09 Chapter2 PDF

Chapter 2 : Retailing in India
2.1 Introduction to Retailing

Retailing can be defined as the list of activities that markets products or services to
final consumers for their own personal or household use by organizing their
availability on a relatively large scale and supplying them to consumers on a
relatively small scale1. In the past, the manufacturers had more economic power due
to their bigger size and determined the prices of their products but these days, retail
has become a separate function and the drivers behind this change are listed below2:
1. Proximity of Retailers to the Customers: One of the reasons for the rising
power of the retailer is that they are the consumers’ first point of contact.
Therefore, Retailers’ are better positioned to understand the consumer’s tastes
and preferences and to influence the consumers.
2. Rise of Consumerism: The consumers are becoming more knowledgeable and
demanding forcing the retailers to change their retail formats to suit the
consumer demands such as convenience, comfort, ambience, shopping time
etc.
3. Private Labels: Presently, retailers decide what products and brands to stock as
the retail shelf space is very vital in attracting prospective consumers and the
retailers today are developing their own in-house brands known as private
labels to cater specifically to needs of their target consumers.
Today, Retailers are emerging as the new leaders in the marketing channel and are no
longer dependent on the manufacturers to sell what is available3.
1
Newman, J Andrew & Peter Cullen (2008), Retailing Management Text and Cases, India Edition,
Cengage Learning, New Delhi
2
Pradhan, Swapna (2010), Retailing Management – Text and Cases, 3rd Edition, Tata McGraw Hill,
New Delhi.
3
Ibid
34
2.1.1 Types of Retail Formats
Retail formats can be classified on the basis of their size, location from the customer,
product assortment and the store atmosphere. Table 2.1 lists the various retail formats
like supermarkets, discount stores, department stores etc.
Table 2.1: Broader Classification of retail formats1

Retail Format Location Size Assortment Price Atmosphere
from
Customer
General Store Close Small Varied High Homely
Variety Near/Far Medium Narrow Medium Varied
Convenience Near Medium Wide range High Cluttered,
Store compact
Supermarket Near/Far/ Large Vast range, Low Busy,
edge of the deep and Organized
town broad
Discount Near/Far/ Medium/ Narrow Low Vastness,
store edge of the Large loftiness
town
Supercenter Far Very Large Multiline Low Vastness,
loftiness
Department Town/retail Large/very Wide range High High Status
store park large with select
items
Warehouse Far Very Large Narrow and Low Functional
club Deep range
Manufacturer Far Small/Medium Narrow in Low Spartan,
Outlet specific Production
lines oriented
1
35
Retail Format Location Size Assortment Price Atmosphere
from
Customer
Discount Near/Far Medium/Large Narrow Low Spacious
variety value range with clutter
Shopping Far Medium/Large Depends on Low/ High-
Mall retail Medium quality
presence sealed
environment
Selling center Far Medium/Large Varied with Low Rummaging
changing and bargain
merchandise hunting
Mass Far Large Narrow Low Volume
Merchandiser with choice
Source: Newman & Cullen, 2008
2.1.2 Environmental changes affecting Retailers
Retailers operate in a continuously changing socio-economic and competitive

environment and therefore success in retailing depends on how the retailer is able to
properly interpret what environmental conditions are changing and how these changes
affecting their customers and then deciding how well to respond to those changes is
the key to their survival. The external environmental forces confronting retailers are
listed below1:
1. Socio-Economic Environment
2. Behavior of Consumers
3. Behavior of Competition
4. State of Technology
5. Behavior of Supply chain
6. Legal and Ethical system
1
Dunne, M Patrick & Lusch, F Robert (2008), Retail Management, India Edition, Cengage Learning,
New Delhi
36
2.1.3 Structural Changes and Trends affecting Retailers
Structural changes are those changes that occur over a much longer period or have
much more enduring effects. Table 2.2 lists the structural changes and trends such as
socio-economic, geographical and technology trends and their impact on the retailers.
Table 2.2: Socio-economic, Geographical and Technology trends affecting

Retailers1,2
Trends/Changes Type Effect on Retailers
Socio-demographic Population Increase in population is synonymous
Trends with growth in retail markets
Age structure of Demand patterns for goods and
population services differs for elderly and younger
people
Household structure The size and structure of the household
has implications for household
spending patterns
Education Education is the single most reliable
indicator of a person’s income
potential, attitudes and spending habits.
Economic Trends Income growth Increased incomes implied increased
demand for goods and services
Working women Increase in double income means
families have less time for shopping
and look for convenience and better
services from retailers
Credit cards Consumers prefer this mode of
payment
1
1Dunne, M Patrick & Lusch, F Robert (2008), Retail Management, India Edition, Cengage Learning,
New Delhi
2
37
Trends/Changes Type Effect on Retailers
Geographic Trends Mobility People frequently change residence due
to employment and higher education.
The retailers’ target audience keeps
changing.
Technology Changes Computerized Use of modern equipment within the
billing systems, store to deliver better customer service.
Customer self-
service, Express
billing counters
(Adapted from Dunne & Lusch, 2008; Newman & Cullen, 2008)
2.1.4 Retail store location

Typically a store location can be classified as listed below1:
1. Free standing/Isolated store: The store is located in a place without much
competition but has some customer traffic.
2. Part of a business district: The store is located in a place which is

considered as city’s major hub for trade and commerce.
3. Part of a shopping center: The store is located alongside other similar

and/or complementing retail and commercial establishments.
Location of a store is a key for any retailers’ success. The factors which determine a
100% perfect location are listed below2:
1. Amount of customer footfalls
2. Ease of accessibility of the store’s location to the customers
3. Number of stores and type of stores located nearby
4. Availability of parking
5. Type of neighborhood
1
New Delhi.
2
Ibid
38
Table 2.3 lists the advantages and disadvantages for stores located in specific location.
Table 2.3: Advantages and Disadvantages of store location1

Store Location Advantages Disadvantages
Isolated or Free No competition, low Advertising costs to
standing rents and ample parking attract customers,
space available customers willingness to
travel to just visit one
store
Part of a Business Good accessibility, Lot Heavy rents, parking
District of customer footfalls problems
Part of a Shopping Heavy customer Heavy rents
center footfalls
Source: Pradhan, 2010
2.1.5 Classification of Store-based Retail Formats in India

on the basis of ownership
1. Independent Retailer
An independent retailer owns and operates only one shop. The owner either employs
local labor or family members to assist in store operations. Many such independent
stores are usually passed on from one generation to another. Examples of such
retailers are the neighborhood kirana stores located all over Hyderabad; Clothing
stores like Andhra Hosiery, F D Khan in Hyderabad; Footwear stores like Lords,
Hollywood, Metro in Hyderabad. The biggest advantage of these retailers is the ease
of entry into the market. The Independent retailers develop a good one to one
relationship with their customer and in the process adapt an appropriate product mix
for that particular location. The biggest disadvantage of Independent retailer is the
lack of economies of scale and limited bargaining power with the suppliers2.
1
New Delhi.
2
Ibid
39
2. Corporate Retail Chain
When two or more retail outlets are owned by a corporate company is termed as a
Corporate retail chain. The retail chains are usually marked by similarities in terms of
merchandise sold, ambience, advertising and promotions. Examples of retail chains
include supermarkets like More, Foodworld, Spencers; Apparel retail chains like
Wills Lifestyle; Department stores like Westside, Shoppers Stop. As the retail chains
have a large number of stores spread across the country, it gives them a great
advantage of having bargaining power with suppliers. The disadvantage of these retail
chains is that it is difficult to adapt their standardized formats to take into account the
regional, local or rural and urban preferences1.
3. Franchising
Franchise is a contractual agreement in which the franchiser grants the franchisee the
permission to carry out a business under the franchiser’s name as per a prescribed
format and the franchiser in return receives a royalty payment. There are two types of
franchising – Product or Trademark franchise and Business Format Franchise. In
Product or Trademark franchise, the franchisee operates under franchiser’s name and
sells the products of the franchiser, for example, Archie stores, Arrow etc. McDonalds
is the best example of business format franchise where the franchisee has to follow
the prescribed format dictated by the franchiser. Franchising can be for a single store
or multiple number of stores or for a region or a country2.
4. Leased Departments (Shop-in-Shop)
This is a relatively trend emerging in India wherein a section in a retail store is leased
or rented to another retailer and is also termed as shop-in-shop. In India, many
department stores such as Lifestyle, Shoppers Stop lease or rent out a section in their
store to perfumes, cosmetics, apparel counters. Many big retail chains are using this
1
New Delhi.
2
Ibid
40
method of setting up smaller retail outlets, which showcase only a fraction of their
products in high-traffic areas like malls, department stores, multiplexes and public
places like airports and railway stations so as to make their products more widely
available to the consumers1.
2.1.6 Classification of Store-based Retail Formats in India

