18270838 project on growth of retail sector in india

8/8/2019 18270838 Project on Growth of Retail Sector in India

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TABL E OF CONTENTS

1. Industry Overview

05

2. Organized Retail Sector10

3. Origin of retail13

4. Indian Retail Industry18

5. Retailing Formats in India23

6. Specialty stores25

7. Major Industry Players33

8. The growth Drivers44

9. Swot of the Market51

10. Challenges55

11. Location Planning58

12. Competitor Analysis65

13. Future Outlook68

14. Merger and Acquisition70


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Growth of Retail Sector in India

15. Technology in retail75

16. Government initiatives and regulation79

17. Research methodology83

18. Research analysis86

19. Conclusion89

20. Consumer survey questionnaire90

21. References94

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IndustryOverview

Indus tr y anal ysis of the Indian retail sector:

Modern retailing has entered India in form of malls and hugecomplexes offering shopping, entertainment, leisure to the consumeras the retailers experiment with a variety of formats, fromdiscount stores to supermarkets to hypermarkets to specialtychains. However, kiranas still continue to score over modernformats mostly due to the convenience factor i.e. near to their house.

This organized segment typically comprises of a large number

of retailers, greater enforcement of taxation mechanisms andbetter labour law monitoring system. It's no longer about juststocking and selling but about efficient supply chainmanagement, developing vendor relationship quality customerservice, efficient merchandising and even the labour class is alsoin the working process timely promotional campaigns. Themodern retail formats are encouraging development of well-established and efficient supply chains in each segment ensuringefficient movement of goods from farms to kitchens, which willresult in huge savings for the farmers as well as for the nation. Thegovernment also stands to gain through more efficient collectionof tax revenues. Network marketing has been

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are emerging as retail hubs for large chain stores like PantaloonRetail because many small cities like Nagpur have a studentpopulation, lower real estate costs, fewer power cuts and lowerlevels 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 forthe market to grow in modern retail, it is necessary that steps aretaken for rewriting laws, restructuring the tax regime, accessing anddeveloping new skills and investing significantly in India.

India is rated as the mo s t attract iv e retail markets

Country

CountryRisk

MarketAttractiveness

MarketSaturation

TimePressure Ran

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

IndiasRank 24th 14th 1st 7th 1st

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Socio demographic f actors w i ll lead tofastergrowth of Organiz e d reta i l in India:

100%9% 9% 10% 11% 12%

80%

60%

40%

20%

19%

25%

47%

19%

24%

47%

20%

24%

45%

22% 23%

26% 27%

42% 39%

0%

1991 1996 2001 2006 2010E

0-19 Yrs 20-34 Yrs 35-54 Yrs 55+ Yrs

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Entertainment Durable

Pharma

2%1%

Home

3%

Food & Grocery

14%

10%

Clothing and

Textile

36%

Health & Beauty1%

Books, Music &

Gifts

3%Watch &

Jewellery

17%

Footwear

13%

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ORGANIZEDRETAIL

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Emerging Retail Markets:

India, Russia, China and Vietnam top the list of the most attractiveemerging markets for retailers' investment in 2007, While India andRussia have held the top two spots since 2004, China'sbooming consumer spending, together with retailers moving intosecond-tier cities, helped it rise to No. 3 from its No. 5 spot last

year, according to the 2007 Global Retail Development Indexfrom management consultant firm A.T. Kearney.

The study based its results on four variables: 'countryrisk', measuring political risk, debt and credit

ratings; 'market attractiveness', encompassing retailsales per capita, population, infrastructure and regulations;'market saturation'; and 'time pressure'.

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

"If you want to be an international player in retail, these are themarkets that demonstrate the characteristics (where) you can besuccessful," said Laura Gurski, a co-author of the study and partnerin 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 toset up a joint venture for a cash-and-carry business. In India, foreignmultiple-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 retailinvestment and development," the report said. "Once India's window

closes for grocery retailers, there will be little opportunity for marketdomination in the main cities."

The country's growing population of young urban professionals withdisposable incomes and the nouveau riche has also made Indiaattractive for luxury retailers. India has attracted "the low end and thehigh end because of the breadth of the consumer segments that areavailable," said Gurski.

When variables stay constant, Gurski said, do-it-yourself, appareland electronics retailers usually enter emerging markets some twoyears after international grocers establish themselves. MiddleEastern countries are also represented on the list, with Saudi Arabia

ranking No. 10

India has emerged as the world's most attractive destination formass merchant and food retailing, maintaining its 2005 position in anannual study of retail investment attractiveness among 30 emergingmarkets.

India was given the top ranking in management consulting companyAT Kearney's 2006 Global Retail Development Index (GRDI). "TheIndian retail market is gradually but surely opening up, while China's

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market becomes increasingly saturated," said Fadi Farra, a principalin AT Kearney's Consumer Industries and Retail Practice and leaderof the GRDI study. Much to the surprise of market observers, Chinawas ranked fifth in this year's tally, declining one more place since2005. While China remains very attractive, the market is becomingincreasingly saturate as and United Arab Emirates No. 18. Gap Incannounced last week it had struck a deal with two franchisees toopen Gap stores in Saudi Arabia starting at the end of this year.Dubai has capitalized on consumer desire for a more Westernlifestyle and has established itself as a retail mecca, Gurski said.Despite its focus on luxury, Dubai is "just beginning to be populatedby the bread-and-butter retailers of the United States and theWestern world," she said. Retailers that have already established apresence in major Chinese cities like Shanghai and Beijing, or thosethat have been slow to gain a foothold there, are now looking at lessdeveloped markets in second-tier cities, the study found. "If themarkets 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 smallermarkets 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 marketshare, the study reveals. According to the study, Asia with a large 40per 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 ofcompetitive advantage for global and regional retailers in theglobalization race. Knowing when to enter emerging retail markets isthe 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, Aftertopping the ranking for two consecutive years in 2003 and 2004,

Russia slipped to second place behind India last year and remainedthere in 2006 too.

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Origin of RetailSector

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Early Trade:

When man started to cultivate and harvest the land, he wouldoccasionally find himself with a surplus of goods. Once the needs ofhis family and local community were met, he would attempt to tradehis goods for different goods produced elsewhere. Thusmarkets were formed. These early efforts to swap goods developedinto more formal gatherings. When a producer who had a surpluscould not find another producer with suitable products to swap,he may have allowed others to owe him goods. Thus early creditterms would have been developed. This would have led to symbolicrepresentations of such debts in the form of valuable items (suchas gemstones or beads), and eventually money.

