global sourcing assignment

8/8/2019 Global Sourcing Assignment

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GLOBAL RETAIL SECTOR

INTRODUCTIONRetailing involves all activities accompanying to selling to ultimate consumer for their personnel

family and household use, from a fixed location such as a department store or kiosk, in small orindividual lots for direct consumption by the purchaser. Retailing is the interface between the

producer and the individual consumer buying for personal consumption. Hence the success of

retailing is highly dependent on an efficient supply chain management.

Growth in the Global Retail Market The confluence of market forces has created an extremely complex climate for the global retail

industry. In mature markets, retail sector is challenged by its inability to grow and maintainprofit margins as a result of a constrained operating environment, market maturity & situation,

slow population growth and more demanding consumers as well as highly volatile consum

behavior.

Today retailing is a primary driver of the global economy and has become an essential part of

our lives. Of the worlds 10 largest retail companies, six are from the US and four are from

Europe. These top ten had combined sales of $978.5 billion in 2007, according to international

consulting group, Deloitte.

The issues that were competing for the retailers from the past 2 years are the power of

technology, product transparency, privacy and security, Green business model, Talent

management

To maintain the highest level of profitability, retailers are establishing a presence in fertile

foreign markets. Retail organizations now view their potential market share to include worldwide

consumers, not just customers in their home country. Among the top 5 retailers in the world in

terms of the revenue the largest retailer is, Wal-Mart which has its headquarters in US. The

second largest retailer in the world is Carrefour of France followed by Tesco of UK, Metro of

Germany and Home Depot of US.


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Present State of Global Retail Industry

In 2009 in the retail industry Cutbacks, layoffs, closings and bankruptcy are the hottest retail

trends in 2008. History will point to 2008 as the official beginning of a massive global retail

recession. There were record-breaking declines in sales, inventories, and consumer confidence

that caused revenue losses.As it was predicted in the Deloitte report, 2008 Industry Outlook: A look around the corner,

U.S. retailing is challenging due to fears about the housing market, tightening credit, not to

mention high gas prices and cost of living increases. The big retailers have been compensated top

U.S. CEOs in fiscal year 2008 which ranged from a high of $30.6 million to a low of

$1.00,according to Salary.com. Robert Iger, Walt Disney Co. received $30.6 million and Steve

Jobs, Apple received $ 1.00 (source: About.com Overview of retail sector)As a result the retailers need to struggle to enhance sales by being creative and competitive but

it's not enough to just show up. History shows that the retailers who survive economic setbacks

are the ones who get inventive, get resourceful, and get noticed.

One of the most exciting things to watch in the global retail landscape is the growth and

influence of the BRIC emerging markets (Brazil, Russia, India and China). China is already a

strong global performer and represented in the top 10 most international markets in our study.

Within the primary cities, such as Beijing, Shanghai and Guangzhou in China, there is a

significant concentration of wealth and it is around these cities that much of the international

retail activity is well centered, Mr. Davies underscored. `Deloitte in its report, Global retail

trends for 2009 has mentioned that successful retailers will find a way to enhance their customer

experience, improving risk management, cutting cost, human resource management, multi-

channel approach, thinking globally and branding.


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INDIAN RETAIL SECTOR

OVERVIEW OF INDIAN RETAIL SECTORIndia is one of the largest and highly fragmented Retail markets globally with the highest retail

outlets in the world crossing over 12 million with unorganized players accounting for around 5%

of market share. Among this unorganized player more than 80 percent of these run as small

family businesses in small towns and cities in the form of kirana stores, push cart vendors,

melas and mandis. In terms of employment the retail outlet in the unorganized sector feeds a

household of six to seven members. The big retail players are beginning to realize the

significance of this untapped market by entering these markets and are being accepted by these

rural consumers. The rural retail revenues are estimated to increase by 60 per cent by 2012, withlarger share of increase in demand for consumer and household products.

Structure of Indian Retail Sector

The Indian retail industry can therefore be broadly divided into organized and unorganized

retailing. Unorganized sector constitutes of the local kiranas, hand cart, the vendors on the

pavement etc. Unorganized retailing is still the backbone of the Indian retail industry

contributing to over 95 per cent of total retail revenues.