on the basis of merchandise offered
Table 2.4 lists the retail store formats in India on the basis of merchandise sold.
Table 2.4: Retail formats in India based on Merchandise sold2

Type of Format Description Size of the Examples in India
Store in sq.ft
Convenience Stores Located near 500 – 1,000 Spencers Express,
neighborhoods HP Speedmart
and operate
longer hours.
Offer assorted
mix of products
mainly grocery
Supermarkets Sell food & 800 – 5,000 Foodworld, More
grocery, laundry
& household
maintenance
products. They
are low-cost,
low-margin, high
volume and self-
service stores
1
New Delhi.
2
Ibid
41
Type of Format Description Size of the Examples in India
Store in sq.ft
Hypermarkets Very large self 40,000– Giant, Big Bazaar
service stores 75,000
selling food and
non-food items
at low prices
Specialty stores Narrow product 2,000 – 5,000 Gautier Furniture,
line with deep Crossword,
assortments in PlanetM
that product.
Appeal to a
clearly defined
target market.
Department stores Large stores 5,000 – Lifestyle,
dealing with 40,000 Shoppers Stop
many product
lines with each
operating as a
department
Factory Outlets Sell branded 500 – 1,000 Pantaloon’s
merchandise at factory outlet,
deep discounts Levi’s factory
outlet
Category killer A specialty 15,000+ Bommana Bros,
retailer offering Chandana
a large selection Bros(Hyderabad),
in a chosen Loft(Mumbai),
product category Toykemp(Bangalo
at low prices re)
42
2.2 Structure of Indian Retail Sector
Retailers in India can be broadly classified into Unorganized and Organized. Table
2.5 lists the characteristics of Unorganized and Organized retailers in India.
Table 2.5: Characteristics of Unorganized retailers and Organized retailers1,2

Type Characteristics Examples
Unincorporated Vegetable and Fruit

Vendors, Pan shops, Street
Hawkers, Roadside vendors
etc
Family owned and operated
Employ family members and lowly
skilled and less educated casual
Unorganized Retail labor without formal contracts Kirana Stores,
Incorporated as Sole Proprietorship, General Merchants,
Partnership and Private Limited Specialty stores, Chemists,
Appliance stores,
Do not follow best practices such as Readymade Garment stores,
Inventory control and supply chain Footwear stores etc
management
No standardization
Incorporated Modern retail stores such as

Professional management Hypermarkets,
Organized Retail Employ labor with formal contracts Supermarkets, Department
stores, Specialty stores etc
Source: Adapted from Kohli & Bhagwati, 2011; Thathoo & Kacheria, 2007
1
Kohli, Rajeev and Bhagwati, Jagdish(2011), “Organized Retailing in India: Issues and Outlook,
Columbia Business Scholl Research Paper No. 12/25, Retrieved from http://ssrn.com/abstract=2049901
2
Thathoo, Rahul and Kacheria, Rahil(2007), Organized Retail “Inquilab” in India, Stanford
Technology Ventures Program, retrieved from http://cs.stanford.edu./people/thathoo/retail.pdf
43
In India, the retail sector is not looked upon as an industry and as a result is highly
fragmented and unorganized. The Indian retail sector is dominated by small shop-
keepers such as kirana stores in the Food and Grocery segment and small independent
retailers in segments such as Apparel and Footwear. Therefore, the market share of
unorganized retail is significantly higher than the organized retail. The unorganized
retail does not employ any technology or best practices but is well-informed about the
consumer’s needs and wants and is quite knowledgeable as what and how much to
stock and also offer additional services such as credit facilities and home delivery.
The organized retail employs technology and best practices to provide a overall better
shopping experience for the customer. The share of organized retail is very small and
therefore, the Indian retail sector is considered to be in a nascent stage. The organized
retail sector is expected to attain a share of 25% by the year 20181.
The reasons for growth of unorganized retailers in India are listed below2:
1. No barriers to entry in retail sector as people just set up shop if they have
anything to sell
2. No regulations has made the retail sector a largely oversupplied sector
3. Absence of any real competition has made the retail sector very unproductive
Retailing provides employment to the individuals and families who operate the
country’s 12-14 million small unorganized outlets and to the casual workers who
work as shop and delivery boys. In 2007-2008, the National Survey Sample
Organization (64th round) found that retailers employed 33.1 million people which is
about 7.2% of all workers in the country3.
1
New Delhi.
2
Thathoo, Rahul and Kacheria, Rahil(2007), Organized Retail “Inquilab” in India, Stanford
Technology Ventures Program, retrieved from http://cs.stanford.edu./people/thathoo/retail.pdf
3
44
Reasons for Under-development of Retailing in India are listed below1:
1. Retail is not regarded as an Industry in India and therefore unavailability

of finance is hampering the growth of this sector.
2. The real estate cost is very high in India and adversely affects the
profitability of retail sector
3. The growth of this sector is also hampered by the multiple and complex
taxation system in India. For example, the sales tax rates differ from state
to state and multiple- point octroi duties are collected etc.
For example, the footwear industry regulations are a nightmare both to foreign as well
as domestic retailers. It takes 5-10 days to get the goods delivered from warehouse to
the store due to lot of regulation and paperwork involved. For instance, it takes two
weeks to move goods from one store to another in different cities due to heavy
paperwork involved and three types of taxes that need to be paid. Other areas making
the life difficult for the retailers are labeling and regulations that keep changing.
Heavy taxation is another troublesome issue as the VAT on footwear products is
higher than VAT on apparel, as footwear is considered non-essential2.
According to KPMG (2014), the Indian retail sector is still highly fragmented with an
estimated 12 to 15 million unorganized retail outlets, which account for over 92 per
cent of the total retail market sales. Only a meager 4 per cent of unorganized retailers
have an operating area more than 500 square feet.3.
1
New Delhi.
2
Agarwal, Sapna (2012), I don’t see many happy retailers in India: Pavers Stuart Pavers speaks about
his stategy to make his India operations profitable by fiscal 2014, retrieved from
http://www.livemint.com/Companies/FzFiN5ESw0RumL74W8UMvL/I-dont-see-many-happy-
retailers-in-India-Pavers.html
3
KPMG(2014), Indian Retail: The Next Growth Story, retrieved from
http://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/Documents/BBG-Retail.pdf
45
Table 2.6 shows that retail market share of organized retail and unorganized retail
around the world and it is quite evident that the organized retail market share in India
is the lowest in the world.
Table 2.6: Retail Market Share of Organized retail vs. Unorganized retail
around the world1
Country Organized Retail Unorganized Retail
India 8% 92%
China 20% 80%
Indonesia 30% 70%
Thailand 40% 60%
Malaysia 55% 45%
Taiwan 81% 19%
USA 85% 15%
Source: KPMG (2014)
2.3 Unorganized Retailers vs. Organized Retailers

