Retailing Scenario

The time line of Indian economy resembles a chain reaction. Maybe it’s not just one reaction;
but a combination of fissions and fusions. It started the IT&ITES boom, then Manufacturing
boom, followed by the retail boom, now the rupee boom and finally retail boom. India has
really gone all guns blazing.

Is it true?

According to the CEO of Retailer’s Association of India-“India will be among the top five economies
in the world by 2025 and no marketer can afford to miss out on the India opportunity”.

According to the CII & Morgan Stanley report:

Today, Indian retail market is worth Rs 10,00,000 crores ($235 billion) in which only 90,000
crores ($21 billion) is organized sector nearly 8.9% in worth but market size of its
(organized retail sector is 3%).”
In next 2 years growth rate of ROS (retail organized sector) will be nearly 20%.
2 million direct jobs in the next two years.
20 per cent of organized retail employees would become tax-payers.
More than 50 per cent of the total employees in modern retail would be women.
Retail contributes 30% in GDP.
Retail categories:
Fruit & groceries (F&G) i.e. reliance retail,
food World, Food bazaar etc
Health & Beauty products i.e. VLCC etc
Clothing & footwear i.e. Levi’s,
Spykars,Liberty, BATA, WoodLANDS etc
Home furniture & household goods
Durable goods & Leisure &
Personal goods.
Food &Groceries (F&G) Retailing:

Fast, Growing, Revitalizing India’s tail (dead/lost) business sector: Agriculture

“I no longer buy fruits & vegetables from street, when it is available at cheaper price with
excellent ambience- with ACs, attractively shelved wares & half dozen uniformed assistants to
attend on customers, specially now when temperature is scorching,”. Customer (50, Delhi)

According to the Indian retail report 2007, F&G business offers a beguiling prospect & estimates
that retail pie was worth Rs 12 lac crores in 2006 with F&G accounting for 63% share.

According to CRISIL report, F&G share in retail was 74% in 2006. However, F&G accounts for a
meager 18% of total ORS (organized retail sector).

India is second largest producer of fruits & vegetables (15% & 14% respectively) after china -
34%.

The growth trend of following horticultural crops in India shows that F&G retail is not a fad. It’s
a positive symbol for Indian farmers & agriculture industry which was dragging with only 2-4%
growth in last years.

200 Big Switch over

150

production(in fruits
100
mn tonnes) Vegetables

50 Spices
Flowers
0 Total

years
source:national horiculture board
New INDIAN entrants in F&G retail are:

……………….

Bharti Group: According to Rajan Mittal; Company’s underlying philosophy is to link Indian
farm to the world “by creating first global outsourcing opportunity in fresh produce”. Company
tied up with PAU (Punjab Agricultural University) for experimenting exotic vegetables destined
for the EU market. Company is going to promote the drip irrigation method to save the wastage
of water because in future it (water) will become a nightmare.

Reliance retail: Company plans to enter into agri-horticulture and the processed food sector.
Conceptually, the company is creating a virtuous circle of prosperity by bringing farmers and
consumers together in a win-win partnership. Company also entered into dairy sector and there
will be three variants of milk available: family milk, low fat and whole milk. Company launched
its liquid milk (family milk segment) in Hyderabad its favorite testing market as national ‘pilot’
launch.

Lots of initiative has to be taken to promote public-private partnerships as they ensure efficient
resource utilization and better management practices. There are many examples of successful
public-private partnerships.

Safal market in Karnataka is an instance of the modernization of wholesale markets. ITC's e-

Chaupal, Haryali Kisan Bazaar, Mahindra Subh Labh, Cargil Farmgate Business and Tata Kisan
Sansar, Godrej Agrovet has tactfully used its marketing experience in rural areas by opening
advice centers called “Aadhar” are all initiatives of marketing distribution in the PPP format.

Agriculture ministry has taken cursory interest in this sector & set up the national horticulture
mission to give a needed thrust to “Farm-to-fork-model”.

Factors responsible for F&G boom:

 Growing consumer base: Current consumer base is 217m people, 27% of population,
equivalent to US population, by 2013 another 200mn will add in this productive
population bracket.
 High Disposable Income & Urbanization.
 Middle class dwelling revamped & hectic environment etc
 New technological Innovations i.e. credit cards, Debit cards, online payments etc
 One stop shopping

Challenges:
 High cost logistics
 Infrastructure & power supply
 Wastage of fresh produce: nearly 30% of produce is lost due to poor logistics during
transportation; which affects the prices of F&G & bear by the customers
 Protest of local vendors & retailers.

Opportunities:
 For Warehouse owner & logistics companies
 Huge job opportunity
 Famers will be highly benefited. E.g. Dharampuri village (Tamil nadu).
 For Automobile companies
 For Real estate companies
Compiled by: M.P.Singh(ICFAI Business School, Hyd)
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