized retail business in India is very small. This is despite the
fact that India is one of the biggest markets. Retail business contributes
around 10-11 per cent of GDP. India also has the largest number of
retailers, about 12 million, though they are mostly small. Most of the
organized retailing in the country has just started recently, and has been
concentrated mainly in the metro cities. Organized retailing in India has a
huge scope because of the vast market and the growing consciousness of
the consumer about product quality and services. Organized retail only
accounts for 3% of the total retail industry as yet and is estimated to grow
to $64 billion by the year 2015. As a result, the retailing space in the
country will also rise by 15-20% by 2010. 50 million sq ft of quality
space under development 7 major cities to account for 41 million sq ft
development 300 malls, shopping centre and multiplexes under
construction To open 35 hypermarkets, 325 large department stores, 1500
supermarkets and over 10,000 new outlets To add US $ 10 billion of
business to organized retail. ASSOCHAM president, Anil K Agarwal
says:” The organized sector retailing is all set to grow at much faster
speed than unorganized sector and the higher growth speed will alone be
responsible for its higher market share which has been projected for $17

38
billion by 2010-11. Cities and metropolis in which retailing will show
booming prospects include Mumbai, Delhi, Chennai, Kolkata, Bangalore
and Kanpur, said Agarwal adding that the popular mode adopted for
building shopping malls in these cities will be based on build, operate,
lease and sell basis".

The 4 major organized retail sectors are Food & Grocery, Clothing,
Consumer Durables and Books & Music. In 2003-04, private
consumption expenditure in India amounted to Rs 1,690,000 crore (USD
375 billion) of which, retail sales constitute about 61% (USD 230
billion).In terms of penetration by the organized retail sector, footwear is
the highest category, followed by clothing. Footwear is driven by the
dominance of home –grown players like Liberty as well as the 15%
market share that MNC retailer Bata Commands. Foreign Presence,
especially through the franchisee route, e.g. Adidas, Reebok, Nike etc.
adds to this slice of the pie. Franchisee activity in this category,
especially in Tier II Cities, is pegged to rise.

Estimated Growth in Organized Retail:

39
 2002 2007 CAGR
(%)
Large 1,924 5,024 21%
Segments
Other 1,315 2,645 15%
Segments
Non-store 239 422 12%
Retailing
Total 3,478 8,091 18%
Organized
retail

The Four Large Segments:

Food 391 1,624 33%
-Chain 326 1,462 35%
Stores 65 162 20%
-Single
Large Stores
Clothing 1,075 2,266 16%
- 293 590 15% Retail is amongst
Manufacturer 315 852 22% the fastest
retailers 467 824 12% growing sectors
-Chain stores in the country.
-Single India ranks
Large Stores First, ahead of
Consumer 359 822 18% Russia, in terms
durables 141 284 15% of emerging
- 98 298 25% markets
Manufacturer 120 240 15% potential in retail
retailers and is deemed a
-Chain stores ‘Priority’ market
-Single for International
Large Stores retail.
Book and 97 310 26%
Music 54 202 30%
-Chain 43 108 20% Major
Stores
Industry
-Single
Large Stores Players
40
 • Wal-Mart
• Shoppers' Stop
• Planet M
• Westside (Trent)
• Pantaloon(Big bazaar)
• Subhiksha
• Lifestyle
• Music World
• Adani- Rajiv's
• Pyramid
• Crossword
• Globus
• Life spring
• Nirma-Radhey

Nanz in North India, Nilgiris in the South, Pantaloon in the East and
Crossroad in the West were the pioneers of the retail revolution in India.
Nanz faced several obstacles (See Case Study) in their business and had
to finally down their shutters. Nilgiris, due to some strange reason, did
not see any logic to expand beyond the southern frontiers. Pantaloon went
to scale up and become bigger and bigger to form the Future Group, that
is now omnipresent in almost all formats right from small groceries to e-
tailing. Crossroads in Mumbai imparted some valuable lessons to their
parent, the Piramyd Group, who has since then gone on an expansion
drive with other formats of retailing in different cities.

The big players in Indian retail landscape now are the Future Group,
Shoppers Stop, Westside, Subiksha and RPG Spencer. The newcomers
who are knocking at the gates are Reliance Retail, Bharti Walmart and
Aditya Birla Trinethra. Here, we intend to do a brief profiling of the
major players in order to understand the retail business in a better
manner.

1 The Future Group

The Future Group, which was earlier known as PRIL (Pantaloon Retail
India Limited) began as a trouser manufacturer in the mid 1980s. The
Future Group is divided into six verticals – Future Retail, Future Capital,
Future Brands, Future Space, Future Media and Future Logistics. The

41
Future Group started operations in the mid 1987s by incorporating the
company as Manz Wear Private Limited. The company went on to
manufacture ready made trousers under the “Pantaloons” brand name. It
came out with a public issue in 1991 and later changed their name to
Pantaloon Fashions (India) Limited (PFIL).

The first exclusive men’s store called Pantaloon Shoppe was inaugurated
in 1992. Pantaloons went for a franchisee route to expand the number of
retail outlets and by 1995, it had reached to a crucial number of 70. The
first departmental store called Pantaloons was opened in Kolkata in 1997
with an investment of Rs 0.7 million. The store was a success and
recorded revenues of Rs 100 million within the first year of operations. In
1999, the company’s name was changed to Pantaloon Retail (India)
Limited (PRIL).

The success of Pantaloons departmental stores encouraged PRIL to come

up with other retailing formats such as “Big Bazaar” to retail low cost
general merchandising, and “Food Bazaar” to retail food products. As of
2005, the Future Group has 3.5 million sq ft of retail space and over 100
stores across 25 cities in India. It employs more than 12,000 people and
has a customer base of more than 120 million.

Kishore Biyani, the promoter of the group who likes to address himself as
“Chief Knowledge Officer” has plans to launch 18 formats and over
3,340 stores, thereby turning the Future Group into a US$7 billion
company with over US$1 billion in profits by the year 2010.

42
2 Shoppers Stop

Shoppers’ Stop, promoted by the real estate group K Raheja, was one of
the first movers to have set up a large retail outlet in New Delhi with
international ambience. Shopper’s Stop Ltd now has a considerable
presence all over the country with over 7 lacks square feet of retail space
and stocks over 200 brands of garments and accessories. The stores are
spread all over India with presence in Mumbai, Delhi, Bangalore,
Hyderabad, Jaipur, Pune, Kolkata, Gurgaon, and Chennai & Ghaziabad.

Shoppers’ Stop is also very well known for having pioneered several
quality retailing concepts in India like CROSSWORD, HyperCITY and
Mothercare. They are the only retailer from India to become a member of
the prestigious Intercontinental Group of Departmental Stores (IGDS).

Shoppers’ Stop is positioned as a family store delivering a complete

shopping experience. With its wide range of merchandise, exclusive
shop-in-shop counters of international brands and world-class customer
service, Shoppers’ Stop brought international standards of shopping to
the Indian consumer providing them with a world class shopping
experience. Shoppers’ Stop’s core customers represent a strong SEC a
skew. They fall between the age group of 16 years to 35 years, the
majority of them being families and young couples with a monthly
household income above Rs. 20,000/- and an annual spend of
Rs.1,50,000/-. A large number of Non - Resident Indians visit the shop
for ethnic clothes in the international environment they are accustomed
to.

The stores offer a complete range of apparel and lifestyle accessories for
the entire family. From apparel brands like Provogue, Color Plus, Arrow,
Levi’s, Scullers, Zodiac to cosmetic brands like Lakme, Chambor, Le
Teint Ricci etc., Shoppers’ Stop caters to almost every lifestyle need.

43
Shoppers' Stop also retails its own line of clothing namely Stop, Life,
Kashish, Vettorio Fratini and DIY. The merchandise at Shoppers’ Stop is
sold at a quality and price assurance backed by its guarantee stamp on
every bill.

Shoppers’ Stop’s customer loyalty program is called “The First Citizen”.

The program offers its members an opportunity to collect points and avail
of innumerable special benefits. Currently, Shoppers’ Stop has a database
of over 2.5 lakh members who contribute to nearly 50% of the total sales
of Shoppers’ Stop.

The Organization, in 2000, along with ICICI ventures also acquired the
reputed bookstore, “Crossword”, which offers the widest range of books
along with CD-ROM, music, stationery and toys. Services like Dial-a-
book, Fax-a-book and Email-a-book enable customers to shop from their
homes. Crossword currently has 18 Stores.

Realizing the role of IT way back in 1991, Shoppers’ Stop was among the
first few retailers to use scanners and barcodes and completely
computerize its operations. Today it is one of the few stores in India to
have retail ERP in place, which is now being integrated with Oracle
Financials and the Arthur Planning System, the best retail planning
system in the world. With the help of the ERP, they are able to replicate
stores, open new stores faster and get information about merchandise and
customers online, which reduces the turnaround time in taking quick
decision.

Shoppers Stop has been very keen to understand the importance of

distribution and logistics in ensuring that merchandise is available on the
shop floors. This has led the retail chain o streamline its supply chain.
The company has developed process manuals for each part of the
logistics chain. These modules include vendor management, purchase
order management, stock receiving systems, purchase verification and
inventory buildup, generation and fixing of price and store tags, dispatch
of stocks to the retail floor and forwarding of bills for payment.

Shoppers’ Stop has a grand ambition to position itself as a global retailer.

The company intends to bring the world’s best retail technology, retail
practices and sales to India. Currently, they are adding 4 to 5 new stores
every year.
44
 3 Trent – Westside

Established in 1998, Trent operates some of the nation's largest and

fastest growing retail store chains. A beginning was made in 1998 with
Westside, a lifestyle retail chain, which was followed up in 2004 with
Star India Bazaar, a hypermarket with a large assortment of products at
the lowest prices. In 2005, it acquired Landmark, India's largest book and
music retailer.

In a recently signed deal, Trent has agreed to anchor 12 malls set up by

DLF Universal Ltd across the country, at its Westside, Landmark and
Star India Bazaar outlets. This amounts to about 27 locations, totaling to
about a million square feet of space.

Trent retails garments and household accessories for men, women and
children, cosmetics and perfumes at Westside, food, beverages, health
and beauty products, vegetables, fruits, dairy products, consumer
electronics and household items at Star India Bazaar and books, music
and stationery at Landmark.

Westside has 25 outlets across 17 cities in India offering a variety of

designs and styles in garments, footwear and accessories, as table linens,
artifacts, home accessories and furnishings. Well-designed interiors,
sprawling space, prime locations and coffee shops enhance the customers'
shopping experience.