India has a population density of 937 people per square mile similar to Japan, which
has 873 people per square mile, where the small stores still continue to thrive.
Another interesting fact is that the population densities of Indian cities and of certain
neighbourhoods within the cities is higher than the population density of the country.
For example, Delhi has a population density of 24,197 people per square mile and
Seemapuri, a neighborhood in Delhi, has 76,342 people per square mile. Higher
population density means there would be enough customers for both small
unorganized retailers and large organized retailers. The smaller unorganized retailers
can compete with large organized retailers by offering a differentiated product mix or
niche products. So it means that these two types of store can co-exist in high density
areas by catering to different target market segments2.
1
KPMG(2014), Indian Retail: The Next Growth Story, retrieved from
http://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/Documents/BBG-Retail.pdf
2
46
Indian Government has traditionally protected and favored the unorganized retailers
by providing them regulation free environment and by excluding them from taxation,
these advantages enjoyed by them has resulted in growth of their market share. The
unorganized retailers are able to offer their merchandise at lower prices to the price-
sensitive and value-driven Indian consumers due to tax exemptions and low cost
operating models. In addition, the unorganized retailers also enjoy the incumbency
advantage of location as they have geographical proximity to the customers. In this
way, the domestic unorganized retailers are able to compete with the larger organized
retailers due to their geographical proximity and cultural proximity of their offerings1.
On the other hand, larger organized retail stores can:
1. set up stores at desired locations such as high streets, shopping malls and
business districts at exorbitant costs and without any restrictions on space as
they have deep financial pockets.
2. remain open for 10 to 11 hours a day including Sundays and Holidays.
3. resort to predatory pricing to destroy small retailers as they enjoy purchasing

economies of scale and follow world class supply chain and inventory
management practices.
4. have a huge bargaining power over small manufacturers and suppliers as they
buy products in bulk and therefore are able to command better terms and
conditions with the suppliers2
1
Mann K Manveer & Byun, Sang-Eun (2011), Assessment of Five Competitive Forces of the Indian
Apparel Retail Industry: Entry and Expansion Strategies for Foreign Retailers, Journal of Textile and
Apparel Technology and Management, Vol.7, Issue 2, Fall 2011, pp 1 – 14.
2
47
Table 2.7 shows the organized retail formats in India.
Table 2.7: Formats of Organized Retail in India1

Format Types of Pricing Example
Merchandise
Hypermarkets All types of Low pricing Big Bazaar, Giant
merchandise Hypermarket
Supermarkets Food and Grocery Low Pricing Spencers, More,
Food World
Neighborhood Daily use items Competitive Subhiksha
Convenience Store
Department Store Apparel & Competitive Shoppers Stop,
accessories Lifestyle
Specialty Store Any one type of Competitive Mobile Store
merchandise
Category Killers Any one type of Low pricing Chandana Bros,
merchandise Nallis, Loft
Source: D & B Research report, 2008
The unorganized retailers are gearing up for competition by improving their store
décor, improving customer service levels and forging stronger customer relationships.
Some of the unorganized retailers are acquiring licenses or entering into franchising
agreements with popular foreign brands or offering branded merchandise in their store
and slowly shifting to organized retail formats. Large domestic organized retail stores
are becoming more competitive by stocking more stock keeping units (SKUs) and by
providing self-service formats2.
1
D & B Research report (2008), Indian Retail Industry: Challenges, Opportunities and Outlook,
retrieved from http://www.dnb.co.in/indianretailindustry/overview.asp
2
48
Table 2.8 lists the competitive advantages exclusively attributable to the unorganized
retailers and organized retailers. These unique competitive advantages experienced by
both unorganized and organized retailers explain the reasons for their co-existence in
India.
Table 2.8: Comparison of competitive advantages of Unorganized and Organized

retailers1
Competitive Factor Unorganized Retailers Organized Retailers
Flexibility and Small retailers have the Organized retailers find it
responsiveness to customer ability of being more difficult to provide such
needs responsive to consumer services which can be
needs. They also important to customers.
understand the likes and
dislikes of individual
customers with whom
they have a long
standing relationship,
recommend products to
them and charge
different prices to
different customers
(Perfect Price
Discrimination).
Space Management Smaller stores manage Large retailers use a self-
physical space far more serve layout, which
efficiently with one or requires more space and
two labor picking out leads to high rental costs.
and packing customer In addition, Self-serve
orders. layouts in Indian stores are
poorly managed.
1
49
Competitive Factor Unorganized Retailers Organized Retailers
Low cost of Operation The smaller stores hire But the cost of operation is
unskilled labor and do significantly higher for
not hire managers or organized retailers as they
sales clerks and have rent space, pay salaries and
little loss due to stealing benefits to employees.
and pilferage and also
have few overhead and
utility costs. Some of
the retailers usually rely
on family members in
managing the business.
Business Model The Business model for In contrast, organized
many smaller stores retailers are profit
(independent retailers) motivated and incur many
which are family owned fixed and variable costs.
and operated is to make
a living.
Supply Chain The smaller retailers Supply chain efficiency
have no choice with provides the organized
respect to distribution retailers with greater
channels as they do not profitability. Large
have the resources or retailers can negotiate
power to make any favorable terms with the
changes in the supply manufacturers. They can
chain. Smaller retailers bypass conventional
find it difficult to bypass distribution channels by
middlemen and to using order processing
negotiate better prices systems, lower transaction
with manufacturers costs owing to economies
of scale and better supply
chain
Source: Adapted from Kohli & Bhagwati (2011)
50
2.4 Retail Segments in India
T he major retail segments in India is listed below1:
1. Food and Grocery
2. Clothing and Accessories
3. Footwear
4. Electronics
5. Catering Services (Food and Beverages)
6. Home and Office Improvement ( Furniture)
7. Telecom
8. Entertainment
9. Jewellery
10. Books, Music and Gifts
11. Watches
12. Pharmaceuticals
13. Beauty and Wellness
1
51
In most of the retail segments in India, two types of retailers compete with each other
i.e. local unorganized retailers and local organized retailers. But in case of retail
segments like Apparel and Footwear, three types of retailers compete with each other
i.e. local unorganized retailers, local organized retailers and foreign brand retailers.
Table 2.9 shows an indicative list of all the retailers both unorganized and organized
operating across thirteen retail product segments including foreign brand retailers, if
any already operating in India through FDI/non-FDI route.
Table 2.9: Types of retailers operating in different retail segments in India1,2

