1. Industry Overview
05
3. Origin of retail
13
6. Specialty stores
25
10. Challenges
55
19. Conclusion
89
21. References
94
2
Growth of Retail Sector in India
Industry
Overview
3
Growth of Retail Sector in India
growing quite fast and has a few large players today. Gas stations
are seeing action in the form of convenience stores, ATMs, food
courts and pharmacies appearing in many outlets.
In the coming years it can be said that the hypermarket route will
emerge as the most preferred format for international retailers
stepping into the country. Estimates indicate that this sector will have
the potential to absorb many more hypermarkets in the next four to
five years
Subhiksha Supermarket
considering moving to self service
Traditionally, the kirana retailing has been one of the easiest ways to
generate self-employment, as it required minimum investment in
terms of land, labour and capital. These store are not affected by the
modern format of retailing. In order to keep pace with the modern
formats, kiranas have now started providing more value-added
services like stocking ready to cook vegetables and other fresh
produce. They also provide services like credit, phone service, home
delivery etc.
Apart from metro cities, several small towns like Nagpur, Nasik,
Ahmedabad, Aurangabad, Sholapur, Kolhapur and Amravati has
seen the expansion of modern retails. Small towns in Maharashtra
4
Growth of Retail Sector in India
are emerging as retail hubs for large chain stores like Pantaloon
Retail because many small cities like Nagpur have a student
population, lower real estate costs, fewer power cuts and lower
levels of attrition.
However, retailers need to adjust their product mix for smaller cities,
as they tend to be more conservative than the metros. In order for
the market to grow in modern retail, it is necessary that steps are
taken for rewriting laws, restructuring the tax regime, accessing and
developing new skills and investing significantly in India.
India 62 34 91 80 1st
Russia 52 58 71 92 2nd
China 68 40 53 90 4th
Turkey 51 56 66 65 9
Thailand 64 41 59 71 12
Malaysia 70 49 58 40 18
Egypt 51 35 85 30 25
Brazil 52 56 57 20 29
India’s
Rank 24th 14th 1st 7th 1st
5
Growth of Retail Sector in India
0%
1991 1996 2001 2006 2010E
0-19 Yrs 20-34 Yrs 35-54 Yrs 55+ Yrs
6
Growth of Retail Sector in India
Pharma
Entertainment Durable 2%
1% 10%
Home
3%
Clothing and
Textile
36%
Food & Grocery
14%
7
Growth of Retail Sector in India
ORGANIZED
RETAIL
8
Growth of Retail Sector in India
India, Russia, China and Vietnam top the list of the most attractive
emerging markets for retailers' investment in 2007, While India and
Russia have held the top two spots since 2004, China's booming
consumer spending, together with retailers moving into second-tier
cities, helped it rise to No. 3 from its No. 5 spot last year, according
to the 2007 Global Retail Development Index from management
consultant firm A.T. Kearney.
The higher the ranking, the more urgency for retailers to enter the
market, according to the study, which ranks the top 30 emerging
countries for retail development and focuses on mass-merchant and
food retailers.
India has already attracted the attention of global retailers like Wal-
Mart Stores Inc., which is working with India's Bharti Enterprises to
set up a joint venture for a cash-and-carry business. In India, foreign
multiple-brand retailers, which sell diverse brands under one roof,
are limited to cash-and-carry and franchise or license operations.
9
Growth of Retail Sector in India
But she cautioned that a separate strategy is needed for the smaller
markets since consumer tastes, ability to spend and willingness to
embrace new formats may be different than in larger urban areas.
10
Growth of Retail Sector in India
Origin of Retail
Sector
11
Growth of Retail Sector in India
Early Trade:
General Store:
12
Growth of Retail Sector in India
Early Markets:
Origins of Retail
13
Growth of Retail Sector in India
This all changed in 1915 when Albert Gerrard opened the Groceteria
in Los Angeles, the first documented self-service store. This was
soon followed a year later by the Piggly Wiggly® self-service store,
founded by Clarence Saunders in Tennessee in the U.S.
Growth:
This new type of shopping was more efficient and many customers
preferred it. Although personal service stores remain to this day, this
new concept started a rapid growth of self-service stores in the
United States. Other countries were slow to take up the idea, but
there has been a steady rise in the global amount of self-service
stores ever since.
Efficiency
14
Growth of Retail Sector in India
15
Growth of Retail Sector in India
16
Growth of Retail Sector in India
Indian Retail
Industry
17
Growth of Retail Sector in India
The unorganized retail sector includes the big, average and modest
grocery stores and the chemist shops. A changeover is taking place
from the conventional retail sector to organized retailing. But the
unorganized segment still dominates and leads the industry. By
2010, the Indian retailing sector is anticipated to become an Rs12.5
trillion market. The share of organized retailing is supposed to jump
to about 10 per cent from the existing three per cent. The anticipated
staggering growth in organized retailing provides an opportunity to
expand the market for both established and new players. According
to the latest report India Retail Sector Analysis (2006ñ07)I by
RNCOS, the total retail market is primarily focused in rural regions,
which makes up 55 per cent or US$ 165 billion of the overall retail
market as opposed to urban segment, which represents 45 per cent
or US$ 135 billion of the gross retail market. The rural market is
spread over 627,000 villages, even though its centre of attention is
focused around a core group of 100,000 villages that makes up 50
per cent of the rural population.
18
Growth of Retail Sector in India
Though India has more than five million retail outlets, they are greatly
unorganized. There is no supply chain management perspective. In
fact, out of the entire retail sector in India, the organized sector is
only 25 per cent and the rest is unorganized. 96 per cent of the retail
outlets are smaller in area than the standard norms. The retail
industry is divided into organized and unorganized sectors.
Organized retailing refers to trading activities undertaken by licensed
retailers who are registered for sales tax and income tax. These
include corporate backed hypermarket and retail chains and so on.