The organized sector on the other is hand trading undertaken by the licensed retailers who have

registered themselves to sales as well as income tax. They constitute of corporate backed

hypermarkets and retail chains. This modern retail has entered India as seen in

sprawlingshopping centers, multi-strayed malls and huge complexes offer shopping,

entertainment and food all under one roof.


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Growth prospects in Indian Retail Sector

The Indian retail industry today is the 5th

largest retail destination and the second most

attractive market for investment in the globe after Veitnam as reported by AT Kearney'sseventh annual Global Retail Development Index (GRDI), in 2008.The growing popularity of the

Indian retail sector has resulted in a growing awareness about brands and quality products. As a

whole Indian retail sector has made life convenient, easy, quick and affordable. Indian retail

sector, especially organized retail is growing rapidly, with the customer spending growing in an

unpredicted manner. It is undergoing a metamorphosis. The diagram clearly demonstrates the

evolution of the retail industry. Till 1980 the retail industry continued in the form of kiranas that

is unorganized retailing. Later in 1990s Branded retail outlets like Food world, Nilgris and local

retail outlets like Trinetra super market, Apna Bazaar, came into existence. Now big players like

Reliance, Bharti, Tatas, ITC and other reputed companies are entering into organized retail

businesses.

Total Share of Retail Sector in India


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The big multinational retailers are slowly entering India in the form of direct entrance eg: - Nike,

Reebok, Metro etc or Joint Ventures e.g.: - Bharti with Wal-Mart and Tatas with Tesco. 2008

onwards the retail sector realized the significance of technology and understanding th

opportunities the retail sector had to offer efforts have been made to leverage traditional

formats. It is estimated that 2011 will see a remarkable growth in retail sector in terms of

investments to optimally benefit from the unexplored retail market.

Evolution in Organized Retail

The Organized Retail Industry in India is estimated to be around US $25.4bn at the end of CY2008,

which only around 5% of total retail market. Among the BRIC countries only in India the share of

organized retail is low. The share of organized retail in other BRIC countries is Brazil (36%),

Russia (33%) and China (20%). Globally, Organized Retail accounts for around52% of Total

Retail. It is seen that the organized sector in India still has a long way to go because the unorganized

retail still continues to dominate the retail market.

But the organized retailing is growing at a fast pace. The organized retail market is presently ~5

percent of the total retail, that is around Rs 67,310 crores and is expected to compound at 27percent

per annum, aggregating to Rs 1,75,103 crores (7.44 percent of the total retail) in 2010-

11. The organized Share of retail sector is expected to increase to 8-9 percent in 2010-11 as compared to4 percent in 2007.However due to urban rural divide the growth is likely toconcentrate more on

metros and large cities.


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Organized Retail Industry Vs Foreign Investors

There have been huge controversies regarding the organized retail taking over the unorganized

sector and the following adverse impact on the lives of various local retailers. The small retailers feel that

they cannot fight the big retailers like reliance fresh, Spencer, food bazaar that aretaking away their

market share.

For the security of domestic retailers there was a ban on foreign investment in multi brand

retailing that kept big foreign players like Wal Mart and Carrefour from entering India. But now

FDI of 51% is permitted in India though only through single branded retail outlets and not

through multi brand outlets. Again they can only enter the market through franchisees. This is

how global players are entering India, like Wal-Mart entering India in join hands with Bharati

Enterprises. However domestic companies like Reliance Industries, are confident that even if foreign

players enter the Indian market the domestic retail players will continue to have a competitive advantage

over them. Competitive advantage will be achieved due to low labor and property costs. New entrants to

the organized retail sector will also face higher labor and property costs than traditional firms and must

bear the additional expense of back-up powersupplies. Other barriers will include expensive and

often inadequate supply-chain infrastructure, inflexible labor laws, complicated property codes,

multiple licensing requirements and a shortage of skilled managerial staff.

Impact of Recession

Interestingly despite the global crisis when other sectors are struggling to survive the retail sector

has not been impacted in a big way as revealed by the ETIG analysis conducted by the economic

times. According to the second-quarter results of leading 70 consumer-related firms there was

arise in their aggregate revenues by 8.5 per cent during the September 2008 quarter over the

same period in 2007. Even though this was lower than the 9 per cent growth posted during the

first quarter of 2008-09, it was a lot higher than the 7 per cent registered during the previous

three quarters for these firms. There is further good news when the retail rentals dropped by

around 30-40%. Further drops in rentals can be expected in 2009 which will open a plethora of

opportunities for the retailers in terms of their expansion plans. The extraordinary role played by

retail sector throughout the world in increasing productivity ofconsumer goods and services are

commendable. It is also becoming a major industry by creating millions of employment


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opportunities for people directly and indirectly. Retail industry has become one of the most

dynamic sectors in India with numerous players entering the market and this in turn has made the

industry competitive and lucrative.

Opportunities of Retail Sector India is going to be an attractive destination for global operations with leading retailers seeking

emerging markets overseas. India presents a significant market with a young population just

beginning to embrace lifestyle changes.

a) Rapid Economic Growth

The fast and furious pace of the Indian economy is the driving force for the Indian

consumerism, confident about earnings , and also spending a large proportion of their

disposable incomes.

Projections by various analysts suggest that India has the potential to be labeled the fastest-

growing economy and the developed economies by 2050. India, promises a continued robust

growth story.

b) The Young India Growing Young Population


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India possesses the advantage of having a largely young population. 35 percent of Indias

population is under 14 years of age and more than 60 per cent of the population is

estimated to constitute the working age group (15-60) till 2050.

This trend is projected to continue for the next decade, with the share set to reach its

maximum in 2010. The large proportion of the working-age population translates to a

lucrative consumer base vis--vis other economies of the world, placing India on the

radar as one of the most promising retail destinations of the world.

c) Potential Untapped Market

India ranks first, ahead of Russia, in terms of emerging market potential.

Organized retail penetration is on the rise and offers an attractive proposition for entry of new

players as well as scope for expansion for existing players. A steadily rising percentage of rich

and super rich population and impressive disposable incomes offers a spectrum of

opportunities, spanning from rural retailing to luxury retailing.

Pantaloon Retail India Limited, one of Indias retail giants captures a mere 0.3 per cent of

total market; compared to Tesco Plc, which captures 14.3per cent of Englands marketand

Wal-Mart which captures 20 per cent of USAs market; giving an insight into the large

untapped market potential.


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d) Abundant Availability of Skilled Labour

India has a vast resource base of talent and skilled labour. Over 37,000,000 students were

enrolled in about 150,000 pre-college institutes and over 11,700,000 in 14,000 higher

education institutions in 2005-06

With English being the language for business in India, the language skills of the Indian

workforce score higher than that of emerging economies.

Retail Management is a sought after education stream amongst students, with over 15

premier institutes offering specialized courses in Retail Management.

e) Emergence of India as the Retail Hub

Riding on the back of a strong manufacturing industry, India is fast emerging as an

important global sourcing hub for top international brands. India has had a continued

presence in the global scenario as one of the leading exporters of apparels and textiles.

The expiry of the Multi Fiber Arrangement has further widened the global markets for

apparel. Many international brands have identified India as one of the important supply centers

for procurement of textiles and apparels.

Wal-Marts sourcing operations was estimated at US$ 1 billion, Tescos around US$ 100

million.


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Key challenges impeding the growth of Organized Retail in India

The key challenges facing Organized Retail in India are acceptance of Organized Retail by the

Traditional retailers (which is leading to tougher regulatory measures by the government), supply chain

in efficiencies, high real estate costs, increasing personnel costs, high execution risks interms of

store rollouts and high shrinkage that hits Retailers' Bottom-lines. We believe that these challenges

would result in Margin contraction for most players. However, increasing economies of scale and

scope would result in savings for the Retailers and mitigate Margin contraction to a large extent.

The retail industry players are successfully blending knowledge from the experiences ofthe

global retail industry with the unique requirements and preferences of the Indian

consumer. Such customization to the latent needs of the Indian consumer has brought

about a great deal of innovation in the product offerings as well the retail formats in which they

are being sold.