Retail Domestic Unorganized retailers Domestic Foreign
Segment Organized Retailers Retailers
Food and Kirana stores, Vegetable More,Reliance, None
Grocery market, Hawkers, Street Spencers, Food
vendors etc World etc
Clothing and Small Independent Retail chains such Diesel,
Accessories retailers/Multi-brand outlets as Wills Lifestyle, Esprit,
owned and operated by sole Westside; Exclusive Levi’s,
proprietors/Family/Partnerships Brand showrooms Marks &
such as Raymonds, Spencer
Pantaloons
Footwear Small Independent Liberty, Khadim Reebok,
retailers/Multi-brand outlets exclusive stores etc Adidas,
owned and operated by sole Nike, Puma
proprietors/Family/ Partnerships etc
Electronics Small Independent Bajaj Electronics, LG , Sony
retailers/Multi-brand outlets TMC, Pai exclusive
owned and operated by sole International, stores
proprietors/Family/ Partnerships Croma
Catering Small Independent food Café Coffe Day McDonalds
1
2
Table adapted from D&B Research report, 2008 and author’s own research
52
Retail Domestic Unorganized retailers Domestic Foreign
Segment Organized Retailers Retailers
Services (Food retailers by sole , Subway,
and Beverages) proprietors/Family/ Partnerships KFC etc
Home and Small Independent Furniture Godrej Lifespace, IKEA to
Office retailers owned and operated by Hometown, enter this
Improvement ( sole proprietors/Family/ Furniture World etc segment
Furniture)
Partnerships shortly
Telecom Small Independent mobile Mobile Store, Lot None
phone retailers owned and Mobile Shoppe,
operated by sole UniverCell
proprietors/Family/ Partnerships
Entertainment Independent cinema theatres PVR cinemas, Big None
Cinemas, INOX
Jewellery Small Independent jewellery Tanishq, Gitanjali None
retailers owned and operated by etc
sole proprietors/Family/
Partnerships
Books, Music Small independent books, gifts Crossword, None
and Gifts retailers owned and operated by Landmark, Odyssey
sole proprietors/Family/ etc
Partnerships
Watches Small independent watch shops Titan Citizen
owned and operated by sole Longines
proprietors/Family/ Partnerships Omega
Pharmacy Small independent medical Apollo Pharnacy, None
shops owned and operated by MedPlus
sole proprietors/Family/
Partnerships
Beauty and Small independent retail shop Reliance Wellness, None
Wellness owned and operated by sole Himalaya Health &
proprietors/Family/ Partnerships Glow
Source: Adapted from D&B Research report, 2008 and Author’s own research
53
2.5 Outlook of Indian Retail Sector
India is geographically the seventh largest country in the world and is also world’s
most populous democracy with over 1.2 billion people. India is a multi-cultural
country with 29 states and 7 union territories and has official languages and hundreds
of dialects. India’s GDP has had a sustained growth of 6% per year since 19911.
India has the second largest number of urban dwellers in the world with only 20% of
the population increase in cities being due to migration and the rest comes from the
expansion of city boundaries or due to the reclassification of rural areas. According to
census reports, the Indian urban population growth rate was 56 per cent faster than the
country’s population growth rate between from 2001 to 2008 and the number of
people living in Indian cities rose from 290 million in 2001 to 340 million in 2008. A
study by the McKinsey Global Institute (2010) predicts that by the year 2030 India
will have a population of 1.47 billion and 40% of the population will live in urban
areas. In 2010, there were 42 cities with more than a million populations and it is
expected that there will be 68 cities with more than a million populations by 2030. It
is projected that six cities will have populations of 10 million or more and in case of
metro cities like Mumbai the population is expected to exceed 33 million, Delhi's
population to exceed 25 million, and Kolkata's population to exceed 22 million. A
McKinsey study also projects that the urban share of GDP will rise to 69% by 2030,
up from 58% in 2008, and that about 120 million new urban jobs will be created
between 2008 and 2030. The number of urban households earning less than Rs.
90,000 per year is expected to fall below 20%, and the number of people earning
between Rs. 200,000 and Rs. 1 million per year is expected to increase fourfold from
32 million to 147 million. In contrast, 75% of urban populations today are in the
lowest income segment with average earnings of about Rs. 80 (about $1.80) per day2.
1
Vinoo, Poornima (2013), “Is Your Business India Ready”, retrieved from
http://munkschool.utoronto.ca/wp-content/uploads/2013/04/Is-Your-Business-India-Ready.pdf
2
54
India is also one of the youngest countries in the world with a median age of 25.
Almost 60 per cent of Indians are aged below 30 years. About half of all Indians are
married and live in either joint or extended families and therefore the average
household size in 2012 was 4.9 people but in urban areas, smaller nuclear families are
becoming common. In 2010, the annual GDP growth was 8.5 per cent and in 2012, it
fell to a ten year low of 5 per cent and it slipped further to 4.4 per cent during quarter
ending June 30, 2013. Nonetheless, India is projected to become the third largest
economy by 2025. The urbanization rates keep increasing with more and more people
shifting from rural areas to cities in search of opportunities1. Table 2.10 lists the
classification of cities and towns in India.
Table 2.10: Classification of cities and towns in India2
Type Characteristics Cities
Tier 1 Population greater than 4 million Mumbai,Kolkata, Delhi, Chennai,
(8 cities) and total income greater than 100 Bangalore,Hyderabad,
billion Indian rupees Ahmedabad, Pune
Tier 2 Population greater than 1 million Surat, Kanpur,Nagpur, Lucknow,
(26 cities) Jaipur, Kochi, Vadodora, Indore,
Ludhiana, Madurai, Bhopal, Patna,
Nasik, Agra, Varanasi, Rajkot
Tier 3 Population greater than 500,000 Tiruchirapalli, Amritsar,
(33 cities) Faridabad, Aurangabad, Allahabad,
Gwalior, Jodhpur, Raipur,
Bhubaneshwar, Goa, Pondicherry,
Aligarh, Moradabad,Mangalore
Tier 4 Small towns Rohtak, Rourkela, Udaipur, Anand,
(5,094 Hassan, Shimla
towns)
1
India Food Retail Report (2013), USDA, Foreign Agricultural Service, Global Agricultural
Information Network, New Delhi, retrieved from
http://gain.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_New%Delhi_India_12-23-
2013.pdf
2
New Delhi
55
According to A T Kearney Global Retail Index Development report (GRDI), due to
global slowdown Indian GDP growth rate fell to 5% down from a 10 year average of
7.8%. In 2009, India was ranked first in the GRDI rankings but fell to 14th position in
2013. The major reasons for retailing growth slowdown include high operating costs,
low bargaining power with vendors and heavy discounting to increase sales, which
had an adverse impact on retailers’ profits and expansion plans. Real estate cost and
space availability still remain a major cause for concern. Many retail players are
embarking on improving their productivity, cutting their operating costs and reducing
their store size. But India’s retail outlook is still very bullish due to a large, young,
increasingly brand and fashion conscious population. Retail growth in India is
expected to be between 14 to 15 percent per year through 2015. Modern retail still
remains small with its share being a dismal 7% in 2012 but is predicted to grow as
there is an increase in urbanization and domestic players planning to expand1.
Factor driving Retail Change and Growth in India are given below:2
1. Socio-Economic Factors: India is now home to a very large middle class and
huge young population and has been experiencing a steady growth of GDP in
the last decade.
2. Increasing Incomes: The steady economic growth has led to increase in

disposable incomes of the young Indian middle class population which in turn
led to stimulation of Indian retail sector.
3. The Age Factor: India today boasts of a young population wherein 70% of its
population is below the age of 40 and about 47% of the population is below
the age of 20.
1
A T Kearney Global Retail Development Index Report (2013), Retrieved from
http://www.atkearney.com/consumer-products-retail/global-retail-development-index/full-report/-
/asset_publisher/oPFrGkbIkz0Q/content/2013-global-retail-development-Full Report-A.T.pdf
2
New Delhi.
56
4. Working Women and the Changing Family Structure: The population of
working women in India is increasing every year. This has led to dual incomes
in the family and hence rising purchasing power. The purchasing habits and
spending habits of working women is very different from that of a housewife.
Today, the working women demand convenience and has led to emergence of
modern retail formats in the country. There is also a change in average
household size with joint families giving rise to more and more nuclear
families. The rise in nuclear families is in fact a major factor that is resulting
in higher retail spending and is also another reason for the evolution of
modern retail formats.
5. Increasing use of credit cards: There has been a drastic change in the Indian
consumer’s mindset with respect to credit. Many Indians are now using credit
cards as a means of spending as well as for increased spending and therefore
the need for modern retail formats.
6. Increasing Urbanization: India has been experiencing increasing urbanization

rates in the last decade and simultaneously, the rural India is moving rapidly
from poverty to prosperity.
2.6 Apparel Retailing Segment in India
Apparel/Clothing refers to readymade garments which includes ready-to-made

apparels such as Men’s Wear (shirts, trousers, t-shirts, jeans), Women’s wear
(including Indian ethnic wear like churidars, kurtas and salwaer-kameez), hosiery
items such as socks and innerwear and Kids wear1.
1
New Delhi.
57
Classification of Apparel
Menswear1
1. Formal wear – Shirts, Trousers, Suit-Pant, Blazers