HOW RETAI L DEVELOPED:

Peddlers and

Producer s :

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

General Store:

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This division continues to this day with some shops specializingin specific areas, reflecting their origins as outlets for producers(such as Pacific Concord of Hong Kong), and others providing abroad mix, known as General Store (such as Casey's in theMidwest of the U.S.A.).Although specialist shops are still with us, over time, thegeneral store has increasingly taken on specialist products.Customers have found this to be more convenient than having tovisit many shops - thus the term "Convenience Store" has alsobeen applied to these shops. As the popularity of general storeshas grown, so has their size. This combined with the advent ofSelf-Service has lead to the Supermarket, or Superstore.

Earl y Markets:

Over time, producers would have seen value in deliberately over-producing in order to profit from selling these goods. Merchantswould also have begun to appear. They would travel from village tovillage, purchasing these goods and selling them for a profit. Overtime, both producers and merchants, would regularly take theirgoods to one selling place in the centre of the community. Thus,

regular markets appeared.The First Shop : Eventually, marketswould become permanent fixtures i.e. shops. These shops along withthe logistics required to get the goods to them were, the start of theRetail Trade.

The Birth of Distance Retail ing:

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

When individuals or groups left their community and settledelsewhere, some missed foodstuffs and other goods that were onlyavailable in their birthplace. They arranged for some of these goodsto be sent to them. Others in their newly adopted community enjoyedthese goods and demand grew. Similarly, new settlersdiscovered goods in their new surroundings that they dispatchedback to their birthplace, and once again, demand grew. This soonturned into a regular trade. Although such trading routes expandedmainly through the growth of traveling salesmen and thenwholesalers, there were still instances where individuals purchasedgoods at long distance for their own use. A second reason thatdistance selling increased was through war. As armies marchedthrough territories, they laid down communication lines stretching

from their home base to the front. As well as garnering goodsfrom whichever locality they found themselves in, they wouldhave also taken advantage of the lines of communication to ordergoods from home.

Origins of Retail

It is likely that, as markets became more permanent fixturesthey evolved into shops. Although advantageous in manyrespects, this removed the mobility that a peddler or travelingmerchant may still have enjoyed. For some shopkeepers, it madesense to obtain extra stock and open up another shop, mostprobably operated by another


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family member. This would recover business from peddlers andcreate new business and the greater volume would allowthe shopkeeper to strike a better deal with suppliers. Thus theretail chain would have started. Its thought that this process wouldhave started in china over 2200 years ago with a chain of shopsowned by a trader called Lo Kass.

T h e F irst Self-Se r vice Store:

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

Growt h:

This new type of shopping was more efficient and many customerspreferred it. Although personal service stores remain to this day,this new concept started a rapid growth of self-service stores inthe 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.

Efficienc y

These entrepreneurs noticed that their staff had to spend agreat deal of time taking grocery orders from customers. Thegroceries were stacked on shelves allowing customers to walkaround and browse, collecting their shopping in a basket that wassupplied. The shopkeeper would only need to tot up the final bill atthe end of the process and transfer the goods from the basket to

the customer and receive payment.

From Fami l y Business to Formal Structure:

Although retail chains would have been mostly run by families, assome chains grew, they would have needed to employ people fromoutside of their family. This was a limiting factor as there would havebeen a limit to the amount of trusted non family members available tohelp run the chain. Another, even more definite limiting factor was thedistance the furthest shop would have been from the original shop.The greater the distance, the more time and effort would have beenneeded to effectively manage outpost shops and to service them withgoods. There was, therefore, a natural barrier to expansion. That

was the case until transport and communications became faster andmore reliable. When this happened towards the end of the 19thcentury, chains became much bigger and more widespread. Many ofthese businesses became more structured and formalized, leading tothe retail chain that we see today.

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I n dian RetailIn dustry

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U NORG ANISE D RE TAIL SECTO R:

Today, retailing doesnt involve just dealing or marketing from shops,it includes analyzing the market in an effort to providereasonable prices together with an array of options and experience tocustomers. The sole purpose of all this is retaining thebrand loyalty of customers. Indian retail is currently a US$ 245billion market and is anticipated to extend to almost US$ 385 billionmark by the next five years. The Indian retail sector is currentlysporting a brand new look and together with a 46.64 per centthree-year Compounded Annual Growth Rate (CAGR), Conventionalmarketplaces are paving way for new shopping malls, the likes ofsuperstores, shopping plazas, supermarkets and brand labelstores. International style shopping centers have started dottingthe skyline of cities and smaller towns, acquainting the Indiancustomer to a unique shopping experience. The retail industry inIndia is split up into the unorganized and organized retailsegments.

The unorganized retail sector includes the big, average and modestgrocery stores and the chemist shops. A changeover is taking placefrom the conventional retail sector to organized retailing. But theunorganized segment still dominates and leads the industry. By2010, the Indian retailing sector is anticipated to become an Rs12.5trillion market. The share of organized retailing is supposed to jumpto about 10 per cent from the existing three per cent. The anticipatedstaggering growth in organized retailing provides an opportunityto expand the market for both established and new players.According to the latest report India Retail Sector Analysis(200607)I by RNCOS, the total retail market is primarily focused

in rural regions, which makes up 55 per cent or US$ 165 billion ofthe overall retail market as opposed to urban segment, whichrepresents 45 per cent or US$ 135 billion of the gross retail market.The rural market is spread over 627,000 villages, even though itscentre of attention is focused around a core group of 100,000villages that makes up 50 per cent of the rural population.

India represents the most compelling international investmentopportunity for mass merchant and food retailers looking to expandoverseas, according to management consulting firm ATKearney's2005 Global Retail Development Index (GRDI), an annual studyof retail investment attractiveness among 30 emerging markets.

India is rated as the fifth largest emerging retail market and isseen as a potential goldmine. Driving global brands into India isthe greatly improved investment climate due to the recentrelaxation of direct ownership restrictions on foreign retailers. Thecountry's retail market totals $330 billion, is vastly underservedand has grown by 10 per cent on an average over the past fiveyears. The message for retailers on India is clear move now orforego prime locations and market positions that will soon becomesaturated. Global retailers that missed opportunities to capturefirst-mover advantage in China will make up for it in India.


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Though India has more than five million retail outlets, they are greatlyunorganized. There is no supply chain management perspective. Infact, out of the entire retail sector in India, the organized sectoris only 25 per cent and the rest is unorganized. 96 per cent of theretail outlets are smaller in area than the standard norms. Theretail industry is divided into organized and unorganizedsectors. Organized retailing refers to trading activities undertaken bylicensed retailers who are registered for sales tax and income

tax. These include corporate backed hypermarket and retail chainsand so on. Unorganized retailing is the traditional low-cost shops,handcarts and pavements and is by far the prevalent form oftrade in India. The efficiency of organized sector in retailing ismanifested in some of the newer supermarkets inurban/metropolitan India the produce is cleaner, fresher, wellpacked and often cheaper than the local shopkeeper. This ispossible because of the far more efficient distribution system,which organized retail chains are employing, by cutting the layersof middlemen involved. There are other benefits too, oftransforming the unorganized retail sector into an organized sector.Firstly, a number of new jobs will be created, far better paid thanthe underage labor working in the local shops. Secondly, thebenefits to the producer and consumer through better prices

and lesser wastage; throwing up exportable surpluses, which willalso benefit the economy as a whole. Thus one can see thatallowing FDI in retailing is beneficial to all the stakeholders involved

The Big Bazaars and Spencers, the huge unorganized retail sectoris finally beginning to see the merit of logging on, even if at a modelscale.