Trent also runs another chain of retail stores called Star India Bazaar.
Launched in 2004, Star India Bazaar provides a large assortment of high
quality products made available at the lowest prices coupled with a
unique shopping experience. Star India Bazaar is located in Ahmedabad
and offers a wide choice of staple food, beverages, health and beauty
products, vegetables, fruits, dairy products, consumer electronics and
household items at the most affordable prices.

Trent has also recently acquired a 76 per cent stake in Landmark, one of
the largest books and music retail chains in India. Landmark commenced
its operations in 1987 with its first store in Chennai, and now has nine
stores in the major metros of the country. Earlier Landmark was focused
on books, stationery and greeting cards. In 1996 it added music to its

45
product portfolio and also started the trend of stocking curios, toys,
music, CDs and other gift items.

4. Piramyd

Piramyd Retail is part of the Piramal Group, which has presence in

diverse sectors spanning Pharmaceuticals, Textiles, Real Estate,
Engineering, Family Entertainment and Retail with manufacturing
operations in 19 locations across five states and employing over 18,000
people.

The promoters launched the apparel business in 1999 under Piramyd

Retail and Merchandising Pvt. Ltd. (PRMPL) while its food; home &
personal care businesses (FHPC) were housed under Crossroads
Shoppertainment Pvt. Ltd. (CSPL). As the apparel and food businesses
individually reached a critical mass the management merged the two
companies into Piramyd Retail Ltd. due to distant synergies in two
businesses in March 2005. Pyramid also has a smaller format of stores
called TruMart that caters to Food and Personal Care products.

Piramyd Retail currently has 5 Mega stores and 8 TruMart stores mainly
in Maharashtra. The company plans to increase these numbers to 17
Mega stores and 69 TruMarts by 2008. The floor space is expected to be
5 times on successful expansion.

The FHPC (Food & Personal Care) business is volume driven while the
Lifestyle store is a margin driven business. Piramyd Retail plans to
increase the contribution of private labels from existing 7% to 18-20% of
the revenues by 2010. Gross margins from private labels are over 40%
and hence the company is planning to increase this business. Most of the
stores are on the lease format and the company is prone to higher lease

46
rentals due to the overall increase in real estate prices. This may bring the
profit levels down substantially.

Piramyd Retail did have a first mover advantage in many locations but it
has actually failed to capitalise over this advantage. Its competitors like
Pantaloon, Shoppers Stop and Trent gained larger benefits of their far
more aggressive business & marketing strategy in the retail space.

5. Subiksha

The Chennai based Subiksha grocery chain runs around 200 outlets all
over the country and its current turnover stands at Rs 224 crore. Their
target customer is the middle income value conscious buyers. The main
aim of Subiksha is to offer a functional and transactional shopping
experience. This retail chain has no qualms and spends almost no money
on creating a pleasant shopping experience, and all stores are non-air
conditioned. There is no false roofing or sparkling vitrified tiles on the
floor.

A few years ago, Subiksha did not even offer shoppers self service. The
customer had to place an order at a computerized teller and the goods
were billed and delivered after cash is collected. Customers had to bring
their own carrybags or pay to buy them from the store. Subiksha even
attempted to charge the customers for home delivery.

47
However, now Subiksha has slightly tweaked their business model in
order to create a better appeal to customers who were defecting to the
competitors. The store formats are still small and non-air-conditioned.
But customers have the option to pick from shelf spaces. They also get
shopping bags and free home delivery. But the selling USP (unique
selling proposition) remains the same --- Subiksha tries to be as close to
the customer as possible and offers the lowest price and huge savings in
comparison to competitors. It’s slogan happens to be --- bachat mera
adhikar hain (saving is my fundamental right).

6. RPG Spencer

RPG’s Spencer presently has 125 stores across 25 cities covering a retail
trading area of half a million square feet and with a clientele of 3 million
customers a month. Spencer's has a national footprint with seven
hypermarkets, three supermarkets and 70 daily use outlets, called Dailies.

All the newly opened Spencer's stores stock every conceivable product
that is required by a household on a daily basis. At Spencer's Daily
shoppers can get fresh fruits, vegetables, fast-moving consumer goods,
household items, groceries, with regular offers and discounts.

Spencer's outlets are divided in to three retail formats. These are,

Spencer's Hyper, the over 25,000-sq ft hypermarkets stocking over
25,000 items. The 8,000sq ft to 15,000-sq ft mini hyper stores, branded as
Spencer's Super and the daily purchase 4,000-sq ft to 7,000-sq ft
Spencer's Daily for groceries, fresh food, chilled and frozen products,
bakery and weekly top up shopping.

7. Reliance Retail

48
On June 26, 2006, Mukesh Ambani, Chairman and Managing Director,
Reliance Industries Limited, announced a Rs 25,000-crore investment in
the retail sector.
Reliance Retail started its retail operation with “Reliance Fresh”, a
grocery store that sells vegetables, fruits, personal care items and other
food products. Soon, these retail outlets will also be selling apparel and
footwear, lifestyle and home improvement products, electronic goods and
farm implements and inputs. They will also offer products and services in
energy, travel, health and entertainment. In addition to this, partnerships
would be developed to bring the best of global luxury brands to India as
well.

Reliance Retail plans to extend its footprint to cover 1,500 Indian cities
and towns with outlets of a varied format, a mix of neighborhood
convenience stores, supermarkets, specialty stores and hypermarkets.
Reliance also plans to open restaurant outlets, financial services marts
and tourism counters within its stores.

Mukesh Ambani’s ultimate ambition seems to be to create the Indian

equivalent of Wal-Mart by scaling up the business to unprecedented
heights to reach every nook and corner of the country. With its retailing
venture, Reliance expected a revenue target of US $20 billion through its
retail operations by 2010. Over a span of five years, RRL expects a 20%
return-on-investment.

The first store christened “Reliance Fresh” opened in November 2006 at

Hyderabad. Within a few months they have now opened stores in
Mumbai, Pune and Ahmedabad and plans foray into other cities on a
rapid scale.

8. Bharti Wal-Mart

49
Bharti Retail (Pvt.) Ltd. unveiled the roadmap for its retail venture on 19th
February, 2007 envisaging an investment of $2.5 billion with expectation
of revenue of $4.5 billion (about Rs. 20,000 crore) from this business by
2015. The first retail outlet is expected to open somewhere in the month
of August.

Bharti’s plan is to invest $2.5 billion by 2015 and open stores across all
major cities. This investment would be only for setting up front-end
stores. The modalities for its back-end linkage, including its joint venture
with the world's largest retailer Wal-Mart, are in the process of being
worked out.

A high-level team from Wal-Mart was visited India in the later part of
February to work out the details of the back-end chain. While Bharti
would manage front-end of the retail venture, Wal-Mart would be
involved in the back-end, including logistics, supply chain and cash-and-
carry, he added.

The JV was presently scouting for 10 million sq. ft. of retail space, which
would include hypermarkets, supermarkets and convenience stores and
would provide employment to about 60,000 people. The company would
open multi-format retail outlets in all cities with a population of about
one million. Bharti is now conducting a massive consumer survey to take
a final decision on branding and promotional campaign.

However, Bharti and Wal-Mart have been facing stiff opposition from the
left parties and other political outfits who fear that the entry of the
50
Bentonville giant will make life difficult for the small grocers and create
massive unemployment. They also expect Wal-Mart to take a tough
stance on lowering prices and force farmers to sell their produce at lower
rates. A lurking fear of monopolistic regime in the retail sector is also
enhancing their fears. Both Bharti and Walmart are presently having a
tough time in convincing the ministers, politicians, agriculturists, the
NGOs and other pressure groups that their business model would serve to
work in the best interests of all the stakeholders.

9. Aditya Birla – MORE

The Aditya Birla Group is India's first truly multinational corporation.

Global in vision, rooted in values, the Group is driven by a performance
ethic pegged on value creation for its multiple stakeholders. A US$ 24
billion conglomerate, with a market capitalization of US$ 23 billion and
in the League of Fortune 500, it is anchored by an extraordinary force of
100,000 employees belonging to over 25 different nationalities. Over 50
per cent of its revenues flow from its operations across the world.” Our
mission is to change the way people shop. We will give them more.” says
Mr. Kumar Mangalam Birla, Chairman, Aditya Birla Group. The more
for you advantage: more. Promises a world-class pleasurable shopping
experience to Indian consumers in their very own neighborhood. more
quality, more. Variety, more convenience and more value are the four
delivery cornerstones of the more chain of supermarket stores more.

MORE Value MORE. promises best in market pricing. Linking up

directly with farmers to source fresh fruits, vegetables and staples ensure
great quality as well as great price. Add to this, the membership program
Club more which provides convenience, customized shopping solutions
and savings, and the more value promise becomes all the more evident.

51
More Is an inspirational brand for an inspirational country? We have a
bright and committed, enthusiastic team that represents the best
experience from India and globally. MORE also has a range of products
from its own stable available across value, premium and select ranges.
The products have been quality-checked and are available in attractive
packaging at competitive prices. To avail additional benefits, at no extra
charge, customers can also enroll for the membership program Club
more.

10. VISHAL RETAIL :

Vishal is one of fastest growing retailing groups in India. Its outlets cater
to almost all price ranges. The showrooms have over 70, 00 products
range which fulfills all your household needs, and can be catered to less
than one roof. It is covering about 1282000 sq. ft. in 18 states across
India. Each store gives you international quality goods and prices hard to
match. The cost benefit that is derived from the large central purchase of
goods and services is passed on to the consumer. What started as a
humble one store enterprise in 1986 in Kolkata (erstwhile, Calcutta) is
today a conglomerate encompassing 51 showrooms in 39 cities. India’s
first hyper-market has also been opened for the Indian consumer by
Vishal. Situated in the national capital Delhi this store boasts of the single
largest collection of goods and commodities sold less than one roof in
India. The group’s prime focus is on retailing.

The Vishal stores offer affordable family fashion at prices to suit every
pocket. The group’s philosophy is integration and towards this end has
initiated backward integration in the field of high fashion by setting up a
state of the art manufacturing facility to support its retail endeavors.
Company has already tied up for 5-lakh sq ft space and is looking for
more. Company will come up with 32 new stores this year. Company is
doing research on more formats. Company is looking for opportunities of
expansion in the South. Contribution of apparels business at 53% may
slightly come down to 50%. India is a big country and there is huge space
for four-five big retail players. Vishal can always sustain growth in this
big market. Company can sustain margins as it is going for backward
integration. Currently manufacturing contributes 10% of the business,

52
which in the next two to three years will go up to 25%. Company is
increasing its focus on the non-apparel and FMCG segment. The current
share of FMCG at 15% could go up to 20-25%. Apparel sales currently
at 63% in the next 2-3 years should come down to 50% as the company is
now also focusing on different segments. With growth in volumes, the
cost of sourcing will come down in the near future. Company will venture
wherever it gets real estate space. Currently, it has very little space in the
south India. Eventually, it will have a pan-India set up.