2. Casual – T-shirts, Jeans, Shirts
3. Ethnic/Indian – Kurta, Pyjama, Dhoti Kurta, Sherwani
4. Sportswear – Track Suits, Polo Shirts, Shorts
5. Innerwear – Vests, Briefs
6. Accessories – Belts, Ties, Handkerchiefs, Socks
7. Winter wear – Jackets, Sweater, Shawl
Womenswear2
1. Traditional/Indian – Saree, Salwar, (Ghagra, Choli)

2. Western – Top, Jeans, Skirt, Frock
3. Informal/Casual – T-shirt, Slacks, Capri, Midi
4. Winter wear – Cardigan, Sweater, Shawl
5. Inner wear – Lingerie, Blouse
Children’s wear3
1. Infants
2. Toddlers
3. Girls & Boys wear
4. Teens
5. Accessories
1
Ray, Rajesh (2010), Supply Chain Management for Retailing, Tata Mcgraw Hill, New Delhi
2
Ibid
3
New Delhi.
58
Apparel retail segment has highest number of organized retailers and is the largest
segment of the Organized Indian retail sector, with a share of 38% of the total1.
Table 2.11 lists the key organized Indian retailers operating in the Apparel segment.
Table 2.11: Key Organized Indian Retailers in Apparel Segment2

Name of the Company Brands No. of stores
Madura Garments (Division Van Heusen, Louis 164 exclusive stores
of Aditya Birla Nuvo) Phillipe, Allen Solly, Peter
England, San Frisco
Arvind Mills Excalibur, Flying Machine, 100 exclusive stores
Ruff & Tuff, Newport
Raymond Apparel Park Avenue, Parx, 300 exclusive stores
Manzoni, ColorPlus
Provogue Provogue Provogue exclusive
stores
ITC Wills Lifestyle Wills Wills Lifestyle specialty
chain of stores
Zodiac Zodiac, Zodi, Z3 50 exclusive stores
Organized domestic Apparel retailers like Zodiac, Madura Garments, Arvind Mills
and Raymond have expanded their retail stores network using the franchise route.
Currently all these players are concentrating on setting up their own exclusive retail
stores for their flagship brands. The Indian ready-to-wear market is dominated by
men’s wear with popular domestic and foreign brands like Arrow, Louis Philippe,
Van Heusen, Peter England, Park Avenue, Color Plus, Allen Solly, Levi’s, Lee,
Wrangler, Ruff N Tuff while in Sportswear segment, the popular foreign brands are
Reebok, Adidas, and Nike etc. The popular brands in Kidswear segment are Gini and
Jony, Lilliput, etc. The women’s western wear segment is a growing segment and
1
New Delhi.
2
Ibid
59
many organized players have started introducing their brands in this segment. Aditya
Birla Nuvo (Allen Solly), Raymonds (Park Avenue & Color Plus), Lee, Levi’s,
Wrangler have started introducing women’s wear range. Sportswear retailing in India
is dominated by foreign players such as Reebok, Nike and Adidas. Reebok is the
largest sportswear brand in India. Amongst the Indian retailers, ITC Wills Sport is a
popular sportswear brand1.
The Apparel retail sector is characterized by multiple formats including the following
formats2:
• Independent Multi-brand outlets typically owned and operated by family
members
• Corporate retail chains such as Pantaloons
• Department stores such as Lifestyle and Shoppers Stop
• Specialty retailers such as Wills Lifestyle and Westside
• Category Killers such as Reliance Trends which sells popular foreign brands
as well as Indian brands and also about 25 odd private labels.
• Foreign Brand stores operating via Franchise route
2.6.1 Entry of Foreign Brand retailers in the Apparel

Segment
Many American and European brands have entered India over the last 15 years in
spite of FDI restrictions in single-brand retail. The fact that the Apparel segment has
the highest number of organized players suggests the presence of large foreign players
in this sector3.
Since 2006, there has been a huge invasion of foreign brands into Indian Apparel
markets thereby increasing competition in this segment. There is a huge diversity in
1
2
Ibid
3
Gugnani, Amit (2013), “FDI and its effect on Indian Fashion Apparel Industry”, Retrieved from
http://technopak.com/Files/fDI-effects-on-indian-fashion-industry.pdf
60
competition due to the existence of three different types of Apparel retailers in India
viz., Foreign retailers, Domestic Organized retailers and Domestic Unorganized
retailers in the Apparel segment. The competition between foreign retailers and
domestic organized retailers is in terms of self-service format, varied assortment, size
of the store and store ambience. Foreign retailers are almost present in all shopping
malls or in department stores. Apparel is the fastest growing retail segment in the
organized retail sector with the highest number of foreign brands1.
Table 2.12 lists selected foreign apparel brands operating in India
Table 2.12: Foreign Apparel Brands operating in India2