Taxation policies also push you to automate and the push is

even harder for those looking to expand beyond their singlestore existence.

Though its early days yet to measure it penetration inthe unorganized retail industry, interest levels are surely raising fast.Its good to at least answer their questions. Though the interest ismore with retailers who register good sales and volumes.

Software available to the retailers is ShawMans RetailMagiK, whichtakes care of the front-end store needs, as well as the back-end warehouse requirements. It would surely help theunorganized sector to get into technologies like bar-coding, whichwill make their operations more efficient. Some other features are

a user-defined billing screen and discount with control mechanismfrom the head- office, delivery order management, batchcontrol and quick information search, among others. Theproduct is a simple to use. The screen design and the functionalityare designed in such a way that the user need not press too manykeys to get things done, says Khushroo Bagwadia, businessdevelopment manager, Shawman Software.

To begin with, most retailers look at decent entry-level solutionsstarting at Rs 25,000. However, there are cheaper quick-fix solutionsavailable too. One can even deploy a computer and start with


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financial accounting programmers like Microsoft Excel, FoxProandTally.

Small retailers seem next in line and vendors are also warming up tothe opportunity. At the low-end however, smart inexpensive

solutions are the need of the hour. And solutions providers likeMicrosoft, Polaris and Shawman are now working on developingsmart tools for the retail enthusiasts. For small players with justone store, the investment on retail solutions go really low,anywhere between Rs10,000 to Rs 25,000. Most of the time these solutions are developedby local firms, who at times compete with the big names inthe industry.

According to Oberoi of Polaris, generally the mom-and-popstores like to go for technology, which will get their workdone at a reasonable cost. They avoid the high-end technology,and consider these as frills. They are not even bothered aboutupgrading, 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 inventoryand supply chain management, he says.

Comparing the case with China, Vedamani suggests India is on theright track. In China, we find the organized sector to be 20-23% ofthe total industry. Here, the technology has advanced in phases, andso is the case in India.

Format Description The Value Proposition

Branded StoresExclusive showrooms either owned or franchised outby a manufacturer.

Complete range available fora g iven brand, certified productquality

SpecialtyStores

Focus on a specific consumer need, carry mostof the brands available

Greater choice to the consumer,comparison between brandsis possible


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DepartmentStores

Large stores having a wide variety of products,organized into different departments suchas clothing, house wares, furniture, appliances,toys, etc.

One stop shop catering to varied/consumer needs.


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Supermarkets Extremely large self-service retail outletsOne stop shop catering to variedconsumer needs

Discount StoresStores offering discounts on the retail price throughselling high volumes and reaping economiesof scale

Low Prices

Hyper- mart

Larger than a supermarket, sometimes with a

warehouse appearance, generally located in quieterparts of the city

Low prices, vast choice available

including services such ascafeterias.

Conveniencestores

Small self-service formats located in crowded urbanareas.

Convenient location and extendedoperating hours.

Shopping MallsEnclosure having different formats of in-

store retailers, all under one roof.Variety of shops available toeach other.

Formats adopted by the R e tailP l aye r s i n INDIA.


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Retailer Original formats Later Formats

RPG Retail Supermarket (Foodworld) Hypermarket (Spencer's)Specialty Store (Health and Glow)

Piramal's Department Store (Piramyd Discount Store (TruMart)

Pantaloon RetailSmall format outlets (Shoppe)Department Store (Pantaloon)

Supermarket(FoodBAZAR)Hypermarket (Big Bazaar) Mall (Central)

K Raheja GroupDepartment Store (shopper'sstop)Specialty Store (Crossword)

SupermarketHypermarket (TBA)

Tata/ Trent Department Store (Westside) Hypermarket (Star India Bazaar)

Landmark

Group

Department Store (Lifestyle) Hypermarket (TBA)

Others Discount Store (Subhiksha, Margin Free, Apna Bazaar), Supermarket (Nilgiri's), Specialty Electronics

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Megastore)


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Retailing form a tsin India

1.Mal ls:

The largest form of organized retailing today. Locatedmainly in metro cities, in proximity to urban outskirts. Ranges from


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60,000 sq ft to 7,00,000 sq ft and above. They lend an idealshopping experience with an amalgamation of product, service andentertainment, all under a common roof. Examples includeShoppers Stop, Pyramid, Pantaloon.

2. Specialt y Stores:

Chains such as the Bangalore based Kids Kemp, theMumbai books retailer Crossword, RPG's Music World and the TimesGroup's music chain Planet M, are focusing on specific marketsegments and have established themselves strongly in their sectors.

3. Discount Stores:

As the name suggests, discount stores or factoryoutlets, offer discounts on the MRP through selling in bulkreaching economies of scale or excess stock left over atthe season. The product category can range from avariety of perishable/ non perishable goods.

4. Department Stores:

Large stores ranging from 20000-50000 sq. ft, cateringto a variety of consumer needs. Further classified into localizeddepartments such as clothing, toys, home, groceries, etc

5. Department Stores:

Departmental Stores are expected to take over the apparelbusiness from exclusive brand showrooms. Among these, thebiggest success is K Raheja's Shoppers Stop, which started inMumbai 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 calledStop!.

6. H ypermarts/Supermarkets:

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

7. Convenience Stores:

These are relatively small stores 400-2,000 sq. feet locatednear residential areas. They stock a limited range of high-turnover convenience products and are usually open forextended periods during the day, seven days a week. Prices areslightly higher due to the convenience premium.


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8. MBO s :

Multi Brand outlets, also known as Category Killers, offerseveral brands across a single product category. These usuallydo well in busy market places and Metros.

S P ECIALI T YSTORES

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Fo od retail :

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

The mobile re vol uti on:

The retail market for mobile phones -- handset, airtimeand accessories -- is already a US$ 16.7 billion business, growing atover20 per cent per year. In comparison, the consumer electronics andappliance market is worth US$ 5.6 billion, with a growth rate that ishalf of the mobile market.

Kids r etai l :

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. 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 parksdesigned around its channels--in the National CapitalRegion.

Sahara One Television has also signed a Memorandumof Understanding to source content from SpacetoonMedia Group, Middle East's largest kids' entertainmentbrand for animation and live action content.

Leading the kids' retail revolution is the apparel business, whichaccounts for almost 80 per cent of the revenue, with kids' clothing inIndia following international fashion trends. According toresearch


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firm KSA Technopak, the branded segment comprises US$701.7 million of the total kids' apparel market-size of over US$ 3billion.