Unorganized retailing is the traditional low-cost shops, handcarts and
pavements and is by far the prevalent form of trade in India. The
efficiency of organized sector in retailing is manifested in some of the
newer supermarkets in urban/metropolitan India – the produce is
cleaner, fresher, well packed and often cheaper than the local
shopkeeper. This is possible because of the far more efficient
distribution system, which organized retail chains are employing, by
cutting the layers of middlemen involved. There are other benefits
too, of transforming the unorganized retail sector into an organized
sector. Firstly, a number of new jobs will be created, far better paid
than the underage labor working in the local shops. Secondly, the
benefits to the producer and consumer through better prices and
lesser wastage; throwing up exportable surpluses, which will also
benefit the economy as a whole. Thus one can see that allowing FDI
in retailing is beneficial to all the stakeholders involved
The Big Bazaars and Spencer’s, the huge unorganized retail sector
is finally beginning to see the merit of logging on, even if at a model
scale.
Taxation policies also push you to automate and the push is even
harder for those looking to expand beyond their single store
existence.
19
Growth of Retail Sector in India
Small retailers seem next in line and vendors are also warming up to
the opportunity. At the low-end however, smart inexpensive solutions
are the need of the hour. And solutions providers like Microsoft,
Polaris and Shawman are now working on developing smart tools for
the retail enthusiasts. For small players with just one store, the
investment on retail solutions go really low, anywhere between Rs
10,000 to Rs 25,000. Most of the time these solutions are developed
by local firms, who at times compete with the big names in the
industry.
20
Growth of Retail Sector in India
Convenience Small self-service formats located in crowded urban Convenient location and extended
stores areas. operating hours.
21
Growth of Retail Sector in India
RPG Retail Supermarket (Foodworld) Hypermarket (Spencer's)Specialty Store (Health and Glow)
22
Growth of Retail Sector in India
Retailing formats
in India
1.
Malls:
23
Growth of Retail Sector in India
2. Specialty Stores:
3. Discount Stores:
4. Department Stores:
5. Department Stores:
6. Hypermarts/Supermarkets:
7. Convenience Stores:
24
Growth of Retail Sector in India
8. MBO’s :
SPECIALITY
STORES
25
Growth of Retail Sector in India
Food retail :
Food dominates the shopping basket in India. The US$ 6.1 billion
Indian foods industry, which forms 44 per cent of the entire FMCG
sales, is growing at 9 per cent and has set the growth agenda for
modern trade formats. Since nearly 60 per cent of the average Indian
grocery basket comprises non-branded items, the branded food
industry is homing in on converting Indian consumers to branded
food.
Kids retail:
When it comes to Indian children, retailers are busy bonding--and
branding:
Monalisa, the Versace of kids is coming to India.
Global lifestyle brand Nautica is bringing Nautica Kids.
International brand Zapp tied up with Raymond to foray into
kids' apparel.
Disney launched exclusive chains which stock character-
based stationery.
Pantaloon's joint venture with Gini & Jony will set up a retail
chain to market kids' apparel.
Swiss kidswear brand Milou is collaborating with Tirupur-
based Sreeja Hosieries.
Turner International India Pvt Ltd. will launch Cartoon
Network Townsville and Planet POGO--two theme parks
designed around its channels--in the National Capital
Region.
Sahara One Television has also signed a Memorandum of
Understanding to source content from Spacetoon Media
Group, Middle East's largest kids' entertainment brand for
animation and live action content.
26
Growth of Retail Sector in India
Industry experts say kids' retailing will touch annual growth of 30-35
per cent. Toys, stationary, sportswear, outerwear, tailored clothing,
eyewear, watches, fragrance, footwear, theme parks, TV channels…
the segment is growing rapidly at 10 per cent per annum. Margins
are in the range of 20-25 per cent (for dealers and distributors), while
companies enjoy an average gross margin of about 10 per cent.
Agricultural retail:
International retailers :
27
Growth of Retail Sector in India
Supermarkets:
Franchise outlets:
28
Growth of Retail Sector in India
Like Tommy Hilfiger and Wal Mart, other US retailers are firming up their
India entry strategies and if they are already in, they are undergoing
rapid expansion. Fashion brands DKNY is also al set to foray into the
Indian fashion Industry through a franchisee agreement with Indian
company, S. Kumar Starbucks recently expressed their interest in
entering Indian company
Hypermarket:
Shopping Malls:
The new shopping malls that have been expanding their footprint
across Indian cities are well designed, built on international formats
of retailing and integrated with entertainment and restaurants to
provide a complete family experience. Over 300 malls are expected
to be built over the next two years and most Indian cities with over a
million populations will be exposed to this modern method of
retailing.
Shopping malls have existed in India since several decades but were
designed and built to house several shops in a single facility. These
malls also known as Shopping Arcades offered only rows of shops,
most of which were small stores that promised bargains for their
various wares. These Shopping Arcades tried to maximize on their
store space and did not offer any areas for recreation and
entertainment.
29
Growth of Retail Sector in India
The present day malls are a creation of the past few years post
2000. They are designed professionally using a lot of international
experience and combine shopping with a lot of brand building,
recreation, food and entertainment. Malls also have a large format
store that serves as their anchor for shopping and a prominent
restaurant that anchors the food needs of visitors. Most malls also
feature a multiplex cinema that offers entertainment to the visitors of
the mall. Finally the mall has large atria and open spaces to allow
visitors and families to hang-out.
30
Growth of Retail Sector in India
Organized Retail
Sector
31
Growth of Retail Sector in India
Product Segments:
32
Growth of Retail Sector in India
Estimated Growth in
Organized Retail
33
Growth of Retail Sector in India
34
Growth of Retail Sector in India
Major Industry
Players
Nanz in North India, Nilgiris in the South, Pantaloon in the East and
Crossroad in the West were the pioneers of the retail revolution in
India. Nanz faced several obstacles in their business and had to
finally down their shutters. Nilgiris, due to some strange reason, did
not see any logic to expand beyond the southern frontiers. Pantaloon
went to scale up and become bigger and bigger to form the Future
Group, that is now omnipresent in almost all formats right from small
groceries to e-tailing. Crossroads in Mumbai imparted some valuable
lessons to their parent, the Piramyd Group, who has since then gone
on an expansion drive with other formats of retailing in different
cities.
35
Growth of Retail Sector in India
The big players in Indian retail landscape now are the Future Group,
Shoppers Stop, Westside, Subiksha and RPG Spencer. The
newcomers who are knocking at the gates are Reliance Retail,
Bharti Walmart and Aditya Birla Trinethra. Here, we intend to do a
brief profiling of the major players in order to understand the retail
business in a better manner.