Foreign Brand Year of Entry Country of Origin
Adidas 1989 Germany
Pierre Cardin 1994 France
Levi 1994 USA
Nike 1995 USA
Lee 1995 USA
Reebok 1995 USA
Benetton 1998 Italy
Ermenegildo Zegna 1999 Italy
Marks & Spencers 2001 UK
Ralph Lauren 2001 USA
Wrangler 2001 USA
Louis Vuitton 2002 France
Hugo Boss 2003 Germany
Daks Simpson 2004 UK
Bvulgari 2004 Italy
1
2
Moreau & Mazumdar (2007), “ Indian retail: Indian retail Bazaar”, Retrieved from
http://www.imagesfashion.com/back/profile/jun03_1_profile.html; IBEF, www.ibef.org;
61
Foreign Brand Year of Entry Country of Origin
Mexx 2004 Netherlands
Calvin Klein 2004 USA
Tommy Hilfiger 2004 USA
La Senza 2004 Canada
Channel 2005 France
Esprit 2005 HongKong
Bossini 2005 HongKong
Christian Dior 2006 France
Promod 2006 France
Giordano 2006 HongKong
Mango 2006 Spain
Zara 2006 Spain
Nautica 2006 USA
Guess 2006 USA
DKNY 2006 USA
Seven Jeans 2006 USA
Versace 2006 Italy
Fendi 2006 Italy
Dolce and Gabanna 2007 Italy
Armani 2007 Italy
Gucci 2007 Italy
Diesel 2007 Italy
Sisley 2007 Italy
Banana Republic 2007 USA
Gap 2007 USA
Kipling 2007 Belgium
FCUK 2007 UK
Jimmy Choo 2007 UK
Canali 2007 Italy
Source: Moreau & Mazumdar, 2007
62
The foreign brands are trickling into the country because of the presence of the large
Indian middle class and the other obvious reasons include government initiatives such
as gradual reduction in import duties and relaxation of FDI in single brand retailing
policy1.
Many foreign apparel brands are already actively present and popular amongst the
Indian consumers. Most of the popular foreign brand retailers are operating via the
franchise route and few foreign brands like Ralph Lauren have already set up their
own stand-alone stores and other foreign brands are planning to set up their own
stores to showcase all their brands2.
Marks & Spencer entered through a joint-venture with Reliance Retail with a majority
stake of 51%. Many foreign retailers preferred route of entry is joint ventures and
franchises. The other foreign brands include Zara has JV with Tata’s Trent Ltd, US
Polo & GAP has JV with Arvind Brands, Shoe major Clarks has JV with Future
group. Arvind Brands have joint venture deals with 14 international brands such as
Arrow, Tommy Hilfiger, Debenhams and US Polo. The foreign retailers who are
interested in investing on their own after 100% FDI in single brand retail are Tommy
Hilfiger and Swarovski3.
In the first half of 2010, the Spanish Fashion brand, Zara; Chinese clothing giant,
Yishion; Diesel, Vero Moda and 7 For All Mankind set up shop in India. According
to Technopak estimates, the fashion retail segment is expected to grow at 25-30 per
cent annually over the next five years and reach Rs.6,000 crore by 2015.Most of the
foreign brands such as Marks & Spencer, Benetton, and Mango initially priced their
1
Das, Atanu Kumar (2010), “Foreign fashion brand play the pricing game”, retrieved from
http://www.business-standard.com/article/management/foreign-fashion-brands-play-the-pricing-game-
110071500051_1.html
2
3
Shasidhar Ajitha and Mukherjee Arpita ( 2014), “Why foreign retailers are still wary of going solo in
India”, Retrieved from www.businesstoday.in/story/foreign-retailers-still-prefer-joint-ventures-in-
india/1/202289.html
63
products at a premium and later realized that Indian consumer is very sensitive to
price and started pricing competitively to cash in on the boom. Yishion, the $12
billion Chinese clothing company, with worldwide presence has mens wear, womens
wear and kids wear priced between Rs.699 and Rs.3499. The Multinational foreign
retailers have the cost advantage and can provide their products a very competitive
price and are a credible threat to domestic retailers. While competitive prices are good
from a customer perspective but it poses great challenges for domestic unorganized
retailers’ survival1.
The year 2011 saw the entry of Manchester United, the largest British football club
and lifestyle brand and also the Australian brands such as Roxy and Quicksilver. The
year 2012 saw the entry of luxury brands such as Thomas Pink, Roberto Cavalli,
Christian Louboutin and womenswear brands such as Elle, Monsoon and also
accessories brand, Claire2. Presently, Tommy Hilfiger operates 58 franchisee outlets
and 60 shop-in-shop outlets in Department stores and it plans to open 500 stores in the
next five years as part of its expansion plans3.
In 2014, the top foreign brands Tommy Hilfiger, Levi’s, Benetton, Marks & Spencer
and Zara reported a significant jump in their revenues somewhere in between 14 per
cent and 42 per cent year-on-year. Their strategy was to keep prices affordable to the
price sensitive Indian consumer and attract them to their stores with good discounts4.
1
Das, Atanu Kumar (2010), “Foreign fashion brand play the pricing game”, retrieved from
http://www.business-standard.com/article/management/foreign-fashion-brands-play-the-pricing-game-
110071500051_1.html
2
Saxena Tarang Gautam & Dutta Dutta (2013), Entry Strategy of Global Brands – Impact of FDI,
retrieved from http://thirdeyesight.in/blog/2013/01/21/entry-strategy-of-global-brands-impact-of-fdi
3
Corporate Catalyst India(2014), A Brief Report on Textile Industry in India, Retrieved from
http://cci.in/.../Textile-Industry-in-India.pdf.
4
Malviya, Sagar (2014), “Global fashion brands like Zara and Marks & Spencers boom in India”,
Retrieved from http://articles.economictimes.indiatimes.com/2014-12-03/news/56684724_1_zara-
global-fashion-brands-tommy-hilfiger
64
Table 2.13 shows the sales performance of some select foreign brands in India.
Table 2.13: Sales of some select Foreign Apparel Brands operating in India1
Foreign Brand Sales in Crores in FY 2014 Sales in Crores in FY 2013
Levi’s India 599 485
Benetton India 598 523
Marks & Spencer 507 357
Zara 580 411
Tommy Hilfiger 236 161
Source: Economic Times, 2014
With 100% FDI in single-brand retail being allowed, large foreign brands are
expected to expand their operations in the country which will certainly have some
impact on unorganized retailers. It is likely that the middle-income economy segment
consumers may move away from unorganized retailers to the foreign retailers2.
2.7 Footwear Segment in India

Footwear retailing is one of the largest retail categories in India and has a large
number of organized players making it the second most organized retail category. The
footwear sector can be classified in terms of pricing such as Premium or High end,
Medium priced and Low priced. In the Organized footwear segment, the classification
is in terms of usage such as Sportswear, Casual/Semi-formal wear, Formal wear and
utility footwear. The sales of casual footwear account for 60% of the organized
footwear market followed by mass/economy footwear range accounting for 20% and
1
Malviya, Sagar (2014), “Global fashion brands like Zara and Marks & Spencers boom in India”,
Retrieved from http://articles.economictimes.indiatimes.com/2014-12-03/news/56684724_1_zara-
global-fashion-brands-tommy-hilfiger
2
Gugnani, Amit (2013), “FDI and its effect on Indian Fashion Apparel Industry”, Retrieved from
http://technopak.com/Files/fDI-effects-on-indian-fashion-industry.pdf
65
the rest is accounted for by sportswear and premium non-leather wear. The volume in
Indian footwear segment is dominated by men’s wear with 58% followed by Kids
wear about 29% and women’s wear with 13 per cent. Most of the volume of women’s
wear happens in the unorganized segment as the women prefer colors and design that
go with a dress rather than comfort. As the brand consciousness among working
women is increasing, there is a huge opportunity in women’s segment as well and
London based Carlton is the first foreign player to enter the women’s footwear
segment. The footwear segment has large number of unorganized, organized and
foreign players. There has been continual entry of both domestic and foreign footwear
brands in recent years like Drish, Lotto, Lotus Bawa, Now, Oakridge, Stryde, Red
Tape, Allen Cooper, Franco Leone, Gucci, Lee Cooper etc1.
Table 2.14 lists the key organized Indian players in the footwear segment.
Table 2.14: Key Organized Indian players in the Footwear Segment2,3