Industry experts say kids' retailing will touch annual growth of 30-35per cent. Toys, stationary, sportswear, outerwear, tailoredclothing, eyewear, watches, fragrance, footwear, theme parks, TVchannels the segment is growing rapidly at 10 per cent perannum. Margins are in the range of 20-25 per cent (for dealers anddistributors), while companies enjoy an average gross margin ofabout 10 per cent.

Ag r i cult ural retail:

Agriculture across India is heralding the country's second GreenRevolution. 14 states, including Maharashtra, Punjab, AndhraPradesh and Rajasthan amended the Agricultural Produce MarketingCommittee (APMC) act this year, along the lines of the Model APMCAct, '02, which allows farmers to sell their produce directly to buyersoffering them the best price.

Agricultural sectors such as horticulture, floriculture, development ofseeds, animal husbandry, pisciculture, aqua culture, cultivationof vegetables, mushroom under cultivated conditions andservices related to agro and allied sectors are open to 100 percent FDI through the automatic route.For its e-Choupal scheme, ITC built internet kiosks in rural villagesso farmers can access latest information on weather, current marketprices, 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 severalthousand acres in Punjab, West Bengal and Maharashtra.

FieldFresh, planning to become India's first large-scale exporter ofproduce, will annually pay farmers over US$ 30,000 to lease landfor vegetables, to hire tractors and to pay their workers.

Besides a five-year program with the Punjab government to provideseveral hundred farmers with four million sweet-orange trees for itsTropicana juices by 2008, PepsiCo--with agriculture exportsworth US$ 40 million--also introduced farmers to high-yieldingbasmati rice, mangoes, potatoes, chilies, peanuts, and barley forits Frito-Lay snacks.

Export potential and a rapidly growing domestic demand for reliableproduce from new supermarket chains is driving change. With 77 percent of India's population relying on agriculture for a living, improved

efficiency and new markets can benefit a large number of people.

Internati onal retailers :

The Australian government's National Food Industry Strategyand Austrade initiated a test marketing food retail in Indiawherein 12 major Australian food producers have tied up withIndia-based distributor AB Mauri to sell their products directly at retailoutlets.The largest-ever 150-member British business delegation inIndia committed investments in the areas of food processing, agriretail


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and manufacturing. It is also likely to press for the liberalisationof sectors like financial & legal services and retail.

US-based home delivery and logistics company, SpecialisedTransportation Inc, will enter the Indian market through astrategic alliance with Patel Retail, a subsidiary of Patel IntegratedLogistics. Among other big international players, Wal-Mart hasannounced its plans for India in partnership with Bharti, Tesco issure to try again, and Carrefour too might finally find the rightpartner.

Supermarkets:

Large self service outlets, catering to varied shopper needs aretermed as Supermarkets. These are located in or nearresidential high streets. These stores today contribute to 30% ofall food & grocery organized retail sales. Super Markets canfurther be classified in to mini supermarkets typically 1,000 sq ft to2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to5,000 sq ft. having a strong focus on food & grocery and personalsales.

Supermarkets are relatively new entrants in the market. They are socalled pioneers in organized food retailing and go by thewestern model in look and feel and format. This is whateverybody means when they say organized food retailing.

Franchise outlets:

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Like Tommy Hilfiger and Wal Mart, other US retailers are firming uptheir India entry strategies and if they are already in, they areundergoing rapid expansion. Fashion brands DKNY is also al set toforay into the Indian fashion Industry through a franchiseeagreement with Indian company, S. Kumar Starbucks recentlyexpressed 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 areundergoing rapid expansion. Fashion brand DKNY is also all set toforay into the Indian fashion Industry through a franchisee agreementwith Indian company, S Kumars.Starbucks recently expressed theirinterest in entering India through the franchise route, like theirAmericanF&B counterparts Pizza Hut, Subway, and the verysuccessful McDonalds. McDonalds has major expansion plans linedup; in the next 3 years, it plans to open another 100 outletsin cities across India.

H ypermarket:

A very large commercial establishment that is a combination ofdepartmental store and a supermarket.The specific features of a hypermarket are the wide range of goodsoffered, quality service, quality display of goods on the shelves andcomplex systems providing for customers loyalty.

Hypermarket is known for a wide range of goods offered. It consist ofdozens of thousands of items, while similar goods can be offered inseveral forms. In order to work with such an assortment it isnecessary to group it into categories and sub categories that wouldunite goods according to this or that criteria.

Sho pping Malls:

The new shopping malls that have been expanding theirfootprint across Indian cities are well designed, built oninternational formats of retailing and integrated withentertainment and restaurants to provide a complete familyexperience. Over 300 malls are expected to be built over the nexttwo years and most Indian cities with over a million populations willbe exposed to this modern method of retailing.

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

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The present day malls are a creation of the past few yearspost2000. They are designed professionally using a lot ofinternational experience and combine shopping with a lot ofbrand building, recreation, food and entertainment. Malls alsohave a large format store that serves as their anchor for

shopping and a prominent restaurant that anchors the foodneeds of visitors. Most malls also feature a multiplex cinema thatoffers entertainment to the visitors of the mall. Finally the mall haslarge atria and open spaces to allow visitors and families to hang-out.

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Organ i z ed R e tail

Sect o r


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Product Segments:

The organized retail business in India is very small. This is despitethe fact that India is one of the biggest markets. Retail

business contributes around 10-11 per cent of GDP. India also hasthe largest number of retailers, about 12 million, though they aremostly small. Most of the organized retailing in the countryhas just started recently, and has been concentrated mainly inthe metro cities. Organized retailing in India has a huge scopebecause of the vast market and the growing consciousness ofthe consumer about product quality and services. Organized retailonly accounts for 3% of the total retail industry as yet and isestimated to grow to $64 billion by the year 2015. As a result, theretailing space in the country will also rise by 15-20% by 2010. 50million sq ft of quality space under development 7 major cities toaccount for 41 million sq ft development 300 malls, shoppingcentre and multiplexes under construction To open 35hypermarkets, 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 togrow at much faster speed than unorganized sector and thehigher growth speed will alone be responsible for its higher marketshare which has been projected for $17 billion by 2010-11. Citiesand metropolis in which retailing will show booming prospectsinclude Mumbai, Delhi, Chennai, Kolkata, Bangalore and Kanpur,said Agarwal adding that the popular mode adopted for buildingshopping malls in these cities will be based on build, operate, leaseand 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 1,690,000crores (USD 375 billion) of which, retail sales constitute about 61%(USD 230 billion).In terms of penetration by the organized retailsector, footwear is the highest category, followed byclothing. Footwear is driven by the dominance of home grownplayers like Liberty as well as the 15% market share that MNCretailer Bata Commands. Foreign Presence, especially throughthe franchisee route, e.g. Adidas, Reebok, Nike etc. adds to thisslice of the pie. Franchisee activity in this category, especially inTier II Cities, is pegged to rise.