36
Growth of Retail Sector in India
2 Shoppers Stop
Shoppers’ Stop is also very well known for having pioneered several
quality retailing concepts in India like CROSSWORD, HyperCITY
and Mothercare. They are the only retailer from India to become a
member of the prestigious Intercontinental Group of Departmental
Stores (IGDS).
Shoppers' Stop also retails its own line of clothing namely Stop, Life ,
Kashish, Vettorio Fratini and DIY. The merchandise at Shoppers’
Stop is sold at a quality and price assurance backed by its guarantee
stamp on every bill.
37
Growth of Retail Sector in India
3 Trent – Westside
38
Growth of Retail Sector in India
Trent also runs another chain of retail stores called Star India
Bazaar. Launched in 2004, Star India Bazaar provides a large
assortment of high quality products made available at the lowest
prices coupled with a unique shopping experience. Star India Bazaar
is located in Ahmedabad and offers a wide choice of staple food,
beverages, health and beauty products, vegetables, fruits, dairy
products, consumer electronics and household items at the most
affordable prices.
4. Piramyd
39
Growth of Retail Sector in India
The FHPC (Food & Personal Care) business is volume driven while
the Lifestyle store is a margin driven business. Piramyd Retail plans
to increase the contribution of private labels from existing 7% to 18-
20% of the revenues by 2010. Gross margins from private labels are
over 40% and hence the company is planning to increase this
business. Most of the stores are on the lease format and the
company is prone to higher lease rentals due to the overall increase
in real estate prices. This may bring the profit levels down
substantially.
5. Subiksha
The Chennai based Subiksha grocery chain runs around 200 outlets
all over the country and it’s 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 transactional
shopping experience. This retail chain has no qualms and spends
almost no money on creating a pleasant shopping experience, and
40
Growth of Retail Sector in India
A few years ago, Subiksha did not even offer shoppers self service.
The customer had to place an order at a computerized teller and the
goods were billed and delivered after cash is collected. Customers
had to bring their own carrybags or pay to buy them from the store.
Subiksha even attempted to charge the customers for home delivery.
6. RPG Spencer
41
Growth of Retail Sector in India
7. Reliance Retail
42
Growth of Retail Sector in India
8. Bharti Wal-Mart
Bharti’s plan is to invest $2.5 billion by 2015 and open stores across
all major cities. This investment would be only for setting up front-end
stores. The modalities for its back-end linkage, including its joint
venture with the world's largest retailer Wal-Mart, are in the process
of being worked out.
A high-level team from Wal-Mart was visited India in the later part of
February to work out the details of the back-end chain. While Bharti
would manage front-end of the retail venture, Wal-Mart would be
43
Growth of Retail Sector in India
The JV was presently scouting for 10 million sq. ft. of retail space,
which would include hypermarkets, supermarkets and convenience
stores and would provide employment to about 60,000 people. The
company would open multi-format retail outlets in all cities with a
population of about one million. Bharti is now conducting a massive
consumer survey to take a final decision on branding and
promotional campaign.
However, Bharti and Wal-Mart have been facing stiff opposition from
the left parties and other political outfits who fear that the entry of the
Bentonville giant will make life difficult for the small grocers and
create massive unemployment. They also expect Wal-Mart to take a
tough stance on lowering prices and force farmers to sell their
produce at lower rates. A lurking fear of monopolistic regime in the
retail sector is also enhancing their fears. Both Bharti and Walmart
are presently having a tough time in convincing the ministers,
politicians, agriculturists, the NGOs and other pressure groups that
their business model would serve to work in the best interests of all
the stakeholders.
44
Growth of Retail Sector in India
45
Growth of Retail Sector in India
METRO Group today, is the third largest trading and retailing group
in the world. The company employs over 2,50,000 staff in 30
countries. In the year 2005 METRO Group had generated sales of
over €55.7 billion; 53% of total sales came from outside Germany.
METRO Cash & Carry started operations in India in 2003 with two
Distribution Centres in Bangalore. With this METRO introduced the
concept of Cash & Carry to India. These Centres offer the benefit of
quality products at the best wholesale price to over 150,000
46
Growth of Retail Sector in India
47
Growth of Retail Sector in India
THE GROWTH
DRIVERS
48
Growth of Retail Sector in India
49
Growth of Retail Sector in India
50
Growth of Retail Sector in India
In India they do not have to face this dilemma largely because rapid
urbanization, increase in demand, presence of large number of
young population, any number of opportunities are available . The
bottom line is that Indian market is changing rapidly and is showing
unprecedented consumer business opportunity.
1. Income
2. Socio-Economic status
3. Age demographics
4. Geographical dispersion
1. Income Classification
2. Socio-Economic Classification:
51
Growth of Retail Sector in India
3. Age Demographics:
Year/
2006 2001 1996
Age
Consumption Trends
52
Growth of Retail Sector in India
GROWING ECONOMY
DISPOSABLE INCOME
53
Growth of Retail Sector in India
RISING INCOMES
Over the past deacde , India’s middle and High Income group has
grown at a rapid pace of over 10% per annum . Though this growth is
most evident in urban areas, it has also taken place in rural markets.
Further, the number of house holds earning above Rs.150,000 per
annum is about 30 million today and is expected to grow to 80 million
by 2007. This growing high-income population is triggering the
demand for consumer goods, leading to the proliferation of Higher
quality/higher priced products.
EXPLOSION OF MEDIA
Private Labels
Brands, store labels, private label brands, store brands. These terms may
seem to be synonyms of each other. However, when it comes to retailing,
each of these terms has a different meaning. While we all know what a
brand is, a private label and a store label are different from any other
brand because they are product lines that are owned, controlled,
merchandised and sold by a specific retailer in its own stores. Among
Indian retailers, Stop, Life and Kashish by Shoppers' Stop, and ETC by
Ebony are private label brands. According to Synovate, is the market
research arm of global communications specialist Aegis Group, the
growth of private labels is about 2-3 times more than that of advertised
brands .Among the product lines launched by retailers, the ones whose
nomenclature is the name of the store itself are called store labels.
Foodworld and Nilgiris have launched their own brand of supermarket
products under the "Foodworld" and "Nilgiris" brand names.
54
Growth of Retail Sector in India
the store label also carries the burden of not only the success of the
brand, but also the failure, which may have a negative rub-off effect on
the retailer's image. A store brand on the other hand is a brand name the
retailer carries. Each retailer, because of its unique offering, is a brand in
itself, which is what the store brand signifies. Nallis, Modern Bazaar and
The Home Store are store brands since each of them stands for a certain
retail offering.
Retailers are now aggressively moving into developing their own private
labels as it not only makes economic sense in the form of retailers
achieving higher margins, it also helps them to plug gaps in their product
portfolio. For instance, in menswear, retailers say that gross margins on
branded products vary from 25-38 per cent. Compared to that, the
retailers can earn whopping margins of around 55-60 per cent on private
labels. Private label products contribute to a retail brands differentiation.
A retailer can achieve differentiation through a large (but not necessarily
exclusive) portfolio of private label products. Service adds to the
differentiation, and together with a unique product range, results in a
strong retail brand. They are not perceived as being interchangeable with
similar private label products launched by other retailers (unlike
manufacturers of branded products, which are the same regardless of the
retailer). Introduction of an in house brand of products helps the retailer
to have means with which they can compete head on with the other
branded products. An established private label brand provides the
retailers a platform to negotiate with suppliers, and the retailers are thus
self-sufficient in a certain category. They have more control over the
merchandise and are able to make the required changes and
modifications to suit the changing customer profile much quicker. This
brings about a more consistent and acceptable product portfolio, which
also helps reduce mark-downs. A retailer can create a stronger emotional
connect with the consumer as the experience is not just the store
experience but also the product experience. An outside brand could be
purchased from any outlet. This is not so in the case of private labels, so
the product experience keeps bringing the consumer back
The question is: why would retailers want to get into the trouble of
launching an own brand when there are "n" number of local, regional and
national brands for practically all kinds of products? The reasons are
multifold.
55
Growth of Retail Sector in India
SWOT OF THE
MARKET
56
Growth of Retail Sector in India
57
Growth of Retail Sector in India
STRENGTH
more people.
extension.
WEAKNESSES
in number.
58
Growth of Retail Sector in India
OPPORTUNITIES:
revolution.
spending power.
enhancing products.
industrial units.
huge opportunity.
THREATS:
spending drastically.
experience.
59
Growth of Retail Sector in India
growth in retail.
CHALLENGES
60
Growth of Retail Sector in India
Retailing in its traditional form has been existing in India for decades.
But retail management in the true sense (as retailing is known in the
west) is a relatively new discipline in India. It is unlike other forms of
marketing and the traditional marketing rules do not apply. In
retailing, as in service, there is a fifth P added to the existing 4 of
marketing, the People. Therefore the contact person (whom the
consumers interact with) becomes a doubly important entity. The
most important difference is that where marketing has the classic 4
Ps (Product, Promotion, Price and place), in retailing a fifth P, people
is added which is critical. They are critical to a service business like
retailing both as employees who execute the business and the
customers with whom retailers must interact.
61
Growth of Retail Sector in India
62
Growth of Retail Sector in India
In the last 2-3 years ,several retailers ranging from F&B operators to
discount clothing, have implemented Supply chain management
(SCM) solutions to improve core business processes such as global
sourcing,distribution,logistics,innovation,transparency and visibility in
financials and inventory, compliance and management of point of
sale(POS) data. Going ahead, India’s FMCG and retail sectors are
likely to see an increase in adoption of SCM.
We believe that the implications and size of this loss will be more
significant as retailers continue to scale up and increase product
lines.
63
Growth of Retail Sector in India
LOCATION
PLANNING
64
Growth of Retail Sector in India
TYPES OF LOCATIONS
A) High – Street Location:
65
Growth of Retail Sector in India
Retailers must decide how to make the best use of limited resources,
such as people, funds, and inventories. In order to use these
resources in the most productive way, the retailer plans for the future.
66
Growth of Retail Sector in India
The most important planning occurs before a retail store even opens
for business. Careful planning at this time can greatly enhance a
store's chances of success. By gathering and synthesizing the
relevant information into a retail business plan, the retailer can make
better decisions. A workable retail business plan should be detailed,
specific, and in writing. Indeed, a major advantage of planning is that
it forces the retailer to put ideas in writing.
Setting objectives-
Financial planning:
67
Growth of Retail Sector in India
For some types of stores, however, the best strategy can be to locate
as close as possible to the competition. Competing stores located in
the same area may increase customer traffic. Some cities, for
example, have an area with many antique shops. Customers are
drawn to the area because of this convenience, and each store's
traffic helps the other stores. Retailers should not be afraid of
competition, but they should try to find a market where there is an
unfilled demand for the type of store they are planning.
68
Growth of Retail Sector in India
Other assessments:
Local laws, tax rates, and the labour force are other areas that can
affect the retail store. The planner should investigate these
uncontrollable environmental factors.
69
Growth of Retail Sector in India
Knowledge on buying
For established retail operations, past sales data are very helpful in
knowing how much to buy. For a new retail business, these past
data are not available. However, if a sales forecast and desired
inventory turnover rate have been determined, the beginning
inventory figure can be calculated. A balance between meeting
customers' needs and high inventory carrying costs must be found.
Knowing how much to buy goes hand in hand with knowing what to
buy. Successful retailing involves having the right merchandise in
the right place, at the right time, and at the right price for the
customer.
Pricing
The goals of retail pricing are fourfold. First, the goods must sell at a
satisfactory rate. Second, inventory costs and expenses must be
covered. Third, a desired profit must be made, and fourth, prices
should be fair to customers.
A store's location, layout, design, and product lines affect its overall
image. Advertising is another key element of the store's image in the
minds of customers. Advertising can be thought of as
communicating with customers. The objective of an advertisement is
to stimulate the customer to want what the retailer has to offer, and to
persuade the customer to take action to satisfy the stimulated want
or need.
70
Growth of Retail Sector in India
Services
71
Growth of Retail Sector in India
Information
72
Growth of Retail Sector in India
COMPETITOR
ANALYSIS
The table below outlines some of the strategic moves being planned
to change the competitive structure of Retail business in India.
Early Birds
73
Growth of Retail Sector in India
Future Group Pantaloon, Big A store a day for Can evolve on Expanding Straddling with
Bazaar, Food the next three to vast customer customer base, too many retai
Bazaar, four years – experience sourcing products formats
Fashion 3,300 planned by and existing at cheaper rates
Station, Blue 2010 models
Sky
Tata Trent Westside Looking to Already has Sprucing up It’s smaller ret
register it’s an established product offerings, operations
presence in brand like opening more
hypermarkets; Westside outlets, and
currently introducing new
operates 21 retail formats
stores
Debutantes
74
Growth of Retail Sector in India
Bharti Field Fresh Pan-Indian Bharti’s local Wooing the price Product
Walmart operations expertise and sensitive Indian pricing, shelf
expected Wal-Mart’s consumer and overall
back-end offerings
make it a
lethal combo
In the Pipeline
75
Growth of Retail Sector in India
Future
Outlook
76
Growth of Retail Sector in India
77
Growth of Retail Sector in India
Merger and
acquisition activity
78
Growth of Retail Sector in India
Consideration
Acquired/ JV Company/
Year Acquirer Nature of Business Stake
Target
(US$ million)
2005 Liberty Shoes Future group Retail (Footwear) 51% 3
2005 Indus - League Clothing Future group Retail clothing 68% 5
Leisure retail chain
Deccan Chronicle
2005 Odyssey India (books, music, 100% 14
Holdings
toys)
Books, music,
2005 Landmark Tata Trent 74% 24
accessories
TGI Friday's (a
subsidiary of Carlson Restaurant (Food
2006 Bistro Hospitality 25% N/A
Restaurant World- retail)
wide)
Indus League clothing Lingerie and 50%
2006 Etam group, France women's wear 8
(Future group company) retailing (JV)
79
Technology – A Critical Tool
Out-of-stocks are the most noticeable problem for consumers — during normal shopping experiences
eight per cent of intended purchases are not on the shelf and when it comes to promotional offers,
these out-of-stocks rise to 15 per cent. Faced with an empty shelf, consumers often do not substitute
the same brand. They simply keep their money and leave the store in search of another product. Let's
take the example of a $25-billion retailer: lost sales due to out-of-stocks added up to nearly 1 per cent
of total sales — a mind-boggling figure of $1 billion! Retailers across the nation are unable to predict
and master the demand-supply gap as a result of orthodox tools to measure changing consumer
behavior. Considering the Indian retail industry grew by 300 per cent in the last 12 months and supply
chain accounts for 50 per cent of costs, retailers are now looking at ways to enhance the supply chain
and predict consumer-buying habits. High consumption patterns driven by disposable incomes,
lifestyle shifts and availability of a wide range of brands are dictating the high-growth of different retail
formats in India. No wonder, Indian retail players are under tremendous pressure to make the supply
chain more efficient in order to deliver quality, selection and service to consumers. Retailers are now
looking at creating an efficient supply-chain via a concept popularly referred to as consumer driven
replenishment. What this implies is placing the consumer in the centre of the replenishment process,
to allow retailers to be able to use real-time data to sense and respond to changing consumer
demands. To implement consumer driven replenishment, one needs to first collect and analyze pre-
shopping signals, which often go unnoticed today. For example, consumers may speak to store
associates or call centre agents to enquire on a particular product. As this often leads consumers to
purchase products, retailers and supply chain partners can use existing consumer touch points to map
consumers' buying preferences. For example, Spanish retailer Zara furnishes its store employees with
PDAs to help them order out-of-stock items the minute the customer brings it to the assistant's
attention. This information captured via the PDAs dictates next-day replenishments at the stores.
In another instance, Wal-Mart leverages weather data for replenishment. When the world's largest
retailer knows about an approaching hurricane or snowstorm, the stores in that area are doubly
stocked up with essential items such as bottled water and batteries. This data helps Wal-Mart align
inventory with increased demand to cover unnatural events and prevent out-of-stock situations.
Consumer driven replenishment will change the way the industry handles forecasting and
replenishment. The major business change will start at the business process level; to respond quickly
to consumer demand, retailers and their supply chain partners must redesign the current business
process. All supply chain partners will become part of a cohesive architecture, enabling information to
flow freely from retail functions to suppliers.
Inevitably, consumer driven replenishment within the Indian retail sector will be reflected in rapid
growth in sales of supermarkets, department stores and hypermarkets. And with this increased
competition, retailers will look at various opportunities to maximize customer satisfaction. These will
include initiatives to streamline internal back end costs so as to translate savings onto customers,
maximizing mind share in a cluttered market and delivering the best in store experience.
Keeping these deliverables in mind, some of the other key modules that the store of the future will
look to implement will include:
Store connectivity:
Stores will invest in building wide-area networks (WANs) and virtual private networks (VPNs) to
access information across various sites. With visibility into every resource, stores will take advantage
of up-to-the-minute data at the right time for increased strategic flexibility and informed decision-
making for managing inventory.
RFID: Widely regarded as the key defining technology to hit the retail sector, RFID tags on each
piece of merchandise will enable companies to monitor their inventory at a more detailed level than
ever before. Executives will identify when problems occur by monitoring signal readers installed at
key junctures, such as loading docks, receiving points, distribution centers, backrooms and store
shelves. These readers in turn will be networked to a centralized monitoring system that would give
companies information they could never imagine with current operations, allowing them to identify
problems as shop lifting, inventory management, and even 'gray market’ sales that can erode profits
and damage distribution relationships. Let’s see the actual benefits of using RFID in the supply chain.
The biggest benefit is the total visibility across the entire supply chain:
What managers worry about the most? It is directly or indirectly related to uncertainty.
Inventory Management
• Maintain a real-time view of tagged inventory as it flows through the supply chain.
• Track discrete movement of tagged inventory.
• Trigger alerts around inventory movement based on business rules you construct.
• Allowing just-in-time practices.
Benefits to Consumers,
RFID can go beyond just intangible cost savings, as RFID can play a role in food safety,
counterfeit control, and warranty programs. Businesses must avoid focusing too intently on the
ways RFID tags can be used and instead stay focused on how RFID can improve consumer
value and address complex business issues.
Misdirected deliveries or incorrect orders can immediately result in on-shelf out-of-stock situations
leading to reduced sales and damaged customer relationships. Indeed, for organizations relying on the
delivery of specific components to fulfill their own order schedule, such errors can have a serious
impact on customer satisfaction. Store Mobility: Stores will use wireless technologies at the point of
sale for faster checkout and real-time product information in the store to improve operations, and
throughout the supply chain to reduce costs.
IP Communications: Stores will converge their data and voice systems, providing instant
communication throughout stores at significantly reduced costs.
In conclusion, suffice to say that faced with poor supply chain management and a rapidly changing
environment, today's retailers will most definitively look for consumer driven replenishment to simplify
supply chain operations, control costs, and measure results. With networks that will enable real time
updates to predict and replenish stocks, the Indian consumer will hopefully never find his shopping
preferences out of stock.
The Indian retail market is booming, and there are numerous applications—both business and
consumer—that can be built around radio frequency identification (RFID) to deliver operational
efficiencies. For instance, if a retailer is able to track shipments and high-value assets in real-time, it
can minimise losses. Apart from improved and enhanced accuracy, RFID can also lead up to 80
percent savings in time spent on scanning items.
Explains Chamaria, “RFID is a transformational technology that has the potential to change the way
business is conducted. Although at a nascent stage, we expect RFID will start gaining traction around
2010. The cost of tags and readers is fairly high today; once it comes down and ROI is established, it
will surely be a boon for both retailers and CPG companies.”
Aggarwal of BEA elaborates. “While RFID is at a nascent stage, there are several killer applications
that can utilise RFID technology across verticals. Supply Chain Visibility and Reusable Asset Tracking
will emerge as key solutions that have high applicability in the Indian market, especially in
manufacturing, retail, government and healthcare."
But as of now, RFID has hardly any presence in India. Laments Chopra, “Indian retailers are still to
adopt bar-coding completely. The level of bar-code usage is also largely due to the retailers’ initiatives
of printing these codes at their warehouses, unlike in developed countries, where suppliers print bar-
codes. Most retailers do not have integrated IT systems today. Many retailers have few IT systems in
the areas of supply chain management, vendor development, merchandising and inventory
management. The annual expenditure on IT is quite negligible.”
Technology in Retail
Over the years as the consumer demand increased and the retailers geared up to meet this increase,
technology evolved rapidly to support this growth. The hardware and software tools that have now
become almost essential for retailing can be into 3 broad categories.
Point of sale systems use scanners and bar coding to identify an item, use pre-stored data to
calculate the cost and generate the total bill for a client. Tunnel Scanning is a new concept
where the consumer pushes the full shopping cart through an electronic gate to the point of
sale. In a matter of seconds, the items in the cart are hit with laser beams and scanned. All
that the consumer has to do is to pay for the goods.
• Payment
Payment through credit cards has become quite widespread and this enables a fast and easy
payment process. Electronic cheque conversion, a recent development in this area,
processes a cheque electronically by transmitting transaction information to the retailer and
consumer's bank. Rather than manually process a cheque, the retailer voids it and hands it
back to the consumer along with a receipt, having digitally captured and stored the image of
the cheque, which makes the process very fast.
• Internet
Internet is also rapidly evolving as a customer interface, removing the need of a consumer
physically visiting the store.
• ERP System
Various ERP vendors have developed retail-specific systems which help in integrating all the
functions from warehousing to distribution, front and back office store systems and
merchandising. An integrated supply chain helps the retailer in maintaining his stocks, getting
his supplies on time, preventing stock-outs and thus reducing his costs, while servicing the
customer better.
• CRM Systems
The rise of loyalty programs, mail order and the Internet has provided retailers with real
access to consumer data. Data warehousing & mining technologies offers retailers the tools
they need to make sense of their consumer data and apply it to business. This, along with the
various available CRM (Customer Relationship Management) Systems, allows the retailers to
study the purchase behavior of consumers in detail and grow the value of individual
consumers to their businesses.
APS systems can provide improved control across the supply chain, all the way from raw
material suppliers right through to the retail shelf. These APS packages complement existing
(but often limited) ERP packages. They enable consolidation of activities such as long term
budgeting, monthly forecasting, weekly factory scheduling and daily distribution scheduling
into one overall planning process using a single set of data.
Leading manufactures, distributors and retailers and considering APS packages such as
those from i2, Manugistics, Bann, MerciaLincs and Stirling-Douglas.
Demographics and buying patterns of residents of an area can be used to compare various
possible sites for opening new stores. Today, software packages are helping retailers not only
in their locational decisions but in decisions regarding store sizing and floor-spaces as well.
• Visual Merchandising
The decision on how to place & stack items in a store is no more taken on the gut feel of the
store manager. A larger number of visual merchandising tools are available to him to evaluate
the impact of his stacking options. The SPACEMAN Store Suit from AC Neilsen and
ModaCAD are example of products helping in modeling a retail store design.
Investment Opportunities
• Potential For Investment: The total estimated Investment Opportunity in the retail sector is
around US$ 5-6 Billion in the Next five years.
• Location: with modern retail formats having made their foray into the top cities namely
Hyderabad, Coimbatore, Ahmedabad, Mumbai, Pune, Chennai, Bangalore, Delhi, Nagpur
there exists tremendous potential in two tier towns over the next 5 years.
• Sectors with High Growth Potential: Certain segments that promise a high growth are
Hyper Market
Discount stores
Department Stores
Convenience Stores and E-Retailing
• Supply Chain Infrastructure: Supply chain infrastructure in terms of cold chain and Logistics.
• Rural Retail: Retail sector offers opportunities for exploration and investment in rural areas,
with Corporates and Entrepreneurs having made a foray in the past. India's largely rural
population has caught the eye of retailers looking for new areas of growth. ITC launched the
country's first rural mall ' Chaupal Sagar', offering a diverse product range from FMCG to
electronics appliance to automobiles, attempting to provide farmers a one-stop destination for
all of their needs. There has been yet another initiative by the DCM Sriram Group called the '
Hariyali Bazaar', that has initially started off by providing farm related inputs and services but
plans to introduce the complete shopping basket in due course. Other corporate bodies
include Escorts and Tata Chemicals (with Tata Kisan Sansar) setting up agri-stores to provide
products/services targeted at the farmer in order to tap the vast rural market.
• Wholesale Trading: wholesale trading also holds huge potential for growth. German giant
Metro AG and South African Shoprite Holdings have already made headway in this segment
by setting up stores selling merchandise on a wholesale basis in Bangalore and Mumbai
respectively. These new-format cash-and-carry stores attract large volumes from a sizeable
number of retailers who do not have to maintain relationships with multiple suppliers for all
their needs.
These days, the left parties are orchestrating a passionate opposition to allowing FDI in retail. The
arguments are familiar – that global retailers will swamp the Indian markets, wipe out small kirana
stores and put millions of jobs in jeopardy. They also argue that giant global retailers will squeeze
suppliers and finish them off. “ The negative effects in terms of job losses and the displacement of
traditional supply chains by the monopoly/ monophony power of multinational retailers far outweigh the
supposed benefits…” the left observed in a recent seven-page note that summarized its arguments
against FDI. Given the political clout of the small trading community, because of their enormous
numbers, the government has barred FDI in retailing since 1997. Most of India’s home grown retailers
also oppose FDI, though for a different reason. “What is the hurry (to allow FDI)? For 10 years, China
allowed only one foreign store per province. I allowed domestic chains to build up good valuation
before opening FDI, “argues Kishore Biyani, managing director, Pantaloon Retail. “ The debate is not
‘whether or not to allow FDI, but ‘when and how’,” he clarifies. Biyani is also chairman of Confederation
of Indian Industry’s retail committee, which estimates that Rs.20, 000 crore will be needed in retail to
scale up to its potential. Indian companies need time to mobilize at least part of the capital before the
foreign players are allowed in, argues CII. In private some domestic retailers fear getting lower
valuations from their global counterparts if they sell out today. But five or 10 years later, when they
have built up larger business, they may get far higher valuations. Of course, the argument of asking for
more time to get even better valuation may not lose its appeal even a decade later, if the approach is
instinctively protectionist. INDIA’s retail industry – the fourth largest in the world – accounts for 11 per
cent of the country’s GDP and employs over 40 million people (about 7 per cent of Sector retailers
(Yes, they have retailing PSU’s!) had a 32 percent share and private sector retailers had 45 per cent.
total employment in the country). Now, a huge majority of the retail workforce is in kiranas.This sector,
in fact acts as an informal social security net – almost anyone without a job can set up a kirana. The
big worry is that global retailers will quickly put these kiranas out of business, leading to millions of job
losses. Is that fear justified? The answer can be found in the experience of othercountries that allow
FDI in retail. In Thailand and Malaysia, global retailers have spelt doom for the traditional mom and
pop stores. In fact the Thai government had to step step in to save local retailers from annihilation. It
set up Allied Retail Trade, a network of franchised stores, which brought small stores together to fight
the big chains.
But if the Thailand story is forbidding, then the China one is inspirational. Global chains have had a 13
year run in china. In 1992, China had one supermarket. Today it has 60, 000. (Supermarkets are
perceived to be kirana killers!). Four of the world’s 10 largest retailers, 35 of the top 50 and 78 of the
top 250 have already opened stores in China. Hypermarkets, supermarkets, discount stores, cash &
carry convenience stores every conceivable format operates in China. The globalization of china is
complete.
It must be mentioned that the global giants got unfettered access into China only in 2004. Therefore
their performance cannot be compared with rest of the country’s retail sector, but must be
benchmarked only against the top 100 firms. When seen thus, the foreign firms account for only 23
percent sales of the top 100 retailers. China’s public Now, the question is which theory is relevant to
India – China’s or Thailand’s? “India cannot be compared with Thailand and Malaysia as the scale is
much smaller and economic levels are dissimilar. The right comparison would be Germany 20-30
years ago or Brazil today.
China makes sense because of its similarities with India: large area, large chunk of underdeveloped
population, disparity in income levels,” says Arvin Singhal, chairman of consultancy KSA Technopak.
Or better still, one could also look at the US story. Its retailing industry is one of the most matures ones
in the world. It is also home to some of the world’s largest retailers. But there is a less understood
aspect of the US retail scene – 95 percent of all retailers in the US are single – store operations. They
may not be as the Indian Kirana, but they are still small ‘mom and pop’ operations on the US scale.
Despite over six decades of dominance by large chains, these small players have not find a lot of them
in the vicinity of a Wal- Mart or a target. They are also under pressure and their market share in on the
decline. But the fact is that the single- store operations still control a little less than 50 percent of US
retail trade.
Again, back home, in Chennai, where large and organised supermarket chains like FoodWorld and
Nilgiri’s have grabbed a 20 percent market share, the kiranas haven’t been slaughtered. They are
smarter, more efficient more customer- friendly than they were five years ago; they are matching the
chains’ prices and continue to do brisk business. Even stores in close vicinity of these large
supermarkets have survived. “Small businesses have their own competitive advantages. They are
local; they are usually in the same block that the customers are in; and they are very convenient. They
know their customers by name, so they offer great customer service. They have tailored their inventory
for their customers, so they have great inventory management, and many times they give credit. Small
businesses have their own model, offer a different product mix, and keep their customers happy. I think
small business can grow and prosper with Wal Mart, “Menzer had argued in an inclusive interview with
BW during his May visit.
Greater level of exports due to increased sourcing by major players Sourcing by Wal-Mart from China
improved multifold after FDI permitted in China Similar increase in sourcing observed for Metro in India
Provides access to global markets for Indian producers.
Investment in technology Cold storage chains solve the perennial problem of wastage. Greater
investment in the food processing sector technology Better operations in production cycle and
distribution.
Better lifestyle Greater level of wages paid by international players usually More product variety Newer
product categories Economies of scale to help lower consumer price. Increased purchasing capacity of
consumers
Manpower and skill development through retail training and Greater managerial talent inflow from other
countries
Tourism Development :
A strong retailing sector boosts tourism as seen from the experience of Singapore and Dubai.
Investment in whole supply chain Improved product basket from India for exports.
Long term benefits,up-gradation of agriculture, development of efficient small and medium size
industries.
FDI would result in market growth and expansion. Employment generated at various levels, Increased
consumer demand implies employment generation across the value chain does not need very high
skill sets, needs high school graduates and other similar skill level. Currently this is a majorly
unemployed demographic group
Boom in employment similar to job generation in ITES industry. On a much larger scale But new jobs
comparatively lower down the value chain Greater clarity and objectivity can be achieved if one looks
beyond kiranas at the larger issue of employment, Despite the entry of organized retail – domestic and
foreign – in China, its retail still employs 6 percent of the total workforce ( only marginally smaller than
India). The top 100 retailers in China employ 810,000 people, a figure growing at over 25 percent
every year. But compared with the US, the percentage looks paltry. In the US, almost 15 million people
or 11.7 of the workforce are employed in retail. This is almost double the retail workforce in China –
and much higher than in India!