Name of the Company No. of Stores
Metro Shoes 72
Liberty 450 stores, 6000 Multi-brand outlets
Action 750
Reliance Footprint 101
M&B 75
Red Tape 45
Puma 45
Lakhani 350 (Wholesalers & Retailers)
Khadim 550
Sree Leathers 25
Source: Pradhan, 2010; retailmantra.com, 2012
1
2
New Delhi
3
Retailmantra.com (2012), “India Organized Footwear/Shoes Retail Chain & Brands Review”
Retrieved from www.retailmantra.com/india-organized-footwear-shoes-retail-chain-brands-review
66
Table 2.15 lists the key foreign players in the footwear segment.
Table 2.15: Key Foreign Players in the Footwear Segment1,2
Name of the Company No. of Stores
Bata 1250
Nike 400
Adidas 750
Reebok 2000 including Multi-brand outlets
Woodland 300
Source: Pradhan, 2010; retailmantra.com, 2012
In terms of pairs sold, the Indian footwear market ranks third after China and the
United States. The organized footwear retailing comprises 30-35% and the rest is
accounted for by the unorganized footwear retailers. The women’s footwear and kid’s
footwear are the two segments with plethora of opportunities. Many footwear retailers
are planning to open stores dedicated to women/children in the near future3. The
Indian Footwear market is experiencing a major boom fuelled by the young fashion
and brand-conscious consumers, who constitute 60 per cent of the billion plus
population. The Indian footwear market has attracted many domestic and
International players in the past few years. Most of the International brands targeted
the high class customers while the local brands were targeted towards the lower class
segment. The highly brand conscious urban youth were unable to purchase the
premium priced International brands and has not much choice in terms of footwear
brands or products. The urban youth segment’s huge potential is waiting to be tapped.
The International footwear brands constitute less than 20 per cent of the huge 10,000
crore footwear market. The key to success in footwear industry are innovative product
designs in terms of style, quality and conformance to consumer preferences and
affordable prices. The success of footwear brand depends on the use of optimum mix
of traditional and organized retail formats including exclusive stores, shop-in-shops
1
New Delhi.
2
Retailmantra.com (2012), “India Organized Footwear/Shoes Retail Chain & Brands Review”
Retrieved from www.retailmantra.com/india-organized-footwear-shoes-retail-chain-brands-review
3
Ibid.
67
arrangement. In terms of volumes, the multi-brand stores and traditional mom and pop
stores still dominate the retail sales of footwear products. However, the exclusive
brand stores are expected to grow in the next few years to help ensure greater
visibility to the target audience. In addition to fashion and lifestyle consciousness, the
growing awareness for health and fitness has led to increased growth in the
sportswear segment1.
In the UK and the US, the footwear market is dominated by women’s footwear, which
accounts for 75% of the total market. It is complete opposite in India with Men’s
footwear being the dominant segment with men having more propensity to spend with
typical price range of men’s footwear being between Rs1,000 – 7,000. Most of the
ladies are not fashion-conscious and go for a very basic product with the typical price
range being Rs.499 – 999. But the scenario is slowly changing in the metros with
women now accounting for 50 per cent of the footwear market and in the next five
years, the Indian footwear market will be a lot like the Western market2.
The national players are gearing up aggressively to increase their market share.
Liberty plans to add 50 stores every year. Reliance Footprint started in November
2007 has 165 multi-brand outlets and 174 exclusive brand outlets. It sells more than
60 brands and has private labels such as Mancini, Toska and Monza for men’s,
women’s and children shoes and has plans to add 50 stores every year. Liberty plans
to grow through company-owned and operated outlets as well as franchise stores and
plans to overhaul its merchandising to make their products more fashionable, colorful
and at the same time affordable to price-sensitive Indian consumers3.
1
Piplani, Gunjan (2013), “Changing the Face of Indian Footwear Industry, Retrieved from
http://www.indianretailer.com/magazine/2013/march/Changing-the-Face-of-Indian-Footwear-
Industry_62-2-1/
2
Agarwal, Sapna (2012), “I don’t see many happy retailers in India: Paver’s Stuart Pavers speaks
about his strategy to make his India operations profitable by fiscal 2014”, retrieved from
3
Mishra, Arunima (2014), “Competition heats up in shoe retail market on new players' entry”,
retrieved from http://businesstoday.intoday.in/storyprint/207244
68
2.7.1 Entry of Foreign Brand Retailers in Footwear Segment
Since 2006, there has been a huge inflow of foreign brands into Indian Footwear
markets thereby increasing competition. There is a huge diversity in competition due
to the existence of three different types of retailers in India viz., foreign retailers,
domestic organized retailers and domestic unorganized retailers in this sector. The
competition between foreign retailers and domestic organized retailers is in terms of
self-service format, varied assortment, size of the store and store ambience. Foreign
retailers are usually present in shopping malls or in department stores1.
The footwear retail business in India is booming with many international brands such
as Pavers UK, Clarks, Crocs, Sketchers, Aldo and Charles & Keith increasing their
presence in India while home-grown brands like Liberty and Reliance Footprint are
constantly innovating to stay ahead in the game. Clarks UK has 50 exclusive brand
outlets in India and has sold 400,000 pairs in two and half years of operations here. It
launches its global line simultaneously in India. For Clarks, women’s footwear sells
the most with women’s shoes accounting for two-thirds of its sales. Clarks has a city
wise strategy and its women’s shoes especially multi-colored sandals, are the best
sellers in Mumbai, Delhi and Bangalore. Clark’s customers find the contemporary
designs very appealing and the company uses a theme-based product display which
helps in selling more. Its USP is half-sizes2.
The US shoe brand Crocs grew 200 per cent in the last two years after it realized that
Indians want a global style shoes not India line of shoes. Its shoes are priced between
Rs. 1400 and Rs.7000. The company plans to double its exclusive brand outlets from
35 to 80 in the next three years and also plans to increase its existing presence from
1
2
69
the current 400 multi-brand outlets including department stores. About 85 percent of
the Indian footwear market is dominated by unorganized sector. With customers
becoming more brand conscious and with the entry of foreign brands, the organized
sector is expected to grow about 27 per cent a year. MNCs have to spend a lot on
brand-building, appropriate pricing and reach so as to increase their market share1.
Pavers, the UK-based footwear retailer entered India via franchising route in 2007 and
had about 142 stores in 2012. By 2015, the company plans to have 400-500 points of
sales through 40 per cent company-owned outlets and 60 per cent through shop-in-
shop arrangement with departmental stores like Shoppers Stop and Reliance Retail,
which will help them to enter tier III cities as well. The company plans to buy out its
franchise Triton Retail Pvt. Ltd. Pavers UK is already one of the top footwear retail
brands in India. By 2020, the top three brands are expected to have 500-1000 stores
each and will grow to multi-thousand by 2025. In China, the fashion appetite is
greater and certain footwear retailers have 17,000 – 18,000 stores. Pavers UK
typically charges between Rs.1500 - Rs.4000 and Rs.2500 – Rs.10000 for ladies and
mens footwear respectively. Pavers is planning to introduce a price-sensitive brand
Miss England in 2014 and four to five brands in the coming few years2.
Payless ShoeSource, one of the largest specialty family footwear retailer has entered
India with its franchisee Relaince Retail. Payless offers shoes for dress, casual and
athletic style for men, women and kids. Payless stores portfolio include popular
brands such as Disney, Airwalk, Dexter, Dexflex, Christian Siriano, Smartfit,
Montego Bay Club, Lower East Side, Cross Trekkers, Fioni, Comfort Plus, BRASH,
and Rugged Outback. The company plans to set up nine Payless Shoesource stores in
key markets including Mumbai, Bangalore, Hyderabad, Kochi, Coimbatore, Madurai,
Mangalore and Mysore. Payless Shoestores are known to offer a distinctive store
1
2
Agarwal, Sapna (2012), “ I don’t see many happy retailers in India: Paver’s Stuart Pavers speaks
about his strategy to make his India operations profitable by fiscal 2014”, retrieved from
70
experience with a product mix in line with the latest fashion at affordable prices.
Payless ShoeSource hopes to capture the rapidly growing branded women and
children’s footwear segment, which is currently dominated by the unorganized
retailers1. Pavers England is the only foreign retailer to set up shop in India with 100
per cent investment after government allowed 100% FDI in single brand retail2.
Nike has applied to Government of India for opening its fully owned flagship stores.
Nike has been operating in India for the last two decades in India and has around 400
franchised stores in the country3.
2.8 Retailing Scenario in the twin cities of Hyderabad