11.METRO – CASH & CARRY INDIA

METRO Group today, is the third largest trading and retailing group in
the world. The company employs over 2,50,000 staff in 30 countries. In
the year 2005 METRO Group had generated sales of over €55.7 billion;
53% of total sales came from outside Germany. METRO Cash & Carry
started operations in India in 2003 with two Distribution Centers in
Bangalore. With this METRO introduced the concept of Cash & Carry to
India. These Centers offer the benefit of quality products at the best
wholesale price to over 150,000 businesses in Bangalore. METRO offers
assortment of over 18000 articles across food and non food at the best
wholesale prices to business customers such as Hotels, Restaurants,
Caterers, Food and Non-food Traders, Institutional buyers and
professionals. METRO's Cash & Carry business model is based on a
Business to Business (B2B) concept and focuses on meeting all the needs
and requirements of business customers. It is a modern format of
wholesale trading, catering only to business customers.

53
12.Viveks- The Unlimited Shop

Vivek Limited is a professionally managed public limited company

carrying three retail brands - Viveks, Jainsons, and Premier and
continuously adding to the formidable strength of 1000 employees. Vivek
Ltd is the largest consumer electronics & home appliances retail chain in
India. Viveks popularized several brands by creating visibility and have
the distinction of being market leaders and trendsetters with continuous
support from the principal companies. Viveks evolved its strategies to
suit the larger scene where there was a stigma attached to borrowing.
Very few hire purchase options were available and hence Viveks started
Vivek Hire Purchase and Leasing Ltd to finance consumer durables,
which enhanced the core retailing business also.Viveks grew from 3
stores to more than 52 stores and turnover increased to over Rs. 350
crores (USD 80 million) and also become a public limited company from
a family run enterprise. In this process, 14 store Jainsons was bought over
in 1999, 2 store Premier in 2001 and Spencers in 2002 and have recently
absorbed Spencers into the Premier brand. With the liberalization of
economy and other changes in the global scene, Viveks streamlined the
marketing and advertising activities and shopping ambience was
improved.

THE GROWTH DRIVERS:

Drivers of Retail Industry

• The Demography Dynamics: Approximately 60 per cent of Indian

population below 30 years of age.
• 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.

54
 • 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.

DRIVERS FOR GROWTH:

Indian consumers are rapidly evolving and accepting modern formats

overwhelmingly. Retail Space is no more a constraint for growth. India is
on the radar of Global Retailers and suppliers / brands world-wide are
willing to partner with retailers here. Further, large Indian corporate
groups like Tata, Reliance, Raheja, ITC, Bombay Dyeing, Murugappa &
Piramal Groups etc and also foreign investors and private equity players
are firming up plans to identify investment opportunities in the Indian
retail sector. The quantum of investments is likely to sky-rocket as the
inherent attractiveness of the segment lures more and more investors to
earn large profits. Investments into the sector are estimated at INR 20 –
25 billion in the next 2-3 years, and over INR 200 billion by end of 2010.

Stocks in the retail sector are also becoming increasingly attractive from
an investor's point of view. Successful development of value based
concepts as well as development of retail space in smaller cities and
towns shall drive the organized retail into the next levels of cities.
Retailers have responded to this phenomenon by introducing
contemporary retail formats such as hypermarkets and supermarkets in
the new pockets of growth. Prominent ‘tier-II' cities and towns which are
witnessing a pick-up in activity include Surat, Lucknow, Dehra Dun,
Vijaywada, Bhopal, Indore, Vadodara, Coimbatore, Nasik, Bhubaneswar,
Varanasi and Ludhiana among others.

With consumption in metros already being exploited, manufacturers and

retailers of products such as personal computers, mobile phones,
automobiles, consumer durables, financial services etc are increasingly

55
targeting consumers in tier II cities and towns. In addition, petro-retailing
efforts of petroleum giants scattered throughout the country's landscape
have also ensured that smaller towns are also exposed to modern retailing
formats.

On the supply side, mall development activity in the small towns is also
picking up at a rapid pace, thereby, creating quality space for retailers to
fulfill their aggressive expansion plans. Thus, the ‘retail boom', 85% of
which has so far been concentrated in the metros is beginning to percolate
down to smaller cities and towns. The contribution of these tier-II cities
to total organized retailing sales is expected to grow to 20-25%.

GROWING CONSUMER CLASS:

Favorable demographic and psychographic changes relating to India's

consumer class, international exposure, availability of increasing quality
retail space, wider availability of products and brand communication are
some of the factors that are driving the retail in India. Over the last few
years, many international retailers have entered the Indian market on the
strength of rising affluence levels of the young Indian population along
with the heightened awareness of global brands and international
shopping experiences and the increased availability of retail real estate
pace.

Development of India as a sourcing hub shall further make India as an

attractive retail opportunity for the global retailers. Retailers like Wal-
Mart, GAP, Tesco, JC Penney, H&M, Karstadt-Quelle etc stepping up
their sourcing requirements from India and moving from third-party
buying offices to establishing their own wholly owned / wholly managed
sourcing & buying offices shall further make India as an attractive retail
opportunity for the global players.

Manufacturers in industries such as FMCG, consumer durables, paints etc

are waking up to the growing clout of the retailers as a shift in bargaining
power from the former to the latter becomes more discernible. Already, a
number of manufacturers in India, in line with trends in developed
markets, have set up dedicated units to service the retail channel. Also,
instead of viewing retailers with suspicion, or as a ‘necessary evil' as was
the case earlier, manufacturers are beginning to acknowledge them as
channel members to be partnered with for providing solutions to the end-
consumer more effectively.
56
 The next level of opportunities in terms product retail expansion lies
in categories such as apparel, jewellery and accessories, consumer
durables, catering services and home improvement. These sectors have
already witnessed the emergence of organized formats though more
players are expected to join the bandwagon. Some of the niche categories
like Books, Music and Gifts offer interesting opportunities for the retail
players.
Indian consumer goods market is expected to reach $400 billion by 2010.
India has the youngest population amongst the major countries. There are
a lot of young people in India in different income categories.

In India they do not have to face this dilemma largely because rapid
urbanization increases in demand, presence of large number of young
population, any number of opportunities are available. The bottom line is
that Indian market is changing rapidly and is showing unprecedented
consumer business opportunity.

Indian consumer class can be classified according to the following

criteria:

1. Income
2. Socio-Economic status
3. Age demographics
4. Geographical dispersion

1. Income Classification

Consumer Annual Income

1996 2001 2007 Change
Classes in Rs.
Rs. 215,000 and
The Rich 1.2 2.0 6.2 416%
more
The Consuming
Rs 45- 215,000 32.5 54.6 90.9 179%
Class
The Climbers Rs. 22-45,000 54.1 71.6 74.1 37%
The Aspirants Rs. 16-22,000 44 28.1 15.3 -65%
The Destitute Below Rs. 16,000 33 23.4 12.8 -61%
Total 164.8 180.7 199.2 21%

57
Source:NCAER

2. Socio-Economic Classification:

In addition to income classification and consumer classification, Indian

households can also be segmented according to the occupation and
education levels of the chief earner of the household (the person who
contributes most to the household expenses). This is called as Socio-
Economic Classification (SEC), which is mainly used by market planners
to target market before launching their new products. SEC is made to
understand the purchase behavior and the consumption pattern of the
households

3. Age Demographics:

India is a very young nation, if compared with some advanced and

developed countries. Nearly two- thirds of its population is below the age
of 35, and nearly 50 % is below 25.

Age distribution if Indian population (In Millions)

Year/
2006 2001 1996
Age
Below 4 yrs 113.5 108.5 119.5
5-14 yrs 221.2 239.1 233.2
15-19 yrs 122.4 109.0 90.7
20-34 yrs 279.1 246.8 224
35-54 yrs 239.2 207.3 178.1
55 & above 118.7 101.7 88.7
Total 1094.1 1012.4 934.2

Marketers explain that the boom in the consumption level and leisure
related expenditure is because of this young population. It will have a
significant impact over the consumer goods market. In addition to that, it
is expected that this will generate trade opportunities and continuous
investment in the economy.

58
There is huge potential for further consumption of goods and services due
to the increased level of disposable income. The expenditure on essential
goods and services has a higher share in developing countries as
compared with that of developed countries.

Consumption Trends

Food Essentials 45.68%

Essential Services (water,
10.1%
power, rent, and fuels)
Clothing 4.9%
Footwear 0.63%
Medicare 4.25%
Transport & Communication 14.51%
Recreation, Education, and
Less than 4%
Culture
Home Goods 3.25%

4. Geographical Dispersion of market potential

There is large difference in economic prosperity levels among several

states in India, linked to the wealth creation from trade, industrial, and
agricultural development. There are poor districts in many states,
classified according to their market potential. India has 500 districts, out
of which 150 districts (category A) and next 150 districts (category B)
account for 78% and 15% of the national market potential respectively.
Remaining 200 districts (category C) are backward and account for only
7% of national market potential. Category C districts have 40% of the
geographical share.

GROWING ECONOMY

Potential for all Formats to Thrive:

Most of the global powerhouses in the retailing sector such as Wal-Mart,

Carrefour, and Tesco etc have adopted multi-format and multi-product

59
strategies in order to customize their product offering for distinct target
segments. Similar trends

Identifying the future

The important thing is to identify the 'future that has already happened'
- Peter Drucker

The important and distinctive are always the result of changes in values,
perceptions and goals of people. Identify the changes that have already
happened, exploit the changes that have already occurred and use them as
opportunities. Dr William T Wilson, Chief Economist for Keystone India
ñ a Chicago-based firm providing cross-border trade facilitation and asset
management services in US are likely to be exhibited in India as all
formats present prospects for growth, the Report says.

Further, with the emergence of larger store formats like superstores and
hypermarkets in countries like UK, France, Germany, Spain since the
1980s and Eastern Europe more recently, traditional food retailers have
been able to stock more extensive non-food ranges. In fact, Tesco, UK's
leading grocer, has become the number one apparel retailer in the Czech
Republic and also a major player in Hungary apart from being one of the
fastest growing clothing retailers in the UK. Together with its rival, Wal-
Mart-owned ASDA, Tesco is one of the food sector's most successful
exponents of clothing in Europe

DISPOSABLE INCOME

There is no point complaining, accusing or justifying that retailing

business is only for larger players and multinational retailing companies.
That's total rubbish and rather an assumed limitation. Recent research
finding is that by the year 2010, India will have at least three million
people with an annual income of over Rs 4,000,000. Mind you, this is the
official, declared and straight income meaning there will be a
considerable number of consumers with other sources of income! (I
suppose). One could comfortably presume that one fourth of the three
millions would reside in Bangalore. Considering the third successive year
with great economic growth in India, it is obvious that we shall have
more people with higher disposable income. With higher disposable
income, the discerning Indian consumers are not going to be conscious
about price alone. This emerging consumers would want something
special, unique, different, better, customized and more. Find the
60
synonyms and transliterate these into value offerings in your field of
business and you have a gold mine, especially when you manage to
connect with the customers' value and perception and India, said that after
significant accelerations in economic growth recently, India's economy is
expected to equal or surpass Japan as the world's third largest sometime
in the year 2006. Dr Wilson also added that India's economy measured in
PPP (purchasing power parity) terms will eclipse the US$ four trillion
mark in 2006, making it equal to or greater than Japan's. Indian
consumers are getting richer noticeably leading to higher disposable
money.