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Organized R e t ail E s tim a ted Growth i n

2004 2009 CAGR (%)

Large Segments 1,924 5,024 21%

Other Segments 1,315 2,645 15%

Non-storeRetailing

239 422 12%

Total Organizedretail

3,478 8,091 18%

The Four Large Segmen t s:

Food-Chain Stores-Single LargeStores

39132665

1,6241,462162

33%35%20%

Clothing-Manufacturerretailers-Chain stores-Single LargeStores

1,075293315467

2,266590852824

16%15%22%12%

Consumerdurables- Manufacturer retailers-Chain stores-Single LargeStores

35914198120

822284298240

18%15%25%15%

Book and Music-Chain Stores

-Single LargeStores

9754

43

310202

108

26%30%

20%


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Retail is amongst the fastest growing sectors in thecountry. Indiaranks First, ahead of Russia, in terms of emergingmarkets potential in retail and is deemed a Prioritymarket for International retail.

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Major Indu s tryPlayers

Nanz in North India, Nilgiris in the South, Pantaloon in the East andCrossroad in the West were the pioneers of the retail revolutionin India. Nanz faced several obstacles in their business and hadto 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 formthe Future Group, that is now omnipresent in almost all formats rightfrom small groceries to e-tailing. Crossroads in Mumbai impartedsome valuable lessons to their parent, the Piramyd Group, who hassince then gone on an expansion drive with other formats ofretailing in different cities.


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

1 The Future Group

The Future Group, which was earlier known as PRIL(PantaloonRetail India Limited) began as a trouser manufacturer in themid1980s. The Future Group is divided into six verticals Future Retail,Future Capital, Future Brands, Future Space, Future Media andFuture Logistics. The Future Group started operations in themid1987s by incorporating the company as Manz Wear Private Limited.The company went on to manufacture ready made trousersunder 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 mens store called Pantaloon Shoppewas inaugurated in 1992. Pantaloons went for a franchiseeroute to expand the number of retail outlets and by 1995, it hadreached to a crucial number of 70. The first departmental storecalled Pantaloons was opened in Kolkata in 1997 with aninvestment of Rs 0.7 million. The store was a success andrecorded revenues of Rs 100 million within the first year ofoperations. In 1999, the companys name was changed to PantaloonRetail (India) Limited (PRIL).

The success of Pantaloons departmental stores encouraged PRIL to

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

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


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Shoppers Stops customer loyalty program is called The FirstCitizen. The program offers its members an opportunity tocollect points and avail of innumerable special benefits. Currently,Shoppers Stop has a database of over 2.5 lakh members whocontribute to nearly 50% of the total sales of Shoppers Stop.

The Organisation, in 2000, along with ICICI ventures also acquiredthe reputed bookstore, Crossword, which offers the widest range ofbooks along with CD-ROM, music, stationery and toys. Services likeDial-a-book, Fax-a-book and Email-a-book enable customers to shopfrom their homes. Crossword currently has 18 Stores.

Realising the role of IT way back in 1991, Shoppers Stop wasamong the first few retailers to use scanners and barcodes andcompletely computerise its operations. Today it is one of thefew stores in India to have retail ERP in place, which is nowbeing integrated with Oracle Financials and the Arthur PlanningSystem, the best retail planning system in the world. With the help ofthe ERP, they are able to replicate stores, open new storesfaster and get information about merchandise and customersonline, which reduces the turnaround time in taking quick decision.

Shoppers Stop has been very keen to understand the importance ofdistribution and logistics in ensuring that merchandise is available onthe shop floors. This has led the retail chain o streamline its supplychain. The company has developed process manuals for each part ofthe logistics chain. These modules include vendor management,purchase order management, stock receiving systems, purchaseverification and inventory build up, generation and fixing of price andstore tags, dispatch of stocks to the retail floor and forwarding of billsfor payment.

Shoppers Stop has a grand ambition to position itself as aglobal retailer. The company intends to bring the worldsbest retail technology, retail practices and sales to India.

Currently, they are adding 4 to 5 new stores every year.

3 Trent Westside

Established in 1998, Trent operates some of the nation's largest andfastest growing retail store chains. A beginning was made in1998 with Westside, a lifestyle retail chain, which was followed up in2004 with Star India Bazaar, a hypermarket with a largeassortment of products at the lowest prices. In 2005, it acquiredLandmark, 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, Landmarkand Star India Bazaar outlets. This amounts to about 27locations, 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 StarIndia Bazaar and books, music and stationery at Landmark.

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Westside has 25 outlets across 17 cities in India offering a variety ofdesigns and styles in garments, footwear and accessories, as tablelinens, artifacts, home accessories and furnishings. Well-designed interiors, sprawling space, prime locations and coffeeshops enhance the customers' shopping experience.

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

Trent has also recently acquired a 76 per cent stake inLandmark, one of the largest books and music retail chains inIndia. Landmark commenced its operations in 1987 with its firststore in Chennai, and now has nine stores in the major metrosof the country. Earlier Landmark was focused on books,stationery and greeting cards. In

1996 it added music to its product portfolio and also started the trendof stocking curios, toys, music, CDs and other gift items.

4. Piramyd

Piramyd Retail is part of the Piramal Group, which has presence indiverse sectors spanning Pharmaceuticals, Textiles, RealEstate, Engineering, Family Entertainment and Retail withmanufacturing operations in 19 locations across five states andemploying over18,000 people.

The promoters launched the apparel business in 1999under Piramyd Retail and Merchandising Pvt. Ltd. (PRMPL) whileits food; home & personal care businesses (FHPC) werehoused under Crossroads Shoppertainment Pvt. Ltd. (CSPL). Asthe apparel and food businesses individually

reached a critical mass themanagement merged the two companies into Piramyd RetailLtd. due to distant synergies in two businesses in March 2005.Pyramid also has a smaller format of stores called TruMart thatcaters to Food and Personal Care products.

Piramyd Retail currently has 5 Mega stores and 8 TruMartstores mainly in Maharashtra . The company plans to increasethese


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numbers to 17 Mega stores and 69 TruMarts by 2008. Thefloor space is expected to be 5 times on successful expansion.

The FHPC (Food & Personal Care) business is volume driven whilethe Lifestyle store is a margin driven business. Piramyd Retail plansto increase the contribution of private labels from existing 7% to 18-20% of the revenues by 2010. Gross margins from private labels areover 40% and hence the company is planning to increase thisbusiness. Most of the stores are on the lease format and thecompany is prone to higher lease rentals due to the overall increasein real estate prices. This may bring the profit levelsdown substantially.