and Secunderabad
Hyderabad ranks as the 24th largest city in the world. About 5.3 million people reside
in an area of 172 sq km in the twin cities of Hyderabad and Secunderabad. It is
expected that by 2030, the population of the twin cities will increase to a whopping
10.15 million. The twin cities with sprawling area of 923 sq km are managed by
Greater Hyderabad Municipal Corporation (GHMC). The average density of the
population in twin cities is around 776 per sq km. The limits of the twin cities start
with Shamshabad in the south and ends at Gundla Pochampally in the north, and starts
from Vanasthalipuram in the east and ends at Patancheru in the west4.
1
Indiaretailing.com (2014), “Mega Footwear Retailer Payless Shoesource enter India”, Retrieved
from http://www.indiaretailing.com/Fashion/7/1/6/12556/Mega-Footwear-Retailer-Payless-
ShoeSource-Enters-India
2
Shasidhar Ajitha and Mukherjee Arpita (Feb, 2014), “Why foreign retailers are still wary of going
solo in India”, Retrieved from www.businesstoday.in/story/foreign-retailers-still-prefer-joint-ventures-
in-india/1/202289.html
3
Times of India (2014), “ Nike to open its own stores in India”, Retrieved from
http://m.timesofindia.com/business/india-business/Nike-to-open-its-own-stores-in-
india/articleshow/41443422.cms
4
Guruswamy, Mohan(2015), “How to unbox the twin cities”, retrieved from
http://www.deccanchronicle.com/150611/commentary-op-ed/article/how-unbox-twin-cities
71
Figure 2.1 shows the major retail zones of the twin cities of Hyderabad and
Secunderabad namely North West Zone, West Zone, Central Zone and East Zone.
Figure 2.1: Retail Map of twin cities of Hyderabad and Secunderabad1

Source: Knight Frank Research report, 2015
1
Knight Frank Research Report (2015), Think India Think Retail 2015 – A Definitive view on India’s
Retail Market, retrieved from http://content.knightfrank.com/research/317/documents/en/india-retail-
report-2646.pdf
72
The prime retail zones in twin cities of Hyderabad and Secunderabad are listed
below1:
1. Northwest Zone: Kukatpally, KPHB Road

2. West Zone: Hitec City, Hitec City Road, Madhapur, Yousufguda, Srinagar
Colony, Jubilee Hills, Banjara Hills.
3. Central Zone: Secunderabad, Begumpet, Ameerpet, Somajiguda, Panjagutta,
Mehdipatnam, Masab Tank, St. John’s Road, Bhoiguda Road,
Golconda X Roads, Narayanguda Road, Chikkadpally Road,
Himayatnagar, Basheerbagh, Abids, Sultan Bazar Road
4. East Zone: Dr. A. S. Rao Nagar, Uppal, Malakpet, Disukhnagar,L B Nagar
The retail epicenter in the twin cities have been constantly shifting, moving from
Abids to Begumpet to Banjara Hills to Jubilee Hills2. Table 2.16 lists the prime main
streets in the twin cities of Hyderabad and Secunderabad.
Table 2.16: Main Streets of Hyderabad and Secunderabad3
Location
M G Road
Raj Bhavan Road, Somajiguda
Himayatnagar
Ameerpet
Kukatpally
1
report-2646.pdf
2
Mahajan, Rajneesh (2009), “City Wise Real Estate Trends – Indian Retail Report 2009”, retrieved
from https://best4downloads.files.wordpress.com/2009/12/Indianretail_sec11_images_2jan09.pdf
3
Ibid.
73
S P Road, Begumpet
Abids
Punjagutta
Jubilee Hills
A S Rao Nagar
Source: Mahajan, 2009
Hyderabad is ranked fifth in terms of retail space per 1,000 population, figuring
amongst cities like Mumbai, NCR, Bengaluru, Pune, Chennai and Kolkata. The West
zone of Hyderabad tops in terms of retail space per 1000 population. Most of the
modern retail space is concentrated in the West and North West zones of Hyderabad.
Incidentally, the West and North West Zones of Hyderabad also top in terms of most
mall space, with locations like Hitec City and KPHB accounting for two-thirds of
mall space in Hyderabad1. Table 2.17 shows the distribution of mall space and
shopping streets in the twin cities of Hyderabad and Secunderabad.
Table 2.17: Distribution of Mall Space and Shopping Streets in twin cities of
Hyderabad and Secunderbad2
Zone Malls Shopping streets
West 37% 63%
North West 52% 48%
Central 14% 86%
East 2% 98%
Source: Knight Frank Research Report, 2015
1
report-2646.pdf
2
Ibid.
74
There has been little mall development in Central zone, which has the oldest and most
dense retail market spaces due to non-availability of space and the East zone is still in
a nascent stage with respect to mall development. Foreign brand and National brand
retail stores dominate the West and North West zones of Hyderabad especially in the
IT corridor areas of Hitec City road, Banjara Hills and Jubilee Hills as most of the
high income group reside in these areas. The regional brand stores dominate the East
Zone of Hyderabad especially in areas like Dilsukhnagar and L B Nagar. The local
brands dominate in Central Zone, where the largest share of population resides and is
the oldest and densest retail market in the twin cities of Hyderabad and Secunderabad.
In the twin cities of Hyderabad and Secunderabad, the National brand and Foreign
Brand stores dominate the mall space whereas the local and regional brands retail
stores dominate the shopping streets1.
2.8.1 Foreign Brand Apparel Retailers in twin cities of

Hyderabad and Secunderabad
Table 2.18 shows the presence of Foreign Brand Apparel retailers in the twin cities of
Hyderabad and Secunderabad clearly indicating that many foreign brand apparel
stores have a significant number of stores in the city.
Table 2.18: Number of stores of Foreign Brand Apparel Retailers in Hyderabad

and Secunderabad2
Foreign Brand Apparel Retailers No. of Stores
US POLO 9
MARKS & SPENCER 4
UNITED COLORS OF BENETTON 10
LEE 11
WRANGLER 9
ARROW 6
1
report-2646.pdf
2
Authors own research and company websites
75
Foreign Brand Apparel Retailers No. of Stores
LEVIS 7
PEPE 12
TOMMY HILFIGER 3
CHARLES & KEITH 1
MANGO 1
Total No. of stores of Foreign Brand 73
Apparel retailers
Source: Author’s own research and Company websites
Table 2.19 shows the presence of Foreign Brand Apparel Retailers area-wise in the
twin cities of Hyderabad and Secunderabad and that they are already present in main
shopping streets and in popular shopping malls.
Table 2.19: Area-wise location of Foreign Brand Apparel Retailers in the twin
cities of Hyderabad and Secunderabad1
Foreign Brand Apparel Area
Retailers
U S POLO A S RAO NAGAR ROAD, ECIL
JUBILEE HILLS, ROAD # 36
SOMAJIGUDA
KHARKHANA
TOLICHOWKI
DILSUKHNAGAR (INDIRANAGAR)
MANJEERA MALL, KUKATPALLY
MOOSARAMBAGH, DILSUKHNAGAR
HIMAYATNAGAR
MARKS & GVK MALL, B'HILLS
SPENCERS INORBIT MALL, MADHAPUR
FORUM SUJANA MALL,
KUKATPALLY
LEE HIMAYATNAGAR
CITY CENTER MLL, B'HILLS
INORBIT MALL, MADHAPUR
DR A S RAO NAGAR
FORUM SUJANA MALL,
KUKATPALLY
1
Author’s own research and company websites
76
Retailers
MANJEERA TRINITY MALL,
KUKATPALLY
GACHIBOWLI
TOLICHOWKI
TRIMULGHERRY
CHANDANAGAR
WRANGLER CITY CENTER MALL, B'HILLS
KUKATPALLY, KPHB
DILSUKHNAGAR
ROAD # 36, JUBILEE HILLS
HIMAