19704579 impact of recession on retail industies

8/8/2019 19704579 Impact of Recession on Retail Industies

1/39

Introduction

Retail

he word 'retail' is derived from the French word 'retaillier' meaning 'to cut apiece off' or 'to break bulk'. In simple terms it involves activities whereby

product or services are sold to final consumers in small quantities. Although

retailing in its various formats has been around our country for many decades, it has

been confined for along time to family owned corner shops.

TEnglishmen are great soccer enthusiasts, and they strongly think that one should never

give Indians a corner. It stems from the belief that, if you give an Indian a corner he

would end up setting a shop. That is how great Indians retail management skill is

considered.

Evolution of Indian Retail

The evolution of retail industry segment in India:

Traditional Rural Retail Fairs

Traditional Family Run Convenience Stores

Traditional Rural Retail Fairs

Traditional family run convenience stores are too well established in India than to be

wiped out and besides there is uniqueness in the traditional items that represent the

sub-continent. Theretail stores in India are essentially dominated by the unorganized

sector or traditional stores. Infact the traditional stores have taken up 98 percent of the

Indian retail market. Now stores run by families are primarily food based and the set

up is as Kirana or the 'corner grocer' stores. Basically they provide high service with

low prices. If the stores are not food based then the type of retail items available are

local in nature.

Traditional rural retail fairs in India deal in a good number of handcrafts items which

are mentioned below:

Hand painted wooden chest drawers

Wooden wall brackets

Embossed wooden table

1


2/39

Hand painted chairs in chowki

Wooden corner stand

Wooden Hand painted table

Embossed wooden chairs

Brown wooden stool

Camel bone Jewelry

Metal jewelry

Snake charmer puppets

Handmade candles

The Suraj Kund mela is also a huge galore of Indian traditional items. This fair is held

at Haryana which is 8 kilometers from South Delhi. The fair has been held for the last

20 years. The fair deals in items categorized as

Indian arts

Handicrafts

Heritage

Culture and tradition

Traditional rural retail fairs have atypical rural set up like:

Huts of mud

Thatched platforms

lamps of wood

String cots

Plainness ground

The small thatched stores are a vibrant display of handcraft items. The focus

every year is on a particular State for instance, in 2006 it was Maharashtra. The

other group of items representing the Indian Subcontinentavailable there are:

Classical

Tribal art

Folk art

2


3/39

As such Traditional Rural Retail fairs involve credit worthy artisans and

weavers of over 350 in number and they are selected from across the country.

Along with the county's rich cultural heritage being showcased, the fair is open

to foreign traditional goods as well. The more rejuvenating side of these fairs

would be listed as under:

Indian Sweets Snacks

Indian folk music

Classical dance

Bengal tiger show

Elephant rides

Tiger show and rides

Giraffe tricks

Balloon and Clay items

Painting

Games

Therefore, traditional rural retail fairs are a never ending occupation and the

key to it lies in the originality and attractiveness of the items.

Traditional Family Run Convenience Stores

Traditional family run convenience stores are too well established in India than to be

wiped out and besides there is uniqueness in the traditional items that represent the

sub-continent. The retail stores in India are essentially dominated by the unorganized

sector or traditional stores. In fact the traditional stores have taken up 98 percent of the

Indian retail market. Now stores run by families are primarily food based and the set

up is as Kirana or the 'corner grocer' stores. Basically they provide high service with

low prices. If the stores are not food based then the type of retail items available are

local in nature.

The traditional family run convenience stores can take pride in the fact that the Kirana

is the most common outlet forms for the consumers. The tough competition for

convenience stores are coming from organized retail stores dealing in food items,

like:

3


4/39

Apna Bazaar

Canteen stores

Food World

Subhiksha

Food Bazaar

Convenience Stores are open for long hours and is one of the formats of the Indian

retail stores that cater to basic needs of the consumer. A good example of such would

be Convenio. These stores are found in both residential as well as commercial

markets. The food products of traditional family run convenience stores are comprised

of branded as well as non-branded items. The benefits of family run convenience

stores is that they give importance to:

Personal touch

Facilities of credit

Quick home delivery

Non-food based stock comprises of multiple and varieties of local brands. Thefuture of such stores as they face competition from organized sector, would dependon the following particulars:

Place and capacity

Diligent area coverage

Disciplined work schedule

Managing turnover

Revenue from assets

Customer service and satisfaction

The traditional family run convenience stores serves the purpose of the housewiveswho definitely wants to avoid traveling long distances to purchase daily needs. Theconvenience factor in terms of items, among people in general can be highlighted as

below:

Groceries

Fruits

Drug Store

Necessary stationery

As such traditional family run convenience stores are here to stay and cannot beoversized by the organized retail sector besides, it represents the variety of India.

4


5/39

Retail Industry

The Indian retail market, which is the fifth largest retail destination globally, has been

ranked the second most attractive emerging market for investment after Vietnam in the

retail sector by AT Kearney's seventh annual Global Retail Development Index

(GRDI), in 2008. The share of retail trade in the country's gross domestic product

(GDP) was between 810 per cent in 2007. It is currently around 12 per cent, and is

likely to reach 22 per cent by 2010.

A McKinsey report 'The rise of Indian Consumer Market', estimates that the Indian

consumer market is likely to grow four times by 2025. Commercial real estate services

company, CB Richard Ellis' findings state that India's retail market is currently valued

at US$ 511 billion.

Banks, capital goods, engineering, fast moving consumer goods (FMCG), software

services, oil marketing, power, two-wheelers and telecom companies are leading the

sales and profit growth of India Inc in the fourth quarter of 2008-09. India continues to

be among the most attractive countries for global retailers. At US$ 511 billion in 2008,

its retail market is larger than ever and drawing both global and local retailers. Foreign

direct investment (FDI) inflows as on January 2009, in single-brand retail trading,

stood at approx. US$ 25.18 million, according to the Department of Industrial Policy

and Promotion (DIPP).

India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$

1.3 trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. As a

democratic country with high growth rates, consumer spending has risen sharply as the

youth population (more than 33 percent of the country is below the age of 15) has seen

a significant increase in its disposable income. Consumer spending rose an impressive

75 per cent in the past four years alone. Also, organised retail, which accounts for

almost 5 per cent of the market, is expected to grow at a CAGR of 40 per cent from

US$ 20 billion in 2007 to US$ 107 billion by 2013.

India has emerged the third most attractive market destination for apparel retailers,

according to a new study by global management consulting firm AT Kearney. It further

says that in India, apparel is the second largest retail category, representing 10 per cent

of the US$ 37 billion retail market. It is expected to grow 12-15 per cent per year.

Apparel, along with food and grocery, will lead the organised retailing in India. India

5


6/39

has one of the largest numbers of retail outlets in the world. A report by Images Retail

estimates the number of operational malls to grow more than two-fold, to cross 412,

with 205 million square feet by 2010, and a further 715 malls to be added by 2015,

with major retail developments even in tier-II and tier-III cities in India.

Marks & Spencer Reliance India is planning to open 35 more stores over the

next five years, according to Mark Ashman, CEO of the company. The 51:49

joint venture between UKs Marks and Spencer and Reliance Retail Ltd

already has 15 stores in India.

Future Group has been restructured to test the new rules on FDI under Press

Notes 2, 3 and 4 issued in February 2009. The company plans to bring in up to

US$ 148.7 million in foreign investment. Although FDI is permitted only in

single-brand retail and not permitted in multi-brand retail businesses like

Future Group's, the conglomerate has created two layers of operations to take

advantage of the three Press Notes that allow FDI up to 49 per cent in

operating-cum-investment companies as long as they are owned and controlled

by Indians.

Carrefour SA, Europes largest retailer, may start wholesale operations in India

by 2010 and plans to set up its first cash-and-carry outlet in the National

Capital Region. Currently, Carrefour exports goods worth US$ 170 million

from India to Europe, UAE, Indonesia, Europe, Thailand, Singapore and

Malaysia.

Jewellery manufacturer and retailer, Gitanjali Group and MMTC are jointly

setting up a chain of exclusive retail outlets called ShuddiSampurna Vishwas.

The joint venture, which plans to open around 60 stores across India by end of

this year, will retail hallmarked gold and diamond jewellery. Mahindra Retail, a part of the US$ 6.7-billion Mahindra Group, plans to invest

US$ 19.8 million by 2010 to step up its specialty retail concept 'Mom and Me'.

Policy Initiatives

100 per cent FDI is allowed in cash-and-carry wholesale formats. Franchisee

arrangements are also permitted in retail trade.

51 per cent FDI is allowed in single-brand retailing.

6


7/39

Road Ahead

According to industry experts, the next phase of growth is expected to come from rural

markets, with rural India accounting for almost half of the domestic retail market,

valued over US$ 300 billion. Rural India is set to witness an economic boom, with per

capita income having grown by 50 per cent over the last 10 years, mainly on account

of rising commodity prices and improved productivity.

According to retail and consumer products division, E&Y India, basic infrastructure,

generation of employment guarantee schemes, better information services and access

to funding are also bringing prosperity to rural households. The rural market, product

design will need to go beyond ideas like smaller sizes (such as single use sachets) tocreate genuinely new products, according to Ramesh Srinivas, national industry

director (consumer markets), KPMG India.

According to the Investment commission of India, the overall retail market is expected

to grow from US$ 262 billion to about US$ 1065 billion by 2016, with organised retail

at US$ 165 billion (approximately 15.5 per cent of total retail sales). India is expected

to be among the top 5 retail markets in the world in 10 years.

According to new market research report by RNCOS titled, "Booming Retail Sector in

India", organised retail market in India is expected to reach US$ 50 billion by 2011.

Number of shopping malls is expected to increase at a CAGR of more than

18.9 per cent from 2007 to 2015.

Rural market is projected to dominate the retail industry landscape in India by

2012 with total market share of above 50 per cent.

Organised retailing of mobile handset and accessories is expected to reach

close to US$ 990 million by 2010.

Driven by the expanding retail market, third party logistic market is forecasted

to reach US$ 20 billion by 2011.

Exchange rate used: 1 USD = 50.5047 INR

7


8/39

The Global Retail Industry

Retail stores constitute 20% of US GDP & are the 3 rd largest employer segment in

USA.

China on the other hand has attracted several global retailers in recent times. Retail

sector employs 7% of the population in China. Major retailers like Wal-Mart &

Carrefour have already entered the Chinese market. In the year 2003, Wal-Mart &

Carrefour had sales of US $ 70.4 Crore & US $ 160 Crore respectively.

The global retail industry has traveled a long way from a small beginning to an

industry where the world wide retail sales is valued at $ 7 x 10 5 Crore. The top 200

retailers alone accounts for 30 % of the worldwide demand. Retail turnover in the EU

is approximately Euros 2, 00,000 Crore and the sector average growth is showing an

upward pattern. The Asian economies (excluding Japan) are expected to grow at 6%

consistently till 2005-06.

On the global Retail stage, little has remained same over the last decade. One of the

few similarities with today is that Wal-Mart was ranked the top retailer in the world

then & it still holds that distinction. Other than Wal-Mart's dominance, there's a little

about today's environment that looks like the mid-1990s. The global economy has

changed, consumer demand has shifted & retailers' operating systems today areinfused with far more technology than was the case six years ago.

Scenario of Retailing in India

Retailing is the most active and attractive sector of last decade. While the retailingindustry itself has been present since ages in our country, it is only the recent past thatit has witnessed so much dynamism. The emergence of retailing in India has more todo with the increased purchasing power of buyers, especially post-liberalization,

increase in product variety, and increase in economies of scale, with the aid of modernsupply and distributions solution. Indian retailing today is at an interesting crossroads.The retail sales are at the highest point in history and new technologies are improvingretail productivity. Though there are many opportunities to start a new retail business.

8


9/39

PRESENT INDIAN SCENARIO

* Unorganized market: Rs. 583,000 crores

* Organized market: Rs.5, 000 crores

* 5X growth in organized retailing between 2000-2005

* Over 4,000 new modern Outlets in the last 3 years

* Over 5,000,000 sq. ft. of mall space under development

* The top 3 modern retailers control over 750,000 sq. ft. of retail space

* Over 400,000 shoppers walk through their doors every week

* Growth in organized retailing on par with expectations and projections of the last

5 Years: on course to touch Rs. 35,000 crores (US$ 7 Billion) or more by 2009-11

Let us look at the evolution process:

Detailing reasons why Indian organized retail is at the brink of revolution, the

IMAGES-KSA report says that the last few years have seen rapid transformation in

many areas and the setting of scalable and profitable retail models across categories.

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 worldwide are willing to partner with retailers here.

Further, large Indian corporate groups like Tata, Reliance, Raheja, ITC, Bombay

9


10/39

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 skyrocket as the inherent

attractiveness of the segment lures more and more investors to earn large profits.

Investments into the sector are estimated at INR 2000 - 2500 Crore in the next 2-3

years, and over INR 20,000 Crore by end of 2011.

Retail Formats

Hypermarket: It is the largest format in Indian retail so far is a one stop shop for the

modern Indian shopper.

Merchandise: food grocery to clothing to spots goods to books to stationery.

Space occupied: 50000 Sq .ft. and above.

SKUs: 20000-30000.

Example: Pantaloon retails Big Bazaar, RPGs Spencers (Giant)

Supermarket: A subdued version of a hypermarket.

Merchandise: Almost similar to that of a hypermarket but in relatively smaller

proposition.

Space occupied: 5000 Sq. ft. or more.

SKUs: Around 10000.

Example: Nilgiris, Apna Bazaar, Trinethra.

Convenience store: A subdued version of a supermarket.

Merchandise: Groceries are predominantly sold.

10


11/39

Space occupied: Around 500 Sq. ft. to 3000 Sq. ft.

Example: stores located at the corners of the streets, Reliance Retails Fresh

and Select.

Department store: A retail establishment which specializes in selling a wide range of

products without a single prominent merchandise line and is usually a part of a retail

chain.

Merchandise: Apparel, household accessories, cosmetics, gifts etc.

Space occupied: Around 10000 Sq. ft. 30000 Sq. ft.

Example: Landmark Groups LifeStyle, Trent India Ltd.s Westside.

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

higher volumes.

Merchandise: A variety of perishable/ non perishable goods.

Example: Viswapriya Groups Subiksha, Piramals TruMart.

Specialty store: It consists of a narrow product line with deep assortment.

Merchandise: Depends on the stores

Example: Bata store deals only with footwear, RPGs Music World,

Crossword.

MBOs: Multi Brand outlets, also known as Category Killers. These usually do well in

busy market places and Metros.

Merchandise: Offers several brads across a single product category.

11


12/39

Kirana stores: The smallest retail formats which are the highest in number (15

million approx.) in India.

Merchandise: Mostly food and groceries.

Space occupied: 50 sq ft and even smaller ones exist.

Malls: The largest form of organized retailing today. Located mainly in metro cities,

in proximity to urban outskirts.

Merchandise: They lend an ideal shopping experience with an amalgamation

of product, service and entertainment, all under a common roof.

Space occupied: Ranges from 60,000 sq ft to 7, 00,000 sq ft.

Example: Pantaloon Retails Central, Mumbais Iorbit.

12


13/39

13


14/39

The organized retail industry is growing at 25- 30 percentage and is expected

to reach the mark of 1, 00,000 crore INR by 2011 from the present figure of 35,000

crore INR approx. With such a mouth watering figures the organized retailing has

been attracting many players and even persuading the existing retailers to expand and

experiment with newer formats. This can also be substantiated by looking the

estimation of the organized retail space to be around 72 million sq ft. by the end of

2009.

Growth of Retail Companies in India

Growth of Retail Companies in India exhibits the boom in the retail industry in

India over the years. The increase in the purchasing power of the Indian middle classes

and the influx of the foreign investments have been encouraging in the Growth of

Retail Companies in India.

Growth of Retail Companies in India : Overview

Growth of Retail Companies in India is still not yet in a matured stage with great

potentials within this sector still to be explored. Apart from the retail company like

Nilgiri's of Bangalore, most of the retail companies are sections of other industries that

14


15/39

have stepped in the retail sector for a better business. The Growth of Retail Companies

in India is most pronounced in the metro cities of India, however the smaller towns are

also not lagging behind in this. The retail companies are not only targeting the four

metros in India but also is considering the second graded upcoming cities like

Ahmedabad, Baroda, Chandigarh, Coimbatore, Cochin, Ludhiana, Pune, Trivandrum,

Simla, Gurgaon, and others. The South Indian zone have adopted the process

of shopping in the supermarkets for their daily requirements and this has also been

influencing other cities as well where many hypermarkets are coming up day to day.

Reasons for the fast Growth of Retail Companies in India:

The retail companies are found to be rising in India at a remarkable speed with the

years and this have brought a revolutionary change in the shopping attitude of theIndian customers. The Growth of Retail Companies in India is facilitated by certainfactors like

existing Indian middle classes with an increased purchasing power

rise of upcoming business sectors like the IT and engineering firms

change in the taste and attitude of the Indians

effect of globalization

heavy influx of FDI in the retail sectors in India

To get further details on the Growth of Retail Companies in India and

otherretail chain of companies in India, please browse through the followinglinks:

Big Bazar

Giants

Shoprite

Lifestyle

Pantaloons

Landmark

Indus Fila

Fame Adlabs

Inox India

PVR Cinemas

15
http://business.mapsofindia.com/india-retail-industry/companies-growth/big-bazar.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/giants.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/shoprite.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/lifestyle.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/pantaloons.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/landmark.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/indus-fila.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/fame-adlabs.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/inox.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/pvr.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/giants.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/shoprite.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/lifestyle.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/pantaloons.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/landmark.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/indus-fila.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/fame-adlabs.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/inox.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/pvr.htmlhttp://business.mapsofindia.com/india-retail-industry/companies-growth/big-bazar.html


16/39

Major Player of Retail Industry

The Indian retail sector has been euphoria over the last five years. India topped

the A.T. Kearney's Global Retail Development Index for two consecutive years

and this has infatuated Indian as well as foreign retail players to go gaga on the

merchandising track. According to geographical expansion, Delhi/NCR and

Mumbai are the felicitated regions as the top companies have rated the

spending potential of consumers in the vicinity of the national capital and the

financial capital as excellent. Other metros such as Kolkata, Chennai,

Hyderabad and Bangalore have caught the sight of investors but their fortunes

are yet to be illuminated. Companies like the Future Group, Reliance,

Bharti-Walmart, DLF etc. have shown the way for other to enter. The

countries are expecting a surge in the growth sprint and lets hope for the best.

Top Companies

Big Bazaaris a chain of department stores

in India, currently with 75 outlets. It is owned

by the Pantaloon Retail India Ltd, Future Group. It works on the same economy

model as Wal-Mart and has considerable success in many Indian cities and

small towns. The idea was pioneered by entrepreneurKishore Biyani, the CEO

of Future Group. Currently Big Bazaar stores are located only in India. It is the

biggest and the fastest growing chain of department store and aims at being 350

stores by the end of year 2010.

It offers all types of household items such as home furnishing, utensils, fashion

products etc. It has a grocery department and vegetable section known as the

16


17/39

Food Bazaar and its online shopping site is known as FutureBazaar.com. The

real estate fund management company promoted by the Future Group expects

to develop more than 50 projects across India covering a combined area of

more than 16 million sq. ft. On April 1 2007, Big Bazaar had to shut its outlets

in Mumbai as the 120 retrenched employees called a strike with the support of

Bhatia Kamgar Sena (the trade Union wing of Shiv Sena). Later the

management agreed to reinstate the sacked workers

Pantaloon Retail India Ltd, is Indias leading

retail company with presence across food, fashion,

home solutions and consumer electronics, books and music, health, wellness

and beauty, general merchandise, communication products, E-tailing and leisure

and entertainment.

Headquartered in Mumbai (Bombay), has over 450 stores across 30 cities in

India and employs over 18,000 people. Pantaloon founded by Mr. Kishore

Biyani. The company owns and manages multiple retail formats catering to a

wide cross-section of the Indian society and its width and depth of merchandise

helps it capture almost the entire consumption basket of the Indian consumer.

Founded in 1987, as a garment manufacturing company, Pantaloon Retail

forayed into modern retail in 1997 with the opening up of a chain of department

stores, Pantaloons. In 2001, it launched Big Bazaar, a hypermarket chain,

followed by Food Bazaar, a supermarket chain. It went on to launch Central, a

first of its kind, seamless mall located in the heart of major Indian cities. Some

17


18/39

of its other formats include, Collection I (home improvement products), E-Zone

(consumer electronics), Depot (books, music, gifts and stationeries), all (fashion

apparel for plus-size individuals), Shoe Factory (footwear) and Blue Sky

(fashion accessories). It has recently launched its retailing venture,

futurebazaar.com.

In India's chaotic markets, Kishore Biyani is the unchallenged king of retail. He

has the knack of catching rivals off-guard and striking where it hurts most. And

now that he's set himself the task of retaining control of the largest retail space

in the country, he won't let anyone - suppliers or international promoters

included - catch him slacking. The latest to face the wrath of the 43-year-old is

South African hypermarket Shop rite, which opened shop in Mumbai last month

through a franchise agreement with local company Normal Lifestyle.

The hypermarket began retailing products from big boys Nestle, Unilever and

Procter & Gamble at consumer discounts of 20-30 per cent, lower than even

Biyani's purchase prices in his Big Bazaar and Food Bazaar stores.

Reliance Fresh is the retail chain division of

Reliance Industries of India which is headed by

Mr.Mukesh Ambani. Reliance has entered into this segment by opening new

retail stores into almost every metropolitan and regional area of India. Reliance

plans to invest Rs 25000 cores in the next 4 years in their retail division and

plans to begin retail stores in 784 cities across the country. The Reliance Fresh

supermarket chain is RILs Rs 25,000 crore venture and it plans to add more

18


19/39

stores across different g, and eventually have a pan-India footprint by year

2011. The super marts will sell fresh fruits and vegetables, staples, groceries,

fresh juice bars and dairy products and also will sport a separate enclosure and

supply-chain for non-vegetarian products. Besides, the stores would provide

direct employment to 5 lakh young Indians and indirect job opportunities to a

million people, according to the company. The company also has plans to train

students and housewives in customer care and quality services for part-time

jobs.

Reliance Fresh recently (24th Jan, 2007) opened several "Fresh" outlets in

Chennai, New Delhi, Hyderabad, Jaipur, Mumbai, Chandigarh, Ludhiana

increasing its total store count to 40. Reliance is still testing its retail concepts

by controlled entry beginning in the southern states

Subhiksha is an Indian retail chain

with more than 760 outlets selling groceries,

fruits, vegetables, medicines and mobile phones. It was started and is

managed by Mr. R. Subramaniam, IIM Ahmedabad alumni. He also plans

to invest Rs.500 crore to increase the number of outlets to 2000 across the

country by 2009.

Derived from the Sanskrit word, Subhiksham or "giver of all things good", It

opened its first store in Thiruvanmiyur in Chennai in March, 1997 with an

investment of about Rs. 5 lakh. The retail chain has seen a considerable growth

by offering goods at cheaper rates and there by increasing its customer base. It

19


20/39

is also dubbed as India's largest retail chain. Vision to deliver consistently better

value to Indian consumers, has guided Subhiksha to deliver savings to all

consumers on each and every item that they need in their daily lives, 365 days a

year, without any compromise on quality of goods purchased.

Subhiksha now has the pan Indian presence with stores across Delhi, UP,

Punjab, Hariyana, Gujarat, Maharashtra, AP, Karnataka and TN. It has recently

commenced operation in Kerala also. Today, it is a multi-location,

professionally managed and vibrant organization. Subhiksha now has even

opened Specialized Mobile shops called Subhiksha Mobile where mobiles are

sold at a discounted price

Subhiksha is India's largest supermarket, pharmacy and telecom chain. Started

in 1997 as a single store entity in South Chennai, it is now present nationally

across 1000 outlets and spread across more than 90 cities. You can now locate

the nearest Subhiksha store in your area with the Store Locators. ICICI Venture

Capital has a 24% stake in Subhiksha.

Food worldis a chain of supermarket stores.

It was started in May 1996 as a division of Spencer & Co, a part of the RPG

Group. In August 1999 it became a separate company. Currently it operates 89

stores in Bangalore, Chennai, Coimbatore, Erode, Hyderabad, Kodai,

Pondichery, Pune, Secunderabad, Salem, Trivandrum and Vellore

20


21/39

DLF Retail Developers Ltd. is one of the

troikas of the DLF Group. Besides being India's

largest real estate developer, DLF is also of the leaders in innovating shopping

malls in India. It caught public eye when it launched the 2, 50,000 sq ft.

shopping mall in Gurgaon. It has brought a dramatic change in the lifestyles and

entertainment with its City Centers and DT Cinemas. DLF has plans to invest

Rs. 2000-3000 crore in all the emerging areas from metros to class cities in the

next two years. Till last year the company was involved in building 18 malls out

of which 10 were in the NCR region. Future plans of DLF involve opening up

of 100 malls (specialty malls, big box retailing and integrated malls) across 60

cities in next 8-10 years. They are slowly transforming into 'lease' and 'revenue

share' models.

Local players like ITC, the A.V. Birla Group and Tatas have given the hints to

enter organized retail. Frances Carrefour SA and Britains Tesco too were

recently in news for their future plans to explore the Indian retailmarket

Bharti Retail,a wholly owned subsidiary of Bharti

Enterprises. Has announced two joint ventures (JV)with

the international retailing behemoth, Wal-Mart. The first JV ensures cash and

carry business, in which 100 percent FDI is permitted and it can sell only to

retailers and distributors. The second JV concerns the franchise arrangement.

Sunil Mittal, Chairman of the Bharti Group assured that the ventures will use

21


22/39

low prices every day and best practices for the satisfaction of the customer.

Processed foods and vegetables will be delivered by Bharti Field Fresh, Bharti's

JV with Rothschild. Bharti Retail aims to foray every city with a population

exceeding 1 million. It has plans to come up with an investment of more than

$2 billion in convenience stores, supermarkets and hypermarkets spread over an

aggregate 10 million sq. ft. The expansion drive looks ambitious but analysts

are worried that Bharti may face stiff competition from Pantaloon and Reliance

as they too have sanguine plans to flood the markets with thousands of retail

outlets in the coming five years. Bharti Telecom also has plans to offer all its

fixed and mobile telecom products and services from a single window to the

SMB (Small and Medium Business) enterprises under the Bharti Infotel

division...

Lifestyle is part of the Landmark

Group, a Dubai-based retail chain. With over 30

years experience in retailing, the Group has become the foremost retailer in the

Gulf. Positioned as a trendy, youthful and vibrant brand that offers customers a

wide variety of merchandise at exceptional value for money, Lifestyle began

operations in 1998 with its first store in Chennai in 1999 and now has 13

Lifestyle stores, 5 Home Centers and 1 Baby shop store across Chennai,

Hyderabad, Bangalore, Gurgaon, Delhi, Mumbai and Ahmedabad.

Business World-IMRB Most Respected Company Awards Survey has rated

22


23/39

Lifestyle as the Most Respected Company in the Retail Sector in 2003 and

2004. Lifestyle has also been awarded the ICICI-KSA Technopak Award for

Retail Excellence in 2005, the Reid & Taylor Retailer of the Year Award for

2006 and more recently, the Lycra Images Fashion Award for the Most Admired

Large Format Retailer of the Year in 2006

The foundation of Shopper's Stop was

laid on October 27, 1991 by the K. Raheja Corp.

group of companies Shoppers Stop aims to position

itself as a global retailer. The company intends to bring the worlds best retail

technology, retail practices and sales to India. Currently, they are adding 4 to 5

new stores every year with an immense amount of expertise and credibility,

Shopper's Stop has become the highest benchmark for the Indian retail industry

Shopper's Stop in the only retailer from India to become a member of the

prestigious Intercontinental Group of Departmental Stores (IGDS).

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. The stores offer a complete range of apparel

and lifestyle accessories for the entire family. From apparel brands like

Provogue, Color Plus, Arrow, Levis, Scullers, Zodiac to cosmetic brands like

Lakme, Chambor, Le Teint Ricci etc., Shoppers Stop caters to every lifestyle

need. Shoppers' Stop retails its own line of clothing namely Stop, Life, Kashish,

23


24/39

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. Their

motto: We are responsible for the goods we sell.

Vishal Mega Mart is one of fastest growing

retailing groups in India. Its outlets cater to almost

all price ranges. The showrooms have over 70,000 products range which

fulfills all your household needs, and can be catered to less than one roof. It is

covering about 1996592 lac sq. ft. in 18 states across India. Each store gives

you international quality goods and prices hard to match. The cost benefits that

is derived from the large central purchase of goods and services is passed on to

the consumer the group had a turnover of Rs. 1463.12 million for fiscal 2005,

under the dynamic leadership of Mr. Ram Chandra Aggarwal. The group had of

turnover Rs 2884.43 million for fiscal 2006 and Rs. 6026.53 million for

fiscal 2007.the groups prime focus is on retailing. The Vishal stores offer

affordable family fashion at prices to suit every pocket.

Welspun Retail Limited (W.R.L.) was

established in 2003 as a part of Welspun Group, one of the

fastest growing business conglomerates in India. Welspun

is a U.S. $1 billion group, into diverse businesses, industries, regions and has

six companies under the umbrella brand. Our International Home Textiles

Company; Welspun India Limited (W I L) launched its Indian retail division,

24


25/39

WRL with an aim to capture the Home Textiles market in 2003. The Retail

brands, SPACES- Home & Beyond has carved its niche with its fashion driven

model in the country's major metros, while Welhome targets a larger audience

with its value for money model. The turn over of the Retail division stands at

100 crore, expected to double in the next 5 years

Key Differentiating Attributes

W.R.L. is the first Retailer of soft furnishing for "Home" in India.

W.R.L. has two models that cater to both, the aspiration clientele and the value formoney conscious clientele.

Launched Spaces -Home & Beyond and Welhome (Welspun Factory Outlet) in the

same year.

Phenomenal growth anticipated in FY 2007-08.

Design Studio ranks amongst the best in the country.

Panel of International Designers for the new collections.

Offer specialized products at affordable prices, Bed sheets starting at Rs. 199,

towels starting at Rs. 79 and Curtains starting at Rs. 99

Trent is the retail arm of the TATA group.

Started in 1998, Trent operates Westside, one of the many growing retail chains in

India. The foresight of the TATA Group, which invested in retail relatively early, is

paying high dividends as retail is one of the booming sectors in India. The company

has a turnover of Rs. 357.6 crores (FY 2005-2006) and currently operates 22 stores in

the major metros and mini metros of India. An international shopping experience, a

perception of values, and offering the latest styles, has created a loyal following for

Westside's own brand of merchandise. Westside was named the 'Most Admired Large

25


26/39

Format Retail Chain of the Year' by the Lycra Images Fashion Awards 2005.Westside

operates stores in Mumbai, Ahmedabad, Bangalore, Delhi, Chennai, Kolkata,

Hyderabad, Pune, Surat, Vadodara, Indore, Noida, Gurgaon, Ghaziabad, Mysore,

Jaipur, Lucknow, Nagpur.

Wal-Mart Stores, Inc. is an

American public corporation that runs a chain of large, discount department stores. It

is the world's largest public corporation by revenue, according to the 2007 Fortune

Global 500. Founded by Sam Walton in 1962, it was incorporated on October 31,

1969. It opened its home office and first distribution center in Bentonville, Arkansas.

It had 38 stores operating with 1,500 employees and sales of $44.2 million .Wal-Mart

is the largest grocery retailer in the United States, with an estimated 20% of the retail

grocery and consumables business, as well as the largest toy seller in the U.S., with an

estimated 22% share of the toy market. Wal-Mart is the largest private user of

electricity in the US. Owns a subsidiary electric company in Texas, and will possibly

move into the power business. It is also undertaking a number of environmentally

conscious initiatives to reduce energy usage and waste. Wal-Mart operates in Mexico

as Walmex, in the UK as ASDA, and in Japan as Seiyu. It has wholly-owned

operations in Argentina, Brazil, Canada, Puerto Rico, and the UK. Wal-Mart's

investments outside North America have had mixed results: its operations in South

America and China are highly successful, but it sold its retail operations in South

Korea and Germany in 2006 after sustained losses. On September 12, 2007, Wal-Mart

introduced new advertising with the slogan, "Save Money Live Better," replacing the

26


27/39

"Always Low Prices, Always" slogan, which it had used for the previous 19 years.

Global Insight, which conducted the research that supported the ads, found that Wal-

Mart's price level reduction resulted in savings for consumers of $287 billion in 2006,

which equated to $957 per person or $2,500 per household

Carrefour SA is a French international hypermarket

chain, with a global network of outlets. The group was

created by Marcel Fournier and Denis Deffore in 1957. It is the second largest retail

group in the world in terms of revenue after Wal-Mart. Carrefour operates mainly in

Europe, Brazil, Argentina, Dominican Republic and Colombia, but also has shops in

North Africa and Asia. Carrefour means cross-road in French. Carrefour is active in

many types of retail distribution: hypermarkets, supermarkets, Discount Store,

Grocery Stores, Cosmetics, and Cash & Carry. Recently The $130 billion French retail

Carrefour has set up a 100 percent-owned arm to enter the wholesale merchandise

business in India and will opt for the franchising route to open multi-brand retail stores

in the country, Carrefour WC&C India will also enter these areas where the Indian

27


28/39

franchisee can get the same technical expertise that go into running the retail trade

stores of the French company across the globally.

The Kroger Co.is an American retail supermarket chain

and parent company, founded by Bernard Henry Kroger in

1883 in Cincinnati, Ohio. It reported over US$66 billion in

sales during fiscal year 2007 and is currently the second-largest grocery retailer in the

country by volume and third-place general retailer in the country, with Wal-Mart and

The Home Depot filling slots one and two, respectively. Kroger operated, either

directly or through its subsidiaries, 2,500 grocery stores, 579 of which had fuel

centers, nearly 800 convenience stores, 400-plus jewelry stores, and 42 manufacturing

facilities in 32 states; we employ a growing family of more than 290,000 associates

coast-to-coast and presently Kroger is active in many other Retail Distribution like

Bakery, Banking, beer, dairy, wine etc. The slogan of Kroger co. is Right Store.

Right Place. Krogers recently launched Perishable Donations Partnership will bring

critically needed perishable food items into the food bank process. The company-wide

program will increase the number of stores in the Kroger family that donate safe,

perishable food to Second Harvest food banks that are equipped to safely handle and

distribute fresh food. Krogers goal is to donate 50 million pounds

of nutritious, fresh food across the country.

28


29/39

Recession

A Recession is a contraction phase of thebusiness cycle.

National Bureau of Economic Research (NBER) is the official agency in

charge of declaring that the economy is in a state of recession.

They define recession as:

Significant decline in economic activity lasting more than a few months, which isnormally visible in real GDP, real income, employment, industrial production, andwholesale-retail sales.

For this reason, the official designation of recession may not come until after

we are in a recession for six months or longer.What Causes Recession?

An economy typically expands for 6-10 years and tends to go into a recession

for about six months to 2 years.

A recession normally takes place when consumers loose confidence in the

growth of the economy and spend less.

This leads to a decreased demand for goods and services, which in turn leads

to a decrease in production, lay-offs and a sharp rise in unemployment.

Investors spend less as they fear stocks values will fall and thus stock

markets fall on negative sentiment.

US Crisis Hits India

US faced major crisis because of

Sub prime mortgage crisis (home loan defaults)

Rising oil prices at $100 a barrel Global Inflation

High unemployment rates A declining dollar value

All this slowed down the growth of the economy and as the GDP growth rate fell to2%, recession set in.

29
http://en.wikipedia.org/wiki/Business_cyclehttp://en.wikipedia.org/wiki/Business_cycle


30/39

Low GDP growth indicating Recession in US

Impact on India

A slowdown in the US economy is bad news for India because:

Indian companies have major outsourcing deals from the US India's exports to the US have also grown substantially over the years.

Indian companies with big tickets deals in the US are seeing their profitmargins shrinking.

Anatomy of the economic depression in India

Share Market

30


31/39

More people have sold the shares in the Indian share market than they boughtin the recent weeks. This has added to the fall of sensex to lower points.

Foreign investors have pulled out from stock markets leading to heavy lossesin stocks and mutual funds

Stock broking houses are laying-off people

Because of such uncertainty many people have started saving money in banksrather than investing

Recession Impact on Retails

Retail sales fell off a cliff in September, plunging by the largest amount in three years

as worried consumers shunned the malls and auto showrooms in the midst of the

country's financial meltdown.

The Commerce Department reported Wednesday retail sales decreased 1.2 percent last

month, nearly double the 0.7 percent drop that had been expected. It was the biggest

decline since retail sales fell by 1.4 percent in August 2005.

The bigger-than-expected decline significantly increased the risks of a recession

because consumer spending is two-thirds of total economic activity.

The news spread recession jitters across Wall Street, as stocks fell sharply pushing the

Dow Jones industrials back below 9,000 at times.

The weakness was led by a 3.8 percent drop in auto sales. Sales dropped below 1

million units as consumers struggled to find financing.

Retail sales have now fallen for three consecutive months, the first time that has

occurred on government records that go back to 1992. Economists had expected sales

to be down in September as a flood of bad news about the financial system and rising

unemployment increased consumers' worries.

Many analysts believe the overall economy, as measured by the gross domestic

product, is slipping into a recession, triggered by a steep slump in housing and the

severe credit crisis.

Even excluding auto sales, retail sales showed widespread weakness, falling by 0.6

percent or double the decline outside of autos that had been expected.

"The consumer shut up shop even before the markets got crushed and that is not good

news for the economy," said Joel Naroff, chief economist at Naroff Economic

Advisors. "What is ominous is that the declines in spending were broad based."

31


32/39

Sales at department stores fell by 1.5 percent following an even bigger 1.6 percent

drop in July. Sales at furniture stores fell by 2.3 percent. Sales at appliance stores slid

1.5 percent.

In other economic news, the Labor Department reported that wholesale prices fell for

a second straight month, declining by 0.4 percent, thanks to a big drop in energy costs.

However, core wholesale prices, which exclude food and energy, rose by 0.4 percent,

double what economists had been expecting.

Federal Reserve policymakers are counting on the economic slowdown to dampen

inflation pressures and give them more room to cut interest rates if needed to keep the

financial crisis from pushing the country into a deep downturn. The central bank last

week cut a key rate by a half-point at an emergency meeting, coordinating the move

with other major economies.

In a third report, the Commerce Department said businesses increased their inventories

by 0.3 percent in August the smallest advance in five months. The increase was

below the 0.5 percent rise that economists had expected and sharply lower than the 1.1

percent jump in July.

Economists are watching to see whether business confidence begins to falter as the

economy weakens. Business plans on inventory growth and investment spending are

key factors influencing economic activity.

32


33/39

Analysts said the slowdown in inventory growth could also be reflecting the serious

problems in the market for commercial paper, where businesses obtain short-term

loans to fund their day-to-day operations such as buying inventories. That market has

frozen up in recent months as banks have grown concerned about the risks of bad

loans.

In one of many emergency measures implemented by the government during the

current credit crisis, the Federal Reserve has announced that it will start a program

later this month to support the commercial paper market in an effort to get those loans

back to more normal levels.

Impact of Recession

Retail sector deep in recession

Retail sales deteriorated further in April, confirming the recession in the local

economy continued into the 2nd quarter. Wholesale andretail trade contracted 2.5%

(saar) in the 1Q09. Although interest rates have already been cut by 4.5%, the positive

impact on spending will take time to become apparent. Further cuts in interest rates are

possible, but the SARB may keep rates unchanged at the June meeting because of the

stickiness of inflation and the time lags involved in monetary policy.

Household finances are taking strain despite the lower interest rates. Reducing the

huge debt burden accumulated in previous years is a priority for many households.

Banks have also tightened their lending criteria significantly and only a small portion

of credit applications are being approved. At the same time weak equity and property

prices are putting household balance sheets under pressure and reducing the propensity

of households to borrow.

Given the surge in mortgage lending in recent years, many households currently havenegative property equity on their balance sheets. The result is that households arecutting back on discretionary spending in a big way and saving more. The labourmarket is also taking strain with increasing unemployment and falling wage increases.In many sectors, such as manufacturing, current wage increases are way below theinflation rate. Current statistics suggest that retail inflation is still around10%.

33


34/39

Seasonally adjusted real retail sales were 1.3% lower in April than in March

and 6.9% lower than a year ago.

April real retail sales (seasonally adjusted) were also 4% lower than

the 1st quarter average.

34


35/39

Challenges

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 customers 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 and quantity that enable the retailer to reach its goals.

Merchandising is perhaps, the most important function for any retail organization, as itdecides 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.

35


36/39

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.

36


37/39

Conclusion

he future for organized retail in India is a bright one. The demographics, the

sense of optimism and the deep-rooted entrepreneurial culture are ready

ingredients for success. The retail industry needs to get organized and drive

its own destiny. The government needs to be lobbied with, to help create a conducive

environment so that the latent entrepreneurial spirit can get unleashed and ultimately

value can be delivered to consumers who will push their shopping carts and participate

actively in this great retail boom. While there are obstacles, there are clear

opportunities in modern retailing in India. In such a scenario, preparedness of Indian

retailers in terms of having appropriate formats, scalable processes, appropriate

technology and relevant organization capability would be crucial to success. The

Indian market is extremely price-quality sensitive; it makes sense to enter the gigantic

market in a phased manner; hence for the multinational players it is imperative to have

the right local partners dealers, distributors and retailers. The Indian retail sector is

ready to take on challenges from global retail players such as Wal-mart and Carrefour

because unlike them, they have a better understanding of the Indian consumers

psyche. Ultimately, a successful retailer is one who understands his customer. The

Indian customer is looking for an emotional connection, a sense of belonging. Hence,

to be successful any retail outlet has to be localized.

T

The customer should feel that it is a part of his culture, his perceived values,

and does not try to impose alien values or concepts on him. Indian customer is not

keen to buy something just because an international company sells it. Ultimately, it

boils down to how much localization and adaptation the company is willing to do for

India. Other than tremendous money power, global companies have nothing extra or

special that the Indian retail business does not have. To use a clichd phrase - We live

in exciting times. Only three percent of Indias retail market is organized. The future

shows tremendous potential for growth in the retail sector. Almost all large companies

worldwide are looking to establish a base or stake in the Indian market. In this

scenario, the Indian retail sector itself must seize the initiative to realize the dreams of

contributing to a prosperous and booming economy.

37


38/39

The focus should be on the Indian horizon before looking for retail opportunities in

other countries because India itself is a big retail market. And with the big cities

getting saturated, the tier II cities hold the key for the prosperity of the retailers in

India, provided they come up with innovations needed to suit the culture and

demographics of these cities.

We shall endwith

Mr. Kishore Biyanis famous gospel for retailing in India

Rewrite rulesbut Retain the

values.

38


39/39

Bibliography

Websites:

1. www.google.com2. www.etretailbiz.com3. www.mothersprideonline.com4. www.futuregroup.com5. www.rbk.com6. www.retailindustry.about.com7. www.pantaloon.com

Books:

1. Marketing Management by Philip Kotler2. Organizational Behavior by Stephen P Robbins.3. Consumer Behavior by Leon G. Schiffman & Lesile Lazar Kanuk

Magazines:

Business today

Business world - The Marketing White book, 2008Press Sources:

Economic Times

Business Standard
http://www.google.com/http://www.etretailbiz.com/http://www.mothersprideonline.com/http://www.futuregroup.com/http://www.rbk.com/http://www.retailindustry.about.com/http://www.pantaloon.com/http://www.google.com/http://www.etretailbiz.com/http://www.mothersprideonline.com/http://www.futuregroup.com/http://www.rbk.com/http://www.retailindustry.about.com/http://www.pantaloon.com/

19704579 impact of recession on retail industies

Documents