RISING INCOMES

Over the past decade, India’s middle and High Income group has grown
at a rapid pace of over 10% per annum. Though this growth is most
evident in urban areas, it has also taken place in rural markets. Further,
the number of households earning above Rs.150, 000 per annum is about
30 million today and is expected to grow to 80 million by 2007. This
growing high-income population is triggering the demand for consumer
goods, leading to the proliferation of higher quality/higher priced
products.

EXPLOSION OF MEDIA

There has been an explosion in media as well during the past decade.
Kick-started by the cable-explosion during the gulf war, television has
accelerated to a pint where there are more cable connections than
telephones in Indian homes and more than 100 channels are being aired at
all times .This media bombardment has exposed the Indian consumer to
the lifestyles of more affluent countries and raised their aspirations from
the shopping experience – they want more choice, value, experience and
convenience.

PRIVATE LABLES

61
Brands, store labels, private label brands, store brands. These terms may
seem to be synonyms of each other. However, when it comes to retailing,
each of these terms has a different meaning. While we all know what a brand
is, a private label and a store label are different from any other brand because
they are product lines that are owned, controlled, merchandised and sold by a
specific retailer in its own stores. Among Indian retailers, Stop, Life and
Kashish by Shoppers' Stop and ETC by Ebony are private label brands.
According to Synovate, is the market research arm of global
communications specialist Aegis Group, the growth of private labels is about
2-3 times more than that of advertised brands .Among the product lines
launched by retailers, the ones whose nomenclature is the name of the store
itself are called store labels. Foodworld and Nilgiris have launched their own
brand of supermarket products under the "Foodworld" and "Nilgiris" brand
names. There is a distinct advantage in naming the brand launched by the
retailer after the same name as that of the store. But at the same time, the
store label also carries the burden of not only the success of the brand, but
also the failure, which may have a negative rub-off effect on the retailer's
image. A store brand on the other hand is a brand name the retailer carries.
Each retailer, because of its unique offering, is a brand in itself, which is
what the store brand signifies. Nallis, Modern Bazaar and The Home Store
are store brands since each of them stands for a certain retail offering.

Retailers are now aggressively moving into developing their own private
labels as it not only makes economic sense in the form of retailers achieving
higher margins, it also helps them to plug gaps in their product portfolio. For
instance, in menswear, retailers say that gross margins on branded products
vary from 25-38 per cent. Compared to that, the retailers can earn whopping
margins of around 55-60 per cent on private labels. Private label products
contribute to a retail brands differentiation. A retailer can achieve
differentiation through a large (but not necessarily exclusive) portfolio of
private label products. Service adds to the differentiation, and together with a
unique product range, results in a strong retail brand. They are not perceived
as being interchangeable with similar private label products launched by
other retailers (unlike manufacturers of branded products, which are the
same regardless of the retailer). Introduction of an in house brand of
products helps the retailer to have means with which they can compete head
on with the other branded products. An established private label brand
provides the retailers a platform to negotiate with suppliers, and the retailers
are thus self-sufficient in a certain category. They have more control over the
merchandise and are able to make the required changes and modifications to
suit the changing customer profile much quicker. This brings about a more
62
consistent and acceptable product portfolio, which also helps reduce mark-
downs. A retailer can create a stronger emotional connect with the consumer
as the experience is not just the store experience but also the product
experience. An outside brand could be purchased from any outlet. This is not
so in the case of private labels, so the product experience keeps bringing the
consumer back

The question is: why would retailers want to get into the trouble of launching
an own brand when there are "n" number of local, regional and national
brands for practically all kinds of products? The reasons are multifold.

CHALLENGES

Retailing in its traditional form has been existing in India for decades.
But retail management in the true sense (as retailing is known in the west)
is a relatively new discipline in India. It is unlike other forms of
marketing and the traditional marketing rules do not apply. In retailing, as
in service, there is a fifth P added to the existing 4 of marketing, the
People. Therefore the contact person (whom the
Consumers interact with) becomes a doubly important entity. The most
important difference is that where marketing has the classic 4 Ps
(Product, Promotion, Price and place), in retailing a fifth P, people is
added which is critical. They are critical to a service business like
retailing both as employees who execute the business and the customers
with whom retailers must interact.

The following are the key challenges of retailing:

• Large transactions: Retailers need to handle smaller transactions in

large numbers and still be able to make money.

• Low price strategy: The Indian consumer being value-conscious, a key

to success for many retailers is the ability to attract customers by offering
low price guarantee.

• Aggressive sales, discount and collection schemes (say, credit

facilities.) and thus keep the enthusiasm going.

63
• Indian consumer behaviors - Retailers need to conduct MRs and
behavioral studies into the Indian psyche simply because he is so
different from those in the west and in fact, different from other Indian
consumers. His shopping patterns need to be analyzed in detail.

• Location: A prime location in the city/town so a big plus. Things such

as
waiting and parking areas need to be taken care of.

• Use of information technology (IT) in developing a supply chain and

integrating all the retailing processes from procurement to after sales.

As somebody rightly pointed out, India remains one of the last frontiers
of modern retailing. Conquering the retailing in India will be a major
challenge, given the complications that the unorganized sector poses
those of the supply chain and consumer behavior as well as the glaring
complexities of such a vast a market with all kinds of consumer segments
thrown in. A wise retailing hawk would set up special cells; committees
to track retailing industry throughout the country. Benchmarking the best
in the country and seeing oneself as to where exactly he wants to be in the
complicated perceptual map would be a fine starter. Any retail chain
needs to experiment and re-orient to cater to the local needs and
preferences. Given that these chains come with huge asset bases and
financing from their international operations, this is not a difficult task.
While Indian markets still beckon a large retail chain, the success of
anyone foraying into the land of snake-charmers and maharajas
ultimately depends on how well and in-depth understanding they have of
the conditions, the people, the supply Retailing in India chain dynamics,
the poorer (but strong) unorganized cousins and of course, the local
Gods!

HR… a critical business process:

The Industry is facing a severe shortage of talented professional,

especially at middle-management level. Areas gradually becoming
critical are technology, supply chain, business development, marketing,
product development and research. Successful Indian retailers are
creating a robust second and third level of management by hiring
aggressively for these key roles.

64
There is also an increase in number of retail management programmes
and institutes. This will bridge the gap in availability of talented
professionals at the middle and lower levels. There is also an increasing
trend towards hiring hotel management graduates in the retail sector. The
retail industry is expected to create 2 million jobs between now and
2010.However, talented professionals will put increased pressure on
wage costs. Therefore, operating margins, especially for mid-sized
retailers will shrink. There is also a huge risk for Indian retailers
becoming a poaching ground for international retailers once they enter
India.

An agile and adaptive supply chain is the key

Logistical challenges, constant changes in consumer preferences and

patterns, crowded marketplaces, efficient customer responsiveness and
swiftly evolving retail environment in India. These factors pose a huge
challenge for that all important key to pushing growth in this kind of an
environment- an efficient and adaptable supply chain.

In the last 2-3 years ,several retailers ranging from F&B operators to
discount clothing, have implemented Supply chain management (SCM)
solutions to improve core business processes such as global
sourcing,distribution,logistics,innovation,transparency and visibility in
financials and inventory, compliance and management of point of
sale(POS) data. Going ahead, India’s FMCG and retail sectors are likely
to see an increase in adoption of SCM.

However, most Indian retail players are under serious pressure to make
their supply chains more efficient in order to deliver the levels of quality
and service that consumers are demanding.

As Indian and International retailers continue to grow their presence

regionally, there will be a pressing need for a single, enterprise-wide IT
platforms to manage operations, which will become increasingly
complex.

Fraud in retail is expensive

65
We feel that fraud in going to be one of the retail sector’s primary
challenges in the future.
Fraud and theft, including employee pilferage, shoplifting, vendor frauds
and inaccuracy in supervision and administration costs the Indian retail
industry about Rs 550-600 crore every year. This is despite the fact that
most large modern format retailers use standard security features such as
CCTV’s, POS systems and anti shoplifting systems for greater control
over fraud and theft. In financial terms, cost of this fraud constitutes
about 2% of the organized retail sector’s revenues.

We believe that the implications and size of this loss will be more
significant as retailers continue to scale up and increase product lines.

Improvement in infrastructure and logistics needed

India is a large and highly fragmented country, with 29 states and 18

officials’ languages. A bulk of its population, 66.1%, lives in rural retail
potential we feel that private logistics companies offering specialized
services, refrigerated transport and ware house facilities across the
country, along with timely distribution of supplies to retail outlets will.

LOCATION PLANNING – TYPES OF LOCATIONS

A) High – Street Location:

a. Very busy with high customer traffic.

b. Has an array of retail stores in small sizes, areas. The lack of adequate
infrastructure makes it virtually impossible to reach this virtually
untapped market. Distribution, or lack of it, is a major hindrance for
retailers in India. The lack of quality infrastructure across the country and
a non- existent distribution sector results in inefficient logistics systems.
Infrastructure is the weakest link in India’s path to progress and there is
urgent need to address issues plaguing this area. Urbanization is driving
an increasing need to upgrade or create infrastructure facilities. An
66
indicator of the urgent need for highway development, for instance, is the
fact that average daily traffic volume on highways of 39,000 Passenger
car units (PCU’s) far exceeds the highway capacity of 15,000 PCU’s.
Transport is a major concern, with a deteriorating railway system and a
limited highway network .In contrast to the global standards, the average
load carried by trucks in India around 7 tons_ is very low. However, the
Indian Government is presently investing heavily in the state highway
system. This will help in an overall decline in logistics a cost which is
currently 10-12% of total GDP. 10,000 MW of power needs to be added
every year for next decade. Growth in air passenger traffic, estimated at
20% p.a. for next two years, necessitates quadrupling of airport
capacities. Ports will witness 38% increase in tonnage in next -3 years
and hence, port infrastructure cannot be ignored.

c. Has stores that are generally found in clusters based on product

categories.

d. High real-estate rentals.

Eg: Linking road in Bandra, Brigade Road in Bangalore

(B)Destination / Freestanding Location

a. Does not have a high footfall rate (customer traffic needs to be

pulled I through the store’s marketing efforts or
products/services/process differentiations)

b. May not be a commercial retail area at all.

c. Low real-estate rentals.

d. May have a large parking area.

Eg: Phoenix Mills Compounds and Shopper’s Stop in Mumbai.

(C)Shopping Centre/Mall Location

a .Has an Existing mall traffic.

b .Has a clean Environment.
c. Has a designated parking area.
d .Medium to High rental cost.
Eg: DLF Mall in Delhi, Crossroads in Mumbai
67
Location, store design and layout:

Once a geographical market has been chosen, the next step in formulating
the retail business plan is to select a site for the store. The importance of
this decision is summarized by a favorite saying of retailers: "There are
three vitally important things in retailing - location, location, and
location."

In assessing the desirability of various available locations, note the

positive and negative aspects of each. Once again, analysis of trends is
important. No location is static; it is either improving or declining in such
things as traffic flow and potential market area.
Store design and layout of the store's interior and exterior help
determine the store's image and character. In planning a new store or
remodeling of an old one, there is plenty of room for creativity. This part
of the plan takes a lot of thought and consideration. Some bad decisions
made in the planning stage can be corrected, but mistakes made in the
area of store design and layouts are usually quite costly to correct.
Retailers can get specialized assistance from merchandise
suppliers, local architects, and store planning consultants. Display
windows, fixtures, lighting, and storage are examples of areas covered in
this part of the retail business plan. Store layout involves such
considerations as allocation of space, customer traffic flow throughout
the store, and maximizing profit per square foot.

Planning a retail business has several advantages. A well thought out

plan not only makes the best of the present, but also anticipates
future contingencies

Retailing is a challenging and dynamic field. The retailer draws on

knowledge from such areas as marketing, psychology, finance,
accounting and management. From the field of management, we learn
that planning is one of the most important functions of the retailer. It is a
function often neglected under the pressure of day-to-day business
activity, but it is so important that the successful retailer must give it top
priority.

68
Retailers must decide how to make the best use of limited resources, such
as people, funds, and inventories. In order to use these resources in the
most productive way, the retailer plans for the future.

The most important planning occurs before a retail store even opens for
business. Careful planning at this time can greatly enhance a store's
chances of success. By gathering and synthesizing the relevant
information into a retail business plan, the retailer can make better
decisions. A workable retail business plan should be detailed, specific,
and in writing. Indeed, a major advantage of planning is that it forces the
retailer to put ideas in writing.

Without planning, there is no predetermined course of action, and with

out some predetermined course of action, retailers do not know what to
do, where to do, or why it should be done. They waste their own energies
and the resources of the store. Planning involves selecting objectives and
developing specific programs, policies, and procedures for achieving
them.

Steps in formulating the retail business plan:

Setting objectives-
Planning begins with objectives. Stores can have many different
objectives: survival, growth, market share increase, high return on
investment, and development of a good store image. Some objectives are
more important than others. Profit, of course, is a primary objective for
any retail organization. Social concerns, however, must often be given
consideration, too, if the store is to be a "good citizen" of its business
community

Objectives are difficult to apply to real situations and decisions if

they are stated in vague terms. An objective should establish a
measurable goal - a yardstick to compare results with efforts. Goals or
objectives such as "to increase sales by 18 per cent this year" or "to break
even in the first year of operation" are examples of clearly defined and
measurable objectives. They must be supported with concrete plans that
are specific for reaching these goals.

In forming the retail business plan, be as specific as possible.

Remember to be customer-oriented while setting objectives; it is one of
69
the keys to successful retailing. Do not lose sight of these objectives once
they are formulated. Schedule quarterly, or if appropriate, monthly
reviews of progress. Revise and update your objectives periodically as
well.

Financial planning:

Financial planning is an important part of the retail business plan. In fact,

inadequate financial planning is a frequent cause of store failure.

Financial statistics on the type of business under consideration are

often available from trade associations. This information can be
invaluable to the manager in the initial planning stages. The retailer must
make a sales forecast, calculate a break-even point, and estimate the
capital requirements of the business. Asset planning, another essential
part of financial planning, involves inventory, accounts receivable,
equipment and fixtures, and cash. Often, these assets must be financed in
part with funds obtained from outside sources - banks, relatives, and so
on.

Assessing available resources:

What are the strengths and weakness of the business? By assessing these
factors, a retailer can maximize the use of all available assets and can
limit or eliminate the handicaps imposed by the inherent weakness of
these resources. Experienced, creative management is a strong resource.
Sufficient working capital to meet the costs of doing business the first
year is another.

At least as important as knowing the strengths of the business are

analyzing its weaknesses. Awareness of weak areas is the first step in
overcoming them. Some weaknesses can be overcome by hiring an
outside expert in areas in which the retailer's knowledge and experience
are limited. Additional training and outside reading are other answers to
many weak areas.

A retailer with general retailing experience but little knowledge of,

say, the shoe business, could benefit greatly by hiring experienced shoe

70
salespeople if she is planning to open a shoe store. A retailer who is weak
in the areas of financial planning and control needs to work closely with a
good accountant. Even during the planning stage, an accountant can be
helpful in setting up an appropriate bookkeeping system.

Assessing market potential

What type of customer, or what segment of the market, does the store
cater to? Is there enough demand for the products to provide sufficient
sales volume? These are some of the main questions the retailer tries to
answer by assessing market potential.

The key factors in market assessment are: first, the number of

people living in the trade area, and second, the buying power of these
people. An extreme example of poor market assessment would be trying
to sell expensive fur coats in a poor mining town. Even the age
distribution of the population can affect a store's market potential.

Assessing the competitive situation

Competition is a good thing. It leads to better products and services at

lower prices. It can inspire a retailer to do a better job. However,
numerous and / or aggressive competitors are costly to the retailer in
many ways. Price wars eat away profits. Too many similar stores serving
too few consumers cause the sales volume of each store to suffer.

For some types of stores, however, the best strategy can be to locate as
close as possible to the competition. Competing stores located in the
same area may increase customer traffic. Some cities, for example, have
an area with many antique shops. Customers are drawn to the area
because of this convenience, and each store's traffic helps the other stores.
Retailers should not be afraid of competition, but they should try to find a
market where there is an unfilled demand for the type of store they are
planning.

Other assessments:

71
Local laws, tax rates, and the labor force are other areas that can affect
the retail store. The planner should investigate these uncontrollable
environmental factors.

In this preliminary work, be aware of trends as well. For example,

demand for the products may look very promising in a certain area, but
the population of this area might be declining. On the other hand, an area
with slightly lower market potential at present could be growing very fast
and provide a better long-run market for a particular store. These
assessments are often difficult to make, but the effort put into planning at
this stage will pay off handsomely when store operations get under way.

Location, store design and layout:

Once a geographical market has been chosen, the next step in formulating
the retail business plan is to select a site for the store. The importance of
this decision is summarized by a favorite saying of retailers: "There are
three vitally important things in retailing - location, location, and
location."

In assessing the desirability of various available locations, note the

positive and negative aspects of each. Once again, analysis of trends is
important. No location is static; it is either improving or declining in such
things as traffic flow and potential market area.
Store design and layout of the store's interior and exterior help
determine the store's image and character. In planning a new store or
remodeling of an old one, there is plenty of room for creativity. This part
of the plan takes a lot of thought and consideration. Some bad decisions
made in the planning stage can be corrected, but mistakes made in the
area of store design and layout is usually quite costly to correct.

Retailers can get specialized assistance from merchandise

suppliers, local architects, and store planning consultants. Display
windows, fixtures, lighting, and storage are examples of areas covered in
this part of the retail business plan. Store layout involves such
considerations as allocation of space, customer traffic flow throughout
the store, and maximizing profit per square foot.

Organization and supervision

72
Planning is an example of a management function. Other management
functions performed by the retailer are organizing, staffing, leading, and
controlling.

By organizing, the retailer establishes relationships among people,

materials, and other resources to get a job done. Labor is organized and
divided, and responsibility is delegated. Staffing entails the recruitment
and selection of employees. It is a vitally important function because the
employees of a store represent that store to the public. People can really
be the most important asset of a retail firm.

Every retailer is in a leadership position. Leadership means

motivating employees to achieve their maximum potential, while at the
same time accomplishing the goals of the organization. Because
leadership means understanding people, it is one of the most creative and
challenging aspects of a retailer's job. The retailer's professionalism and
attitudes set the tone for employees' attitudes and performance.

Controlling is the follow-up function of retail management. Actual

performance is compared with planned performance to spot and evaluate
deviations.

Knowledge on buying

For established retail operations, past sales data are very helpful in
knowing how much to buy. For a new retail business, these past data are
not available. However, if a sales forecast and desired inventory turnover
rate have been determined, the beginning inventory figure can be
calculated. A balance between meeting customers' needs and high
inventory carrying costs must be found.
Knowing how much to buy goes hand in hand with knowing what to
buy. Successful retailing involves having the right merchandise in the
right place, at the right time, and at the right price for the customer.

Information from store records is a valuable aid in knowing what to

buy. In the absence of this information, an understanding of the target
customer's shopping habits and motivations is helpful. Information from
suppliers can provide valuable input for the store buyer. Once the

73
inventory has been obtained, a unit control system must be set up to keep
track of the stock.

Pricing
The goals of retail pricing are fourfold. First, the goods must sell at a
satisfactory rate. Second, inventory costs and expenses must be covered.
Third, a desired profit must be made, and fourth, prices should be fair to
customers.

There are different pricing strategies for different types of stores, from the
discount store to the exclusive shop with quality merchandise and
expanded customer services. Pricing in retailing is both a science and an
art.

Retailers have special terms to describe various pricing operations,

such as markup, markdown, and psychological pricing. Pricing is,
naturally, closely related to financial planning.

Advertising and promotion

A store's location, layout, design, and product lines affect its overall
image. Advertising is another key element of the store's image in the
minds of customers. Advertising can be thought of as communicating
with customers. The objective of an advertisement is to stimulate the
customer to want what the retailer has to offer, and to persuade the
customer to take action to satisfy the stimulated want or need.

Besides advertising, retailers send messages to customers through

personal selling, sales promotion, and packaging. Information channels
beyond the direct control of the retailer are publicity and word-of-mouth
communication.

By giving careful consideration to defining who the advertisement

is directed at (the "target customer"), retailers can get more mileage out
of advertising spend. The content of an advertisement should focus on
benefits desired by the target customers.

Sales promotion and display techniques are a major promotional

tool. Sales promotions can have various objectives, such as generation of
immediate sales, attracting customers to the store, and building goodwill.

74
 Window displays can serve to attract customers, to show customers
the kind of merchandise the store carries, and to project the image of the
store. Because window displays are so visible, they should be given the
attention, care, and creative input they deserve. Interior displays can be
informative, can stimulate impulse buying, or can suggest uses of a
product. In addition, they can enhance the store's image. Other sales
promotion strategies include special events, sales, coupons, and trading
stamps.

Employee selection and training

The salesperson is a communicator: This person translates product
features into benefits and satisfactions for the customer. But most
important, the salesperson is the representative of the store to its
customers.
The unique quality that distinguishes personal selling from other
promotion activities is the opportunity for feedback between customer
and salesperson. Good advertising and promotion can get people into a
store. Good salespeople and good value keep them coming back.
The importance of employee selection and training cannot be
overstated. Many retailers are surprised to learn that monetary
compensation, although important to employees, is usually not their most
important concern. Fairness, security, honesty, and opportunity are often
more important than pay.

Services
An enlightened retailer realizes that the customer is the pivot around
which all retailing activities revolve. This attitude is expressed to the
customer through shopping conveniences, services, employee attitudes,
and fair values. As part of the retail business plan, decisions must be
made about the types of services to be offered. Services, and handling of
credit policies and customer complaints, deserve the ongoing attention of
the manager.

Accounting and financial management

Information and control play an important role in the internal operation of
a retail business. Good records are the basis for guiding and controlling a
retail business. They are the tools a manager uses to control inventory,
expenses, and ultimately, profits.

75
 Financial statements, such as balance sheets and income
statements, are summaries of the financial strength and profitability of the
retail business. They tell how well a business is doing, and give evidence
about the quality of management decisions. Financial planning in the
form of budgets helps retailers to spot problems before they occur.

Information
One information tool in particular has been a real boon to retailers, and
that is the computer. More and better information is available to the
retailer now than ever before, because of computers. This means that
better and faster decisions can be made. Computers offer speed and
accuracy of information processing that is especially helpful in inventory
management.

Information is important for intelligent decision-making. Much of

this information evolves from basic store records or is provided by a
computer system. Another source of information for the retailer is
marketing research, such as the market assessment. Most of the research
involved in formulating the retail business plan is in fact, marketing
research. Research can also help answer questions in such areas as
pricing, promotion and distribution.

COMPETITOR ANALYSIS

The table below outlines some of the strategic moves being planned to
change the competitive structure of Retail business in India.

Early Birds

Retailer Brands Plans Strengths Challenges Threats

76
K Raheja Shopper’s 310 Pulse on Keeping up Could get
Group Stop, Shoppers’ customer brand loyalty bogged
Crossword, Stop Outlets tastes with down in
Inorbit by 2010, 60- vast local positioning
Mall 70 new retailing itself right
Hyper Crossword experience
City, Café outlets within
Brio/Desi two years,
Café 100 Café
Brio/ Desi
Café and 14
new
Hypercity

Future Pantaloon, A store a day Can Expanding Straddling

Group Big for the next evolve on customer with too
Bazaar, three to four vast base, many retail
Food years – 3,300 customer sourcing formats
Bazaar, planned by experience products at
Fashion 2010 and cheaper rates
Station, existing
Blue Sky models

Tata Westside Looking to Already Sprucing up It’s smaller

Trent register it’s has an product retail
presence in established offerings, operations
hypermarkets; brand like opening
currently Westside more outlets,
operates 21 and
stores introducing
new retail
formats

RPG Spencer’s, Expansion Still Establishing

Music into other considered a itself into
World major cities at southern newer
prime brand regions,
locations; B- sourcing
Cities next on products at
list competitive

77
 prices

Source : Indian Management, Volume 46, Issue 1, January 2007, Page

16

Debutantes

Retailer Brands Plans Strengths Challenges Threats

Reliance Reliance Plans to set Strong Getting the Product

Fresh up a range of back end, retail pricing,
different nationwide portfolio infrastructure,
store fuel right for manpower,
formats, retailing Indian brands
convenience platform tastes
stores and
hypermarket
s as well as
create a
back-end
retail-
services
business

78
Bharti Field Pan-Indian Bharti’s Wooing the Product
Walmart Fresh operations local price pricing, shelf
expected expertise sensitive and overall
and Wal- Indian offerings
Mart’s consumer
back-end
make it a
lethal
combo

In the Pipeline

Retaile Brands Plans Strengths Challenges Threats

r

Aditya Madura To roll out Extensive Gaining a Building

Birla Garments, its retail experience in national retail
Birla Sun business supply-chain footprint formats
Life within the management, from
Insurance next 7-8 vendor scratch
and Idea months with development
Cellular, a with premium
Planet combination brands like
Fashion of large and Louis
and small stores Phillippe, Van
Trouser Heusen and
Town Allen Solly

Hero Easy Bill Floated Aero Strong Creating Little

Group Infrastructure background in retail experience
Ltd several operations in
announcing manufacturing from everyday
foray into sectors; sound scratch consumer
retail. financial base retailing.
Currently
developing
two
industrial
parks at

79
 Haridwar
and
Uttaranchal

Future Outlook

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 centers, multi-storied 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 workingwomen population and emerging opportunities in the
services sector are going to be the key growth drivers of the organized
retail sector in India. 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 India’s 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
country’s 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
80
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 (CHART)

Road Ahead; Plans of Large Retailers

• Reliance Retail: investing Rs. 30,000 crore ($6.67 billion) in

setting up multiple retail formats with expected sales of Rs. 90,000
crore plus ($20 billion) by 2009-10.
• Pantaloon Retail: Will occupy 10 mn sq.ft retail space and
achieve Rs.9, 000 crore-plus ($2 bn) sales by 2008.
• RPG: Planning IPO will have 450-plus Music World, 50-plus
Spencer's Hyper covering 4 million sq.ft by 2010.
• LIFESTYLE: Investing Rs.400 crore-plus ($90 million) in next
five years on Max Hypermarkets & value retail stores, home and
lifestyle centres.
• Raheja's: Operates Shoppers' Stop, Crossword, Inorbit Mall, and
'Home Stop' formats. Will operate 55 "Hypercity" hypermarkets
with US$100 million sales across India by 2015.
• Piramyd Retail: Aiming to occupy 1.75 million sq.ft retail spaces
through 150 stores in next five years.

81
Merger and acquisition activity:
India witnessed a record number of M&A deals in the first half of
2006, which were collectively worth USD 25.6 billion. A
significant number of deals have being carried out in the Indian
retail sector in the past few months in order to acquire a larger
share in the growing domestic market and to compete against the
prospective global and domestic players.13 The table below shows
some recent deals that have taken place in the Indian retail
sector:

Source: Price water house Coppers, Asia-Pacific M&A bulletin,

midyear.
Acquired/ JV Consideration
Nature of
Company/ Acquirer Stake
Business
Target (US$ million)
Retail
2005 Liberty Shoes Future group 51% 3
(Footwear)
Indus - League Retail
2005 Future group 68% 5
Clothing clothing
Deccan Leisure retail
2005 Odyssey India Chronicle chain (books, 100% 14
Holdings music, toys)
Books,
2005 Landmark Tata Trent music, 74% 24
accessories
TGI Friday's
(a subsidiary
Bistro Restaurant
2006 of Carlson 25% N/A
Hospitality (Food retail)
Restaurant
World-wide)
Indus League Lingerie and
clothing 50%
Etam group, women's
2006 8
(Future group France wear (JV)
retailing
company)

82
Technology – A Critical Tool
Out-of-stocks are the most noticeable problem for consumers — during
normal shopping experiences eight per cent of intended purchases are not on
the shelf and when it comes to promotional offers, these out-of-stocks rise to
15 per cent. Faced with an empty shelf, consumers often do not substitute
the same brand. They simply keep their money and leave the store in search
of another product. Let's take the example of a $25-billion retailer: lost sales
due to out-of-stocks added up to nearly 1 per cent of total sales — a mind-
boggling figure of $1 billion! Retailers across the nation are unable to
predict and master the demand-supply gap as a result of orthodox tools to
measure changing consumer behavior. Considering the Indian retail industry
grew by 300 per cent in the last 12 months and supply chain accounts for 50
per cent of costs, retailers are now looking at ways to enhance the supply
chain and predict consumer-buying habits. High consumption patterns
driven by disposable incomes, lifestyle shifts and availability of a wide
range of brands are dictating the high-growth of different retail formats in
India. No wonder, Indian retail players are under tremendous pressure to
make the supply chain more efficient in order to deliver quality, selection
and service to consumers. Retailers are now looking at creating an efficient
supply-chain via a concept popularly referred to as consumer driven
replenishment. What this implies is placing the consumer in the centre of the
replenishment process, to allow retailers to be able to use real-time data to
sense and respond to changing consumer demands. To implement consumer
driven replenishment, one needs to first collect and analyze pre-shopping
signals, which often go unnoticed today. For example, consumers may speak
to store associates or call centre agents to enquire on a particular product. As
this often leads consumers to purchase products, retailers and supply chain
partners can use existing consumer touch points to map consumers' buying
preferences. For example, Spanish retailer Zara furnishes its store employees
with PDAs to help them order out-of-stock items the minute the customer
brings it to the assistant's attention. This information captured via the PDAs
dictates next-day replenishments at the stores.

In another instance, Wal-Mart leverages weather data for replenishment.

When the world's largest retailer knows about an approaching hurricane or
snowstorm, the stores in that area are doubly stocked up with essential items
such as bottled water and batteries. This data helps Wal-Mart align inventory

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with increased demand to cover unnatural events and prevent out-of-stock
situations.

Consumer driven replenishment will change the way the industry handles
forecasting and replenishment. The major business change will start at the
business process level; to respond quickly to consumer demand, retailers
and their supply chain partners must redesign the current business process.
All supply chain partners will become part of a cohesive architecture,
enabling information to flow freely from retail functions to suppliers.

Inevitably, consumer driven replenishment within the Indian retail sector

will be reflected in rapid growth in sales of supermarkets, department stores
and hypermarkets. And with this increased competition, retailers will look
at various opportunities to maximize customer satisfaction. These will
include initiatives to streamline internal back end costs so as to translate
savings onto customers, maximizing mind share in a cluttered market and
delivering the best in store experience.

Keeping these deliverables in mind, some of the other key modules that the
store of the future will look to implement will include:

Store connectivity:
Stores will invest in building wide-area networks (WANs) and virtual
private networks (VPNs) to access information across various sites. With
visibility into every resource, stores will take advantage of up-to-the-minute
data at the right time for increased strategic flexibility and informed
decision-making for managing inventory.

RFID: Widely regarded as the key defining technology to hit the retail
sector, RFID tags on each piece of merchandise will enable companies to
monitor their inventory at a more detailed level than ever before.
Executives will identify when problems occur by monitoring signal readers
installed at key junctures, such as loading docks, receiving points,
distribution centers, backrooms and store shelves. These readers in turn will
be networked to a centralized monitoring system that would give companies
information they could never imagine with current operations, allowing
them to identify problems as shop lifting, inventory management, and even
'gray market’ sales that can erode profits and damage distribution
relationships. Let’s see the actual benefits of using RFID in the supply

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chain. The biggest benefit is the total visibility across the entire supply
chain:
What managers worry about the most? It is directly or indirectly related to
uncertainty.

Uncertainty is the mother of inventory and the father of stock-outs.

Inventory Management
• Maintain a real-time view of tagged inventory as it flows through
the supply chain.
• Track discrete movement of tagged inventory.
• Trigger alerts around inventory movement based on business
rules you construct.
• Allowing just-in-time practices.

Maximizing warehouse space

With the high costs associated with storage real estate, the goal is to
maximize warehouse space. This will improve utilization without
undermining the ease with which goods can be moved in and out.

Minimizing goods shrinkage

Theft combined with imprecise inventory management can create a
significant shortfall in actual versus expected goods available. Within
the retail environment goods shrinkage is widely perceived to account
for up to one per cent of stock, representing a significant dent in profit
margin.

Benefits to Consumers,
RFID can go beyond just intangible cost savings, as RFID can play a
role in food safety, counterfeit control, and warranty programs.
Businesses must avoid focusing too intently on the ways RFID tags can
be used and instead stay focused on how RFID can improve consumer
value and address complex business issues.

Minimizing errors in delivery

Misdirected deliveries or incorrect orders can immediately result in on-shelf
out-of-stock situations leading to reduced sales and damaged customer
relationships. Indeed, for organizations relying on the delivery of specific
components to fulfill their own order schedule, such errors can have a
serious impact on customer satisfaction. Store Mobility: Stores will use
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wireless technologies at the point of sale for faster checkout and real-time
product information in the store to improve operations, and throughout the
supply chain to reduce costs.

IP Communications: Stores will converge their data and voice systems,

providing instant communication throughout stores at significantly reduced
costs.

In conclusion, suffice to say that faced with poor supply chain management
and a rapidly changing environment, today's retailers will most definitively
look for consumer driven replenishment to simplify supply chain operations,
control costs, and measure results. With networks that will enable real time
updates to predict and replenish stocks, the Indian consumer will hopefully
never find his shopping preferences out of stock.

The Indian retail market is booming, and there are numerous applications—
both business and consumer—that can be built around radio frequency
identification (RFID) to deliver operational efficiencies. For instance, if a
retailer is able to track shipments and high-value assets in real-time, it can
minimize losses. Apart from improved and enhanced accuracy, RFID can
also lead up to 80 percent savings in time spent on scanning items.

Explains Chamaria, “RFID is a transformational technology that has the

potential to change the way business is conducted. Although at a nascent
stage, we expect RFID will start gaining traction around 2010. The cost of
tags and readers is fairly high today; once it comes down and ROI is
established, it will surely be a boon for both retailers and CPG companies.”

Aggarwal of BEA elaborates. “While RFID is at a nascent stage, there are

several killer applications that can utilise RFID technology across verticals.
Supply Chain Visibility and Reusable Asset Tracking will emerge as key
solutions that have high applicability in the Indian market, especially in
manufacturing, retail, government and healthcare."

But as of now, RFID has hardly any presence in India. Laments Chopra,
“Indian retailers are still to adopt bar-coding completely. The level of bar-
code usage is also largely due to the retailers’ initiatives of printing these
codes at their warehouses, unlike in developed countries, where suppliers
print bar-codes. Most retailers do not have integrated IT systems today.
Many retailers have few IT systems in the areas of supply chain
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management, vendor development, merchandising and inventory
management. The annual expenditure on IT is quite negligible.”

Technology in Retail
Over the years as the consumer demand increased and the retailers geared up
to meet this increase, technology evolved rapidly to support this growth. The
hardware and software tools that have now become almost essential for
retailing can be into 3 broad categories.

Customer Interfacing Systems

• Bar Coding and Scanners

Point of sale systems use scanners and bar coding to identify an item,
use pre-stored data to calculate the cost and generate the total bill for a
client. Tunnel Scanning is a new concept where the consumer pushes
the full shopping cart through an electronic gate to the point of sale. In
a matter of seconds, the items in the cart are hit with laser beams and
scanned. All that the consumer has to do is to pay for the goods.

• Payment

Payment through credit cards has become quite widespread and this
enables a fast and easy payment process. Electronic cheque
conversion, a recent development in this area, processes a cheque
electronically by transmitting transaction information to the retailer
and consumer's bank. Rather than manually process a cheque, the
retailer voids it and hands it back to the consumer along with a
receipt, having digitally captured and stored the image of the cheque,
which makes the process very fast.

• Internet

Internet is also rapidly evolving as a customer interface, removing the

need of a consumer physically visiting the store.

• ERP System

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 Various ERP vendors have developed retail-specific systems which
help in integrating all the functions from warehousing to distribution,
front and back office store systems and merchandising. An integrated
supply chain helps the retailer in maintaining his stocks, getting his
supplies on time, preventing stock-outs and thus reducing his costs,
while servicing the customer better.

• CRM Systems

The rise of loyalty programs, mail order and the Internet has provided
retailers with real access to consumer data. Data warehousing &
mining technologies offers retailers the tools they need to make sense
of their consumer data and apply it to business. This, along with the
various available CRM (Customer Relationship Management)
Systems, allows the retailers to study the purchase behavior of
consumers in detail and grow the value of individual consumers to
their businesses.

• Advanced Planning and Scheduling Systems

APS systems can provide improved control across the supply chain,
all the way from raw material supplier’s right through to the retail
shelf. These APS packages complement existing (but often limited)
ERP packages. They enable consolidation of activities such as long
term budgeting, monthly forecasting, weekly factory scheduling and
daily distribution scheduling into one overall planning process using a
single set of data.

Leading manufacturers, distributors and retailers and considering APS

packages such as those from i2, Manugistics, Bann, MerciaLincs and
Stirling-Douglas.

Strategic Decision Support Systems

• Store Site Location

Demographics and buying patterns of residents of an area can be used

to compare various possible sites for opening new stores. Today,
software packages are helping retailers not only in their locational
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 decisions but in decisions regarding store sizing and floor-spaces as
well.

• Visual Merchandising

The decision on how to place & stack items in a store is no more

taken on the gut feel of the store manager. A larger number of visual
merchandising tools are available to him to evaluate the impact of his
stacking options. The SPACEMAN Store Suit from AC Neilsen and
ModaCAD are example of products helping in modeling a retail store
design.

Investment Opportunities
• Potential for Investment: The total estimated Investment Opportunity
in the retail sector is around US$ 5-6 Billion in the Next five years.

• Location: with modern retail formats having made their foray into the
top cities namely Hyderabad, Coimbatore, Ahmedabad, Mumbai,
Pune, Chennai, Bangalore, Delhi, Nagpur there exists tremendous
potential in two tier towns over the next 5 years.

• Sectors with High Growth Potential: Certain segments that promise a

high growth are

 Food and Grocery

 Clothing
 Furniture and Fixtures
 Pharmacy
 Durables, Footwear & Leather, Watch & Jewellery

• Fastest Growing Formats: Some of the formats that offer good growth
potential are:
o Speciality and Super Market

 Hyper Market
 Discount stores
 Department Stores
 Convenience Stores and E-Retailing

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 • Supply Chain Infrastructure: Supply chain infrastructure in terms of
cold chain and Logistics.

• Rural Retail: Retail sector offers opportunities for exploration and

investment in rural areas, with Corporates and Entrepreneurs having
made a foray in the past. India's largely rural population has caught
the eye of retailers looking for new areas of growth. ITC launched the
country's first rural mall ' Chaupal Sagar', offering a diverse product
range from FMCG to electronics appliance to automobiles, attempting
to provide farmers a one-stop destination for all of their needs. There
has been yet another initiative by the DCM Sriram Group called the '
Hariyali Bazaar’ that has initially started off by providing farm related
inputs and services but plans to introduce the complete shopping
basket in due course. Other corporate bodies include Escorts and Tata
Chemicals (with Tata Kisan Sansar) setting up agri-stores to provide
products/services targeted at the farmer in order to tap the vast rural
market.

• Wholesale Trading: wholesale trading also holds huge potential for

growth. German giant Metro AG and South African Shoprite
Holdings have already made headway in this segment by setting up
stores selling merchandise on a wholesale basis in Bangalore and
Mumbai respectively. These new-format cash-and-carry stores attract
large volumes from a sizeable number of retailers who do not have to
maintain relationships with multiple suppliers for all their needs.

Government Initiatives & Regulations

There has always been a strong opposition to FDI in India’s retail sector
(though 100 Percent FDI is allowed in distribution companies that sell to the
trade and not to the consumer). The BJP was not too keen on it early on,
though towards the end of Vajpayee’s government‘s term there were noises
that it would consider such a move.

These days, the left parties are orchestrating a passionate opposition to

allowing FDI in retail. The arguments are familiar – that global retailers will
swamp the Indian markets, wipe out small kirana stores and put millions of
jobs in jeopardy. They also argue that giant global retailers will squeeze

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suppliers and finish them off. “ The negative effects in terms of job losses
and the displacement of traditional supply chains by the monopoly/
monophony power of multinational retailers far outweigh the supposed
benefits…” the left observed in a recent seven-page note that summarized its
arguments against FDI. Given the political clout of the small trading
community, because of their enormous numbers, the government has barred
FDI in retailing since 1997. Most of India’s home grown retailers also
oppose FDI, though for a different reason. “What is the hurry (to allow
FDI)? For 10 years, China allowed only one foreign store per province. I
allowed domestic chains to build up good valuation before opening FDI,
“argues Kishore Biyani, managing director, Pantaloon Retail. “ The debate
is not ‘whether or not to allow FDI, but ‘when and how’,” he clarifies.
Biyani is also chairman of Confederation of Indian Industry’s retail
committee, which estimates that Rs.20, 000 crore will be needed in retail to
scale up to its potential. Indian companies need time to mobilize at least part
of the capital before the foreign players are allowed in, argues CII. In private
some domestic retailers fear getting lower valuations from their global
counterparts if they sell out today. But five or 10 years later, when they have
built up larger business, they may get far higher valuations. Of course, the
argument of asking for more time to get even better valuation may not lose
its appeal even a decade later, if the approach is instinctively protectionist.
INDIA’s retail industry – the fourth largest in the world – accounts for 11
per cent of the country’s GDP and employs over 40 million people (about 7
per cent of Sector retailers (Yes, they have retailing PSU’s!) had a 32
percent share and private sector retailers had 45 per cent.
Total employment in the country). Now, a huge majority of the retail
workforce is in kiranas. This sector, in fact acts as an informal social
security net – almost anyone without a job can set up a kirana. The big
worry is that global retailers will quickly put these kiranas out of business,
leading to millions of job losses. Is that fear justified? The answer can be
found in the experience of othercountries that allow FDI in retail. In
Thailand and Malaysia, global retailers have spelt doom for the traditional
mom and pop stores. In fact the Thai government had to step step in to save
local retailers from annihilation. It set up Allied Retail Trade, a network of
franchised stores, which brought small stores together to fight the big chains.

But if the Thailand story is forbidding, then the China one is inspirational.
Global chains have had a 13 year run in china. In 1992, China had one
supermarket. Today it has 60, 000. (Supermarkets are perceived to be kirana
killers!). Four of the world’s 10 largest retailers, 35 of the top 50 and 78 of
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the top 250 have already opened stores in China. Hypermarkets,
supermarkets, discount stores, cash & carry convenience stores every
conceivable format operates in China. The globalization of china is
complete.

So what impact has this had?

The top 100 retailers (both domestic and foreign) in China had combined
sales of $60 billion in 2004, according to the China Chain Store & Franchise
Association. These 100 companies have so far opened 30,416 stores with a
total area of 25.8 million square metres. But – and here’s the revelation they
have only 9.6 per cent share of China‘s $628- billion retail trade! That figure
has grown from 2.9 per cent in 2000.

It must be mentioned that the global giants got unfettered access into China
only in 2004. Therefore their performance cannot be compared with rest of
the country’s retail sector, but must be benchmarked only against the top
100 firms. When seen thus, the foreign firms account for only 23 percent
sales of the top 100 retailers. China’s public now, the question is which
theory is relevant to India – China’s or Thailand’s? “India cannot be
compared with Thailand and Malaysia as the scale is much smaller and
economic levels are dissimilar. The right comparison would be Germany 20-
30 years ago or Brazil today. China makes sense because of its similarities
with India: large
area, large chunk of underdeveloped population, disparity in income levels,”
says Arvin Singhal, chairman of consultancy KSA Technopak.

Or better still, one could also look at the US story. Its retailing industry is
one of the most matures ones in the world. It is also home to some of the
world’s largest retailers. But there is a less understood aspect of the US retail
scene – 95 percent of all retailers in the US are single – store operations.
They may not be as the Indian Kirana, but they are still small ‘mom and
pop’ operations on the US scale. Despite over six decades of dominance by
large chains, these small players have not find a lot of them in the vicinity of
a Wal-Mart or a target. They are also under pressure and their market share
in on the decline. But the fact is that the single- store operations still control
a little less than 50 percent of US retail trade.

Again, back home, in Chennai, where large and organized supermarket

chains like Food World and Nilgiri’s have grabbed a 20 percent market
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share, the kiranas haven’t been slaughtered. They are smarter, more efficient
more customer- friendly than they were five years ago; they are matching
the chains’ prices and continue to do brisk business. Even stores in close
vicinity of these large supermarkets have survived. “Small businesses have
their own competitive advantages. They are local; they are usually in the
same block that the customers are in; and they are very convenient. They
know their customers by name, so they offer great customer service. They
have tailored their inventory for their customers, so they have great
inventory management, and many times they give credit. Small businesses
have their own model, offer a different product mix, and keep their
customers happy. I think small business can grow and prosper with Wal
Mart, “Menzer had argued in an inclusive interview with BW during his
May visit.

Benefits of opening the Retail sector

Improve competition Develop the market :

Greater level of exports due to increased sourcing by major players Sourcing
by Wal-Mart from China improved multifold after FDI permitted in China
Similar increase in sourcing observed for Metro in India provides access to
global markets for Indian producers.

Investment in technology Cold storage chains solves the perennial problem

of wastage. Greater investment in the food processing sector technology
Better operations in production cycle and distribution.

Better lifestyle Greater level of wages paid by international players usually

more product variety Newer product categories Economies of scale to help
lower consumer price. Increased purchasing capacity of consumers

Manpower and skill development through retail training and Greater

managerial talent inflow from other countries

Tourism Development:
A strong retailing sector boosts tourism as seen from the experience of
Singapore and Dubai. Investment in whole supply chain improved product
basket from India for exports.

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Long term benefits, up-gradation of agriculture, development of efficient
small and medium size industries.
FDI would result in market growth and expansion. Employment generated at
various levels, increased consumer demand implies employment generation
across the value chain does not need very high skill sets, needs high school
graduates and other similar skill level. Currently this is a majorly
unemployed demographic group

Boom in employment similar to job generation in ITES industry. On a much

larger scale But new jobs comparatively lower down the value chain Greater
clarity and objectivity can be achieved if one looks beyond kiranas at the
larger issue of employment, Despite the entry of organized retail – domestic
and foreign – in China, its retail still employs 6 percent of the total
workforce ( only marginally smaller than India). The top 100 retailers in
China employ 810,000 people, a figure growing at over 25 percent every
year. But compared with the US, the percentage looks paltry. In the US,
almost 15 million people or 11.7 of the workforce are employed in retail.
This is almost double the retail workforce in China – and much higher than
in India!

Many believe that organized retail actually leads to job gains rather than job
losses. This is not to say that the changeover will be painless. Shifting of
jobs is bound to happen. “Supermarket chains will divert business from
small vendors, but they also create many jobs,” argues retail expert Gale.
One reason for that is growth of organized retail stimulates consumption.
And increased consumption means more production and therefore more
jobs. In India, owners of large and small stores will tell you that they face
stock outs – products not available when a consumer asks for it. This is lost
demand. And it is due to India’s rather inefficient supply chain. One could,
therefore argue that India’s consumption is actually way below actual
potential – and that there is inherent job loss of jobs that exists in the
economy. Here poor distribution and below-par processes is another
bottleneck. “If the economy grows at 6.5 percent or so every year, we will
have 5-7 years. If you do not have an efficient distribution chain, the
economy cannot grow…Such inefficiency will lead to job losses. If you do
not have organized distribution, you won’t have employment growth,”
argues Harsh Bahadur, managing director, Metro Cash & Carry, India.
Finally, if the fear of kiranas being snuffed out is true, then the government
ought to be equally concerned about Indian retailers as well. Several large
and influential business groups like the Tatas and Ambanis have ambitious
94
plans that include setting up of hundreds of supermarkets and hypermarkets.
Won’t these kill kiranas and lead to job losses. In reality; foreign retailers
will be in a position to influence employment only several years after they
enter India. But they will have an impact on the consumer almost
immediately. Of course, in India the consumer is invariably forgotten when
protectionist lobbies voice their concern.

Conclusion

Big Retail is here to stay. Assuming that improvements in infrastructure

and lower real estate costs become a reality, Big Retail still has a long
way to go before satisfying the highly diverse needs of the Indian
population. As a result, there will be a steady-state where Big Retail will
co-exist with Small Retail.

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 APPENDIX

CONSUMER SURVEY QUESTIONNAIRE RETAIL CHAINS

The objective of this survey is to collect tangible information about shopping
in Retail Chains. This questionnaire is being administered to people like you
who have visited and bought products in Retail Chains. Please let us know
your spontaneous response to the questions that pertain to your shopping
experience in Retail Chains. All information provided by you shall be kept
confidential and we shall only be publishing the outcomes. Please provide us
your unbiased and frank opinions.

1. What is your monthly shopping budget?

0-2K 2-5K 5-10K 10-20K 20-50K >50K

2. Which retail chains did you visit?

Big Bazaar
Shoppers Stop
Westside
Piramyd
Vishal Megamart
Any other (Please specify) ________________________________

3. Which retail chains do you visit often?

Big Bazaar
Shoppers Stop
Westside
Piramyd
Vishal Megamart
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 Any other (Please specify) ________________________________

4. Which retail chain did you like most?

Big Bazaar
Shoppers Stop
Westside
Piramyd
Vishal Megamart
Any other (Please specify) ________________________________

5. Why did you like that particular retail chain?

Ambience
Attractive Prices
Wide range of choices
Discount Schemes
Free Offers
Customer Service
Any Other (Please Specify)
___________________________________

6. Mark on a scale of -3 to +3 your perceptions about your shopping

experience in the following retail chains (where -3 indicates inferior
and + 3 indicates superior) :

Feature Big Vishal Westside Shoppers Piramyd

Bazaar Megamart Stop

Ambience
Attractive Prices
Range of Choices
Price Discounts
Freebies
Salespeople
Behaviour

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Parking Facilities
Convenience
Home Delivery

7. Which products do you normally buy from retail chains?

_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________

8. Which products do you normally buy from your local grocery store?

_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________

9. Which products do you normally buy from your chemist shop?

_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________

10.Why do you like to buy from local grocery store?

_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________

11.Why do you like to buy from chemist shops?

_______________________________________
_______________________________________
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 _______________________________________
_______________________________________
_______________________________________

12.How much time do you spend in the retail chain on every visit?

0-30 Minutes 30-60 Minutes 1-2 Hour 2-3 Hours

3-4 Hours 4-5 Hours <5 Hours

13.The emergence of retail chains will create unemployment problems:

Strongly Agree Agree neither agree nor disagree Disagree

Strongly Disagree

14.The emergence of retail chains will destroy social harmony:

Strongly Agree Agree Neither agree nor disagree Disagree

Strongly Disagree

15.The emergence of retail chains will cause monopolistic control over

prices:

Strongly Agree Agree Neither Agree nor disagree Disagree

Strongly Disagree

16. FDI in Retail Sector will contribute to the Growth Momentum:

Strongly Agree Agree Neither Agree nor disagree Disagree

Strongly Disagree.

Demographics

1. Name:
______________________________________________________

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2. Age: 15-20 20-30 30-40
40-50 50 & above

3. Occupation: Student Govt. Employee Private Employee

Businessman Any other (Please specify)
_______________

4. Income group: 5k-10k 10k-20k 20k-30k 30k-40k

40k-50k 50k & above

5. Education: Student Graduate Post-Graduate

MBA Any other (Pls specify)
___________________

6. Number of Family Dependants: Nil One Two Five

Any other (Pls specify)

7. Telephone Number / E-
mail:___________________________________________

________________________________ Thank
You______________________________

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 References:

Web Sites and Search Engines

• www.indiabiznews.com
• www.fashion2fibre.com
• www.indiainfoline.com
• www.equitymaster.com
• www.economywatch.com
• www.google.com
• www.rediff.com
• www.ibef.org

Newspapers

• The Times Of India

• The Indian Express
• The Economic Times
• Financial Express
• Business Standard
• Business Line

Books and Magazines

• Business World
• The Indian Dream
• Business & Economy

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