Khadi & Village Industries Commission is set to roll out a string of swanky Khadi

Plazas, which would showcase the traditional handloom textiles in a completely new form.

Over 7,000 existing outlets are to be beefed up to cater to the changing tastes of the

young Indian consumer and thereby provide a boost to the presently stagnant sales of the

khadi textiles. The latest addition to the list of diverse retail formats are the Village

Malls, with the fair price shops being revamped to cater to larger needs of local

populations. The Government of Gujarat has spearheaded one such initiative with

512Village malls launched in the state with further plans for 508 such malls.

Retailing as an industry in India has still a long way to go. To become a truly flourishing

industry, retailing needs to cross the following hurdles.

o Automatic approval is not allowed for foreign investment in retail.

o Regulations restricting real estate purchases, and cumbersome local laws.


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MAJORPLAYERS OF INDIAN RETAILSECTOR

4.1 SHOPPERSs STOP LIMITED

Shoppers Stop Ltd. is a retail chain of branded and own label apparel, footwear, perfumes,

cosmetics, jewellery, leather products and accessories, home products, books, music and toys.

Shoppers Stop operates through 23 stores located in the cities of Mumbai, Delhi, Kolkata,

Chennai, Bangalore, Hyderabad, Pune, Jaipur and Gurgaon.

Apart from the retail store chain Shoppers Stop, the company has forayed into specialty stores for

books with Crossword Book Store having 41 outlets, home dcor with Home Stop having 2 stores and in

cosmetics and maternal care through exclusive retail agreements with international brands like M.A.C.

and Mother care having 11 stores respectively. Shoppers Stop Ltd. alsoventured in the Food

& Beverages business by opening Brio the caf bistro having 12 outletsand Desi Caf. The

Company is occupying an aggregate area of 1,152,590 sq. ft. and Crossword

Bookstores Ltd. occupies additional 201,890 sq ft.


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TRENT LIMITED

Acquisition of a London-based retail chain Littlewoods by the Tatas was followed by the

establishment of Trent Ltd. which is the parent company of Westside store, Star Bazaar and Fashio

Yatra store which are chains of retail outlets promising customers an international shopping experienc

and value-for-money. Contemporary, high quality designs and a plethora of products have been

successfully balanced to create the ultimate shopping experience for the consumers. Westside has

chain stores in Mumbai, Bangalore, Hyderabad, Chennai, Pune, New Delhi and Kolkata with

several departments to meet the varied shopping needs of customers including menswear, women

wear, lingerie, kids wear, household accessories, cosmetics and perfumes sections. Complementing

the shopping ambience is a coffee shop, Cafe West, managed by the Taj Group. Trent has 18

Westside stores and one Hyper-market in the year 2004-05.


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VISHAL RETAIL LIMITED

Vishal Retail is a hypermarket chain established in Kolkata in 1986 that currently functions in major

metro cities in India. The company is a pioneer in low prices everyday and does its business in

grocery, department and apparels. Currently the company has over 100 storesthroughout India

which run under the name of Vishal Mega mart.

Presence of Vishal Retail across

The apparels rolled out by the company are under private label and the FMCG & Non-Apparel

are under both private and renowned brands. The company is focused on increasing the privatelabel products on its shelves.

Vishal Retail's net profit has dropped by 86.7% for the quarter ended 31 December. The

company has posted net profit worth Rs 2.15 crore compared with Rs15.55 crore for the same

quarter FY'08 (Source: www.topnews.in)


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PROVOGUE (INDIA) Ltd

Provogue (India) Limited (PIL) was incorporated on 17th November 1997 as Acme Clothing

Private Limited and commenced its operations as a manufacturer and retailer of apparel for men

under the brand Provogue. Provogue stands for fashion and not pure apparel, its designs are

cutting edge and radical. Divisions of the company include accessories, women's wear and men's wear.

The Company's manufacturing unit is situated at Nani Daman, Daman.

To capitalize the opportunities in the retail business, the company through its subsidiary, Prozone

Enterprises Pvt. Ltd collaborated with UK based, Liberty International Plc, is in the process of developing

properties for commercial purposes including development of shopping malls. Promart, a division of

Provogue will offer consumers their favorite brands at a great value through their off-price retail

stores.

The Company had launched the fashion brand Provogue' in March of the year 1998. After a year

in 1999, PIL had introduced the brand Provogue in National Chain Stores like Piramyd,Shopper's Stop and Lifestyle. The Company had opened the first Provogue Studio (an exclusive

brand outlet) in Lokhandwala, Andheri at Mumbai during the year 2000. Further, PIL had

opened its second Studio Store in Chandigarh during the year next.


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FOREGIN RETAIL PLAYER

Despite ongoing deregulatory reform in the Indian economy foreign direct investment is still not

allowed in the retail market (except for a brief period in the 1990s). This does not mean though,

there are not other, indirect avenues for access. Basically, there are four ways for foreign

consumer brands to access Indias market, franchising, wholesaling, licensing or by having a

manufacturing base in India.

Such global brands as Pizza Hut, McDonalds, Adidas, Nike, Benetton, Marks and Spencer,

Baskin and Robbins and Dominos are but a few who have chosen the franchising route, many of

them in joint ventures with Indian firms. These companies are now well-positioned though, as

the Indian government in early 2006 announced it will allow 51% ownership in JVs by single

brand companies in the retail market. Already single brand companies like Gap, Zara, Timex and

Starbucks have announced plans to enter the market.

In wholesaling, where 100% foreign investment is allowed, Metro of Germany, Shoprite of

South Africa and Itochu of Japan have set up cash and carry wholesaling operations which entail

the building of distribution infrastructure to assist local manufacturers. The move has not been

without pitfalls as Metro was sued by local merchants saying that they were also catering to theretail market. Wal-Mart has been thinking about entering through this route with its own Sams

Club wholesale operations.

Most foreign brands, Gucci, Disney, Liz Claiborne and Rolex, to name just a few, have entered

the market through licensing agreements. Just one recent example is the Tommy Hilfiger brand

which entered the Indian market in a joint venture licensing agreement with the Murjani and

Lalbhai (Arvind Brands) Groups of India.


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Nokia of Finland, now has over 40% of the urban mobile phone market, however the markets

really heating up with most of the major foreign makers (Samsung, Motorola, etc.) going head-

to-head with some of Indias most famous corporate names (Tata, Reliance, etc.) And in the all

important fast moving consumers goods market Hindustan Lever, a Unilever (Anglo-Dutch) joint

venture, is Indias largest FMGC, while Nestle India, Colgate-Palmolive India and P&G are all

big players in the industry, along with such Indian companies as Dabur, Godrej Consumer and

Marico, to name a few. And of course the automobile industry is represented by most major auto

makers, with Toyota and BMW announcing new recent investments.

The current hope in Indias retail market is that FDI barriers in retailing will soon be lifted,

possibly within the next year or so. The Indian governments thinking is that the investment will

help improve infrastructure and modernize supply chains, already the likes of Wal-Mart, Gap,

Tesco and others have huge sourcing operations in India, and that the Indian consumer market

will be so big that the foreign giants will be needed to meet the consumers needs. On the other

hand, they may remove the barrier in phases, over a few or so years, in order to give Indian

retailers a bigger jump on their foreign rivals than they already have.

The Waiting Foreign Juggernaut:

The largest retailer in the world Wal-Mart has a turnover of $ 256 bn. and is growing annually

at an average of 12-13%. In 2004 its net profit was $ 9,000 mn. It had 4806 stores employing 1.4

mn persons. Of these 1355 were outside the USA. The average size of a Wal-mart is 85,000sq.ft

and the average turnover of a store was about $ 51 mn. The turnover per employee averaged $

175,000. In 2004 Wal-Mart had a 9% return on assets and 21% return on equity.

By contrast the average Indian retailer had a turnover of Rs. 186,075. Only 4% of the 12 million

retail outlets were larger than 500sq.ft in size. The total turnover of the unorganized retail sector

was Rs. 735,000 crores employing 39.5 mn persons. Let alone the average Indian retailer in the

unorganized sector, no Indian retailer in the organized sector will be able to meet the onslaught

from a firm such as Wal-Mart when it comes. With its incredibly deep pockets Wal-Mart will

be able to sustain losses for many years till its immediate competition is wiped out. This is a

normal predatory strategy used by large players to drive out small and dispersed competition.

This entails job losses by the millions.


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India has 35 towns each with a population over 1 million. If Wal-Mart were to open an average

Wal-Mart store in each of these cities and they reached the average Wal-Mart performance per

store we are looking at a turnover of over Rs. 80,330 mn with only 10195 employees.

Extrapolating this with the average trend in India, it would mean displacing about 4, 32,000

persons. If large FDI driven retailers were to take 20% of the retail trade, as the now somewhat

hard-pressed Hindustan Lever Limited anxiously anticipates, this would mean a turnover of

Rs.800 billion on todays basis. This would mean an employment of just 43,540 persons

displacing nearly eight million persons employed in the unorganized retail sector.


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OBJECTIVE OF STUDY

TITLE:-

Comparative Study on Indian Retail Industry & Foreign Retail Industry and

Challenges to organized retails in the current scenario.

This project is based on the comparative study of Indian Retail Industry and Foreign

Retail Industry.

Objective:-To study the comparative study between Indian retailer and foreign retailers.

Understand the key strategy of the Indian retailers over the coming foreign retail industry.

Analyze the threats and challenges to organized retailers in the current scenario of

competitive market.

Objective:-Understand the sector of organized retails, find out the challenges faced by them and

determine what the measures are taken by these retailers to survive in this current scenario.

RESEARCH METHODOLOGY

This chapter describes the methodology of the study. This project is based on information

collected from primary sources. After the detailed study, an attempt has been made to present

comprehensive analysis of Big Bazar organized retailers and Upcoming retail industry Wall-

Mart. In collecting requisite data and information regarding the topic selected, we went to the

Big Bazar, Mumbai and collected the data.

Research design:

The study is based on descriptive research design because the data were collected to reveal

accurate descriptions of variables related to the decisions being faced, without demonstrating that

some relationship exists between variables. For the purpose of present study a related sample of

stores were selected on the basis of convenience.

Sample Size and Design:

A sample of 200 was taken on the basis of convenience.


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Research Period:

Research work is only carried for 1 week.

Research Instrument:

This work is carried out through self-administered questionnaires. The questions included were

close ended with Ordinal-polychromous response scale.

Data Collection:

The data, which is collected for the purpose of study, is divided into 2 bases:

Primary Source: The primary data comprises information survey of Comparative Study on

Indias Retail Industry & Foreign Retail Industry. The data has been collected directly from

respondent with the help of structured questionnaires.

Secondary Source: The secondary data was collected from internet and references from Library

and various journals on retail industry.

Data Analysis:

The data is analyzed on the basis of suitable tables by using mathematical techniques. The

technique that we have used is bar graphs, pie charts, with MS-EXCEL and SPSS.


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QUESTIONNAIR FOR RETAILERS

A. Store name:____________________________________________

B. Location of the Store:(i) Mall (ii) General

C. Which kind of customers generally visit at your store?(i) High grade income level(ii) Medium grade income level

(iii) Average grade income levelD. Flow of customer per day in your store:(i) Below 500 (ii) 500 to 1000

E. Revenue earned per customer basis:In 2004-05 Rs. In 2008-0

F. Does the brand consciousness of customers divert them to the different departments?Yes No

G. Whatkey strategies are used over the coming foreign retail industry?


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QUESTIONNAIR FOR CUSTOMERS

1. Name ________________________________________________________________

2. How regularly do you visit retail store?

Every day every weak In 15 day

3. What are the influencing factors to visit this store?

Price Services

4. Are you satisfied with your existing retail store?

Yes

If Not, What is your expectation about retail store?

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

5. Which retail store would you like to prefer?

Indian retail store foreign retail store

Why,

___________________________________________________________________________

___________________________________________________________________________

.

global sourcing assignment

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