Many believe that organised retail actually leads to job gains rather than job losses. This is not to say
that the changeover will be painless. Shifting of jobs is bound to happen. “Supermarket chains will
divert business from small vendors, but they also create many jobs,” argues retail expert Gale. One
reason for that is growth of organised retail stimulates consumption. And increased consumption
means more production and therefore more jobs.In India, owners of large and small stores will tell you
that they face stockouts – products not available when a consumer asks for it. This is lost demand.
And it is due to India’s rather inefficient supply chain. One could, therefore argue that India’s
consumption is actually way below actual potential – and that there is inherent job loss of jobs that
exists in the economy. Here poor distribution and below-par processes is another bottleneck. “If the
economy grows at 6.5 percent or so every year, we will have 5-7 years. If you do not have an efficient
distribution chain, the economy cannot grow…Such inefficiency will lead to job losses. If you do not
have organized distribution, you won’t have employment growth,” argues Harsh Bahadur, managing
director, Metro Cash & Carry, India. Finally, if the fear of kiranas being snuffed out is true, then the
government ought to be equally concerned about Indian retailers as well. Several large and influential
business groups like the Tatas and Ambanis have ambitious plans that include setting up of hundreds
of supermarkets and hypermarkets. Won’t these kill kiranas and lead to job losses. In reality; foreign
retailers will be in a position to influence employment only several years after they enter India. But they
will have an impact on the consumer almost immediately. Of course, in India the consumer is invariably
forgotten when protectionist lobbies voice their concern.
RESEARCH METHODOLOGY
Objectives of study
• This study is also aimed at finding out the relation between major demographic variables and
satisfaction level of customers’ and preference of retail formats.
• To study the preference given by consumers in term of quality, ambience, service, scheme
and location for retail purchase.
Research Design:
Data Sources:
It will be collected with the help of Questionnaire Method and Survey Research.
As well as unstructured observation will also come in use at some part (topic) of study.
Secondary Data - It will be collected with the help of Internet, books, journals, articles of newspapers
& magazines and research papers related to booming organized retail sector.
Data Analysis:
1. Questionnaire method
2. Method of observation
Sampling Design:
• Result will be the knowledge about customer’s preference towards exclusive and multi-brand
retail outlet that will be helpful to find out the factors that influence the satisfaction level of
customer.
• It will be helpful to know the connection between demographic factors of consumer like age,
income, education and choice of people for different types of product.
• The present study is limited to the growth of retail sector in india only.
Delivery Method:
Two hard copies in form of booklets and two softcopies in form of CDs.
The below given was the interpretation of the average monthly shopping budget for the sample
size in the project survey. In the sample size most of the people (i.e. 38%)were able to do
shopping between Rs. 2000-5000.
0-2000
7% 1% 23%
12% 2000-5000
5000-10000
10000-20000
19%
38% 20000-50000
50000 & More
The store location, its customer services, discount schemes and offers, its quality are the
important factors for the awareness of the any retailing company or brand but apart from all these
the most important thing which influence the awareness of any particular brand is it’s advertising
and other promotional activities. Big Bazaar of future group in Lucknow is very well know brand
among the people of sample because of it’s pricing, attractive offers and discounts and its very
good promotional and marketing activities. The Vishal Mega Mart is also famous because of its
reach in the various areas of the city.
120
100
80
60
40
20
0
Shoppers
Landmark
Vishal
Big Bazar
West
Mega
Side
Mart
Stop
• Which Retail chain Customers like to visit often:
Because of it’s attractive pricing and good schemes and offers people like to visit Big Bazaar most
often. Vishal Mega Mart is also giving attractive discount on formal wear so it is also known for
good footfall. Shoppers stop do not have discount offers and schemes but it is still liking of some
of people in sample size because of its ambience, shopping comfort and good customer services.
West Side
Landmark
9%
11%
Shoppers
Stop Big Bazar
17% 36%
Vishal
Mega Mart
27%
The consumers of sample size were visiting the big retail outlets most because of their good
pricing and for their attractive schemes and discounts offers. After that they also going there for
the quality experience. The location of the store is also a big concern for the consumers.
Thereafter they are also looking for good customer services. They want to get well treated by the
sales persons of the stores. Ambience came in last for all of them.
Discount Schemes
Quality
Location
Customer Service
Ambience
Conclusion
After studying the customer survey questionnaire statistically and theoretically as well and
after observing the consumer’s mood and their preferences I can say that Big Retail is here to
stay. Assuming that improvements in infrastructure and lower real estate costs become a
reality, Big Retail still has a long way to go before satisfying the highly diverse needs of the
Indian population. As a result, there will be a steady state where Big Retail will co-exist with
Small Retail.
APPENDIX
CONSUMER SURVEY QUESTIONNAIRE RETAIL CHAINS
The objective of this survey is to collect tangible information about shopping
in Retail Chains. This questionnaire is being administered to people like you
who have visited and bought products in Retail Chains. Please let us know
your spontaneous response to the questions that pertain to your shopping
experience in Retail Chains. All information provided by you shall be kept
confidential and we shall only be publishing the outcomes. Please provide us
your unbiased and frank opinions.
Big Bazaar
Shoppers Stop
Westside
Landmark
Vishal Megamart
Any other (Please specify) ________________________________
Big Bazaar
Shoppers Stop
Westside
Landmark
Vishal Megamart
Any other (Please specify) ________________________________
4. Which retail chain did you like most?
Big Bazaar
Shoppers Stop
Westside
Landmark
Vishal Megamart
Any other (Please specify) ________________________________
Ambience
Attractive Prices
Wide range of choices
Discount Schemes
Free Offers
Customer Service
Any Other (Please Specify) ___________________________________
Ambience 15
Attractive Prices 70
Range of Choices 65
Price Discounts 80
Freebies 60
Salespeople Behavior 50
Parking Facilities
Convenience
Home Delivery
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
8. Which products do you normally buy from your local grocery store?
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
12. How much time do you spend in the retail chain on every visit?
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
15. The emergence of retail chains will cause monopolistic control over prices:
Demographics
1. Name: ______________________________________________________
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