Piramyd Retail did have a first mover advantage in many locationsbut it has actually failed to capitalise over this advantage. Itscompetitors like Pantaloon, Shoppers Stop and Trent gained largerbenefits of their far more aggressive business & marketing strategyin the retail space.

5. Sub iksha

The Chennai based Subiksha grocery chain runs around 200 outletsall over the country and its current turnover stands at Rs 224 crores.Their target customer is the middle income value conscious buyers.The main aim of Subiksha is to offer a functional and transactionalshopping experience. This retail chain has no qualms andspends almost no money on creating a pleasant shoppingexperience, and

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all stores are non-air conditioned. There is no false roofing orsparkling 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 thegoods were billed and delivered after cash is collected.Customers had to bring their own carrybags or pay to buy themfrom the store. Subiksha even attempted to charge the customers forhome delivery.

However, now Subiksha has slightly tweaked their business model inorder to create a better appeal to customers who were defecting tothe competitors. The store formats are still small and non-airconditioned. But customers have the option to pick from shelfspaces. They also get shopping bags and free home delivery. Butthe selling USP(unique selling proposition) remains the same--- Subiksha tries to be as close to the customer as possible andoffers the lowest price and huge savings in comparison tocompetitors. Its slogan happens to be --- bachat mera adhikarhain (saving is my fundamental right).

6. RPG Spencer

RPGs Spencer presently has 125 stores across 25 cities covering aretail trading area of half a million square feet and with a clientele of3 million customers a month. Spencer's has a national footprint withseven hypermarkets, three supermarkets and 70 daily useoutlets, called Dailies.

All the newly opened Spencer's stores stock every conceivableproduct that is required by a household on a daily basis. At Spencer'sDaily shoppers can get fresh fruits, vegetables, fast-moving

consumer goods, household items, groceries, with regular offers anddiscounts.

Spencer's outlets are divided in to three retail formats. Theseare, Spencer's Hyper, the over 25,000-sq ft hypermarkets stockingover25,000 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 ftto7,000-sq ft Spencer's Daily for groceries, fresh food, chilled andfrozen products, bakery and weekly top up shopping.


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7. Reliance Retai l

On June 26, 2006, Mukesh Ambani, Chairman and ManagingDirector, Reliance Industries Limited, announced a Rs 25,000-croreinvestment 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 beselling apparel and footwear, lifestyle and home improvementproducts, electronic goods and farm implements and inputs. They willalso offer products and services in energy, travel, health andentertainment. In addition to this, partnerships would be developedto bring the best of global luxury brands to India as well.

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

Mukesh Ambanis ultimate ambition seems to be to create the Indianequivalent of Wal-Mart by scaling up the business to unprecedentedheights to reach every nook and corner of the country. Withits retailing venture, Reliance expected a revenue target of US$20 billion through its retail operations by 2010. Over a span offive years, RRL expects a 20% return-on-investment.

The first store christened Reliance Fresh opened in November2006 at Hyderabad. Within a few months they have nowopened stores in Mumbai, Pune and Ahmedabad and plans forayinto other cities on a rapid scale.

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8. Bharti Wal-Mart

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

month of August .

Bhartis plan is to invest $2.5 billion by 2015 and open stores acrossall major cities. This investment would be only for setting up front-endstores. The modalities for its back-end linkage, including its jointventure with the world's largest retailer Wal-Mart, are in the processof being worked out.

A high-level team from Wal-Mart was visited India in the later part ofFebruary to work out the details of the back-end chain. While Bhartiwould manage front-end of the retail venture, Wal-Mart wouldbe


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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 andconvenience stores and would provide employment to about 60,000people. The company would open multi-format retail outlets in all

cities with apopulation of about one million. Bharti is now conducting a massiveconsumer survey to take a final decision on branding andpromotional campaign.

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

9. Adit ya Birla MORE

The Aditya Birla Group is India's first truly multinational corporation.Global in vision, rooted in values, the Group is driven bya performance ethic pegged on value creation for itsmultiple stakeholders. A US$ 24 billion conglomerate, with amarket capitalization of US$ 23 billion and in the League of Fortune500, it is anchored by an extraordinary force of 100,000 employeesbelonging to over 25 different nationalities. Over 50 per cent ofits revenues flow from its operations across the world. Our missionis to change the way people shop. We will give them more.says Mr. Kumar Mangalam Birla, Chairman, Aditya Birla Group.The more. for you

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advantage: more. promises a world-class pleasurableshopping experience to Indian consumers in their very ownneighborhood. more. Qualit y ,more. varie t y ,more. c o nvenien c e andmore. value are the four delivery cornerstones of the more. chainof supermarket stores. more.

MORE. Value MORE. promises best in market pricing. Linkingup directly with farmers to source fresh fruits, vegetables andstaples ensure great quality as well as great price. Add tothis, the membership program Club more. which providesconvenience, customized shopping solutions and savings, andthe more. value promise becomes all the more evident.

More. Is an inspirational brand for an inspirational country. We havea bright and committed, enthusiastic team that represents thebest experience from India and globally. MORE. also has arange 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 atcompetitive prices. To avail additional benefits, at no extra charge,customers can also enroll for the membership program Club more.

10.V IS H AL RE T A IL :

Vishal is one of fastest growing retailing groups in India. Its outletscater to almost all price ranges. The showrooms have over70,00 products range which fulfills all your household needs, andcan be catered to under one roof. It is covering about 1282000 sq.ft. in 18 state across India. Each store gives you internationalquality goods and prices hard to match. The cost benefits that isderived from the large central purchase of goods and services ispassed on to the consumer. What started as a humble one storeenterprise in 1986 in Kolkata(erstwhile, Calcutta) is today aconglomerate encompassing

51 showrooms in 39 cities. Indias first hyper-market has also beenopened for the Indian consumer by Vishal. Situated in thenational capital Delhi this store boasts of the singe largest collectionof goods and commodities sold under one roof in India. Thegroups prime focus is on retailing.

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The Vishal stores offer affordable family fashion at prices tosuit every pocket. The groups philosophy is integration and towardsthis end has initiated backward integration in the field of high

fashion by setting up a state of the art manufacturing facility tosupport its retail endeavors. Company has already tied up for 5-lakh sq ft space and is looking for more. Company will come upwith 32 new stores this year. Company is doing research onmore formats. Company is looking for opportunities of expansionin the South. Contribution of apparels business at 53% may slightlycome down to 50%. India is a big country and there is huge spacefor four-five big retail players. Vishal can always sustain growth inthis big market. Company can sustain margins as it is going forbackward integration. Currently manufacturing contributes 10% of thebusiness, which in the next two to three years, will go up to 25%.Company is increasing its focus on the non-apparel and FMCGsegment. The current share of FMCG at15% 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 isnow also focusing on different segments. With growth involumes, 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 apan-India set up.

11. ME TRO CASH & C ARRY INDI A

METRO Group today, is the third largest trading and retailing groupin the world. The company employs over 2,50,000 staff in 30countries. In the year 2005 METRO Group had generated salesof over 55.7 billion; 53% of total sales came from outsideGermany. METRO Cash & Carry started operations in India in2003 with two Distribution Centres in Bangalore. With this METROintroduced the concept of Cash & Carry to India. These Centresoffer the benefit of quality products at the best wholesale priceto over 150,000


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businesses in Bangalore. METRO offers assortment of over18000 articles across food and non food at the best wholesaleprices to business customers such as Hotels, Restaurants,Caterers, Food and Non-food Traders, Institutional buyersand professionals. METRO's Cash & Carry business model isbased on a Business to Business (B2B) concept and focuses onmeeting all the needs and requirements of business customers.It is a modern format of wholesale trading, catering only tobusiness customers.

12. Viveks- The Unlimited Shop

Vivek Limited is a professionally managed public limitedcompany carrying three retail brands - Viveks, Jainsons,Premier and continuously adding to the formidable strength of1000 employees. Vivek Ltd is the largest consumer electronics &home appliances retail chain in India. Viveks popularized severalbrands by creating visibility and have the distinction of beingmarket leaders and trendsetters with continuous support from theprincipal companies. Viveks evolved its strategies to suit the largerscene where there was a stigma attached to borrowing. Very fewhire purchase options were available and hence Viveks started VivekHire Purchase and Leasing Ltd to finance consumer durables, whichenhanced the core retailing business also.Viveks grew from 3 storesto more than 52 stores and turnover increased to over Rs. 350crores (USD 80 million) and also become a public limited companyfrom a family run enterprise. In this process, 14 store Jainsons wasbought over in 1999, 2 store Premier in 2001 and Spencers in 2002and have recently absorbed Spencers into the Premier brand. Withthe liberalization of economy and other changes in the global scene,Viveks streamlined the marketing and advertising activities andshopping ambience was improved.

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THE GROWTHDRIVERS

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Dri vers of Retail Indus tr y

The Demography Dynamics: Approximately 60 per centof

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.

Urbanization: increased urbanization has led tohigher

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 urbanizationhelps a retailer in reaping the economies of scale.

Covering distances has become easier: withincreased

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 GROW TH:

Indian consumers are rapidly evolving and accepting modern formatsoverwhelmingly. Retail Space is no more a constraint forgrowth. 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 alsoforeign investors and private equity players are firming up plansto identify investment opportunities in the Indian retail sector. The

quantum of investments is likely to sky-rocket as the inherentattractiveness of the segment lures more and more investors toearn large profits. Investments into the sector are estimated at INR20 25 billion in the next 2-3 years, and over INR 200 billion by endof 2010.

Stocks in the retail sector are also becoming increasingly attractivefrom an investor's point of view. Successful development ofvalue based concepts as well as development of retail space insmaller cities and towns shall drive the organized retail into the nextlevels of cities. Retailers have responded to this phenomenon byintroducing contemporary retail formats such as hypermarkets and


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supermarkets in the new pockets of growth. Prominent tier-II'cities and towns which are witnessing a pick-up in activityinclude Surat, Lucknow,


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Dehra Dun, Vijaywada, Bhopal, Indore, Vadodara,Coimbatore, Nasik, Bhubaneswar, Varanasi and Ludhiana amongothers.

With consumption in metros already being exploited, manufacturersand retailers of products such as personal computers,mobile phones, automobiles, consumer durables, financial services

etc are increasingly targeting consumers in tier II cities andtowns. In addition, petro-retailing efforts of petroleum giantsscattered through out the country's landscape have also ensuredthat smaller towns are also exposed to modern retailing formats.

On the supply side, mall development activity in the small towns isalso picking up at a rapid pace, thereby, creating quality spacefor retailers to fulfill their aggressive expansion plans. Thus, theretail boom', 85% of which has so far been concentrated in themetros is beginning to percolate down to smaller cities andtowns. The contribution of these tier-II cities to total organizedretailing sales is expected to grow to 20-25%.

GROWING CONSUMER CLASS :

Favorable demographic and psychographic changes relatingto India's consumer class, international exposure, availabilityof increasing quality retail space, wider availability of productsand brand communication are some of the factors that aredriving the retail in India. Over the last few years, manyinternational retailers have entered the Indian market on thestrength of rising affluence levels of the young Indian populationalong with the heightened awareness of global brands and

international shopping experiences and the increased availability ofretail real estate pace.

Development of India as a sourcing hub shall further make India asan attractive retail opportunity for the global retailers. Retailerslike Wal-Mart, GAP, Tesco, JC Penney, H&M, Karstadt-Quelleetc stepping up their sourcing requirements from India and movingfrom third-party buying offices to establishing their own whollyowned / wholly managed sourcing & buying offices shall furthermake 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 shiftin bargaining power from the former to the latter becomes more

discernible. Already, a number of manufacturers in India, in line withtrends in developed markets, have set up dedicated units to servicethe retail channel. Also, instead of viewing retailers with suspicion, oras a necessary evil' as was the case earlier, manufacturersare beginning to acknowledge them as channel members tobe partnered with for providing solutions to the end-consumermore effectively.

The next level of opportunities in terms product retail expansion liesin categories such as apparel, jewellery and accessories, consumerdurables, catering services and home improvement. Thesesectors have already witnessed the emergence of organized formats


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Growth of Retail Sector in Indiathough more players are expected to join the bandwagon. Some ofthe niche


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categories like Books, Music and Gifts offer interesting opportunitiesfor the retail players.Indian consumer goods market is expected to reach $400 billion by2010. India has the youngest population amongst themajor countries. There are a lot of young people in India in differentincome categories.

In India they do not have to face this dilemma largely because rapid

urbanization, increase in demand, presence of large number ofyoung population, any number of opportunities are available .The bottom line is that Indian market is changing rapidly and isshowing unprecedented consumer business opportunity.

Indian consumer class can be classified according to the followingcriteria:

1. Income

2. Socio-Econo m ic s tatus

3. A ge demographics

4. Geographical dispersion

1. Income Classification

Consumer Classes Annual Income in Rs. 1999 2004 2009 Change

The Rich Rs. 215,000 and more 1.2 2.0 6.2 416%

The Consuming Class Rs 45- 215,000 32.5 54.6 90.9 179%

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%

Source: NCAER

2. Socio - Economic Cla s sificatio n :

In addition to income classification and consumer classification,Indian households can also be segmented according to theoccupation and education levels of the chief earner of the household(the person who contributes most to the household expenses). Thisis called as Socio-Economic Classification (SEC), which ismainly
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used by market planners to target market before launching their newproducts. SEC is made to understand the purchase behavior and theconsumption 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 theage of 35, and nearly 50 % is below 25.

Age distribution if Indian population (In Millions)

Year/

Age

2006 2001 1996

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 leisurerelated expenditure is because of this young population. It will have asignificant impact over the consumer goods market. In additionto that, it is expected that this will generate trade opportunitiesand continuous investment in the economy.

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

Consumption Trends

Food Essentials 45.68%

Essential Services (water, power, rent,and fuels)

10.1%

Clothing 4.9%

Footwear 0.63%

Medicare 4.25%

Transport & Communication 14.51%

Recreation, Education, and Culture Less than 4%

Home Goods 3.25%

4. Geographical Dispersion o f market po tential


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There is large difference in economic prosperity levels amongseveral states in India, linked to the wealth creation from trade,industrial, and agricultural development. There are poor districts inmany states, classified according to their market potential. India has500 districts, out of which 150 districts (category A) and next 150districts (category B) account for 78% and 15% of the nationalmarket 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 Thri ve :

Most of the global powerhouses in the retailing sector such as Wal-Mart, Carrefour, Tesco etc have adopted multi-format and multi-product strategies in order to customize their product offering fordistinct target segments. Similar trends

Identif ying the future

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

The important and distinctive are always the result of changesin values, perceptions and goals of people. Identify the changesthat have already happened, exploit the changes that havealready occurred and use them as opportunities. Dr William TWilson, Chief Economist for Keystone India a Chicago-basedfirm providing cross-border trade facilitation and asset managementservices in US are likely to be exhibited in India as all formatspresent prospects for growth, the Report says.

Further, with the emergence of larger store formats like superstoresand hypermarkets in countries like UK, France, Germany, Spainsince the 1980s and Eastern Europe more recently, traditional foodretailers have been able to stock more extensive non-food ranges. Infact, Tesco, UK's leading grocer, has become the numberone apparel retailer in the Czech Republic and also a majorplayer in Hungary apart from being one of the fastestgrowing clothing retailers in the UK. Together with its rival, Wal-Mart-owned ASDA, Tesco is one of the food sector's mostsuccessful exponents of clothing in Europe

DISPOS ABLE INCOME

There is no point complaining, accusing or justifying thatretailing business is only for larger players and multinationalretailing companies. That's total rubbish and rather an assumedlimitation. Recent research finding is that by the year 2010, Indiawill have at least three million people with an annual incomeof over Rs4,000,000. Mind you, this is the official, declared and straight incomemeaning there will be a considerable number of consumers withother sources of income! (I suppose). One couldcomfortably presume that one fourth of the three millionswould reside in Bangalore. Considering the third successiveyear with great economic growth in India, it is obvious that we


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people with higher disposable income. With higherdisposable income, the discerning Indian consumers are notgoing to be conscious about price alone. This emergingconsumers would want something special, unique, different, better,customized and more. Find the synonyms and transliterate theseinto value offerings in your field of business and you have a goldmine, especially when you manage to connect with thecustomers' value and perception and India, said that after

significant accelerations in economic growth recently, India'seconomy is expected to equal or surpass Japan as the world's thirdlargest sometime in the year 2006. Dr Wilson also added thatIndia's economy measured in PPP (purchasing power parity)terms will eclipse the US$ four trillion mark in 2006, making it equalto or greater than Japan's. Indian consumers are getting richernoticeably leading to higher disposable money.

RIS ING INCOMES

Over the past deacde , Indias middle and High Income grouphas grown at a rapid pace of over 10% per annum . Though thisgrowth is most evident in urban areas, it has also taken place inrural markets. Further, the number of house holds earning above

Rs.150,000 per annum is about 30 million today and is expected togrow to 80 million by 2007. This growing high-income populationis triggering the demand for consumer goods, leading to theproliferation of Higher quality/higher priced products.

EX PLOSION OF MEDIA

There has been an explosion in media as well during the pastdecade . Kick-started by the cable-explosion during the gulfwar, television has accelerated to a pint where there are morecable connections than telephones in Indian homes and morethan 100 channels are being aired at all times .This media

bombardment has exposed the Indian consumer to the lifestylesof more affluent countries and raised their aspirations from theshopping experience they want more choice , value , experienceand convenience.

Pri vate Labels

Brands, store labels, private label brands, store brands. These terms mayseem 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 abrand is, a private label and a store label are different from anyother brand because they are product lines that are owned,

controlled, merchandised and sold by a specific retailer in its ownstores. Among Indian retailers, Stop, Life and Kashish by Shoppers'Stop, and ETC by Ebony are private label brands. According toSynovate, is the market research arm of global communicationsspecialist Aegis Group, the growth of private labels is about 2-3 timesmore than that of advertised brands .Among the product lines launchedby retailers, the ones whose nomenclature is the name of the storeitself are called store labels. Foodworld and Nilgiris have launchedtheir own brand of supermarket products under the "Foodworld" and"Nilgiris" brand names.

There is a distinct advantage in naming the brand launched by the


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the store label also carries the burden of not only the success ofthe brand, but also the failure, which may have a negative rub-offeffect on the retailer's image. A store brand on the other hand is a brandname the retailer carries. Each retailer, because of its unique offering, isa brand in itself, which is what the store brand signifies. Nallis, ModernBazaar and The Home Store are store brands since each of them standsfor a certain retail offering.

Retailers are now aggressively moving into developing their own privatelabels as it not only makes economic sense in the form of retailersachieving higher margins, it also helps them to plug gaps in their productportfolio. For instance, in menswear, retailers say that gross margins onbranded products vary from 25-38 per cent. Compared to that, theretailers can earn whopping margins of around 55-60 per cent on privatelabels. Private label products contribute to a retail brands differentiation.A retailer can achieve differentiation through a large (but not necessarilyexclusive) portfolio of private label products. Service adds to thedifferentiation, and together with a unique product range, results ina strong retail brand. They are not perceived as being interchangeablewith 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 productshelps the retailer to have means with which they can compete headon with the other branded products. An established private labelbrand provides the retailers a platform to negotiate with suppliers, andthe retailers are thus self-sufficient in a certain category. They havemore control over the merchandise and are able to make therequired changes and modifications to suit the changing customerprofile much quicker. This brings about a more consistent andacceptable product portfolio, which also helps reduce mark-downs. Aretailer can create a stronger emotional connect with the consumer asthe experience is not just the store experience but also the productexperience. An outside brand could be purchased from any outlet. Thisis not so in the case of private labels, so the product experience keepsbringing the consumer back

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

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SWOT OF THE

MARKET

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S TRENGTH

1) Organized retailing at US$ 3.31 billion, growing at 8%.

2) 2nd largest contributor to GDP after agriculture at 20%.

3) Pattern of consumption changing along with shopping trends.

4) A Growing population will translate to move consumers.

5) Consumer spending increasing at 11% annually.

6) Almost 25 million sq. ft. retail space available.

7) Paradigm shift in shopping experience for consumers pulling in

more people.

8) M

18270838 project on growth of retail sector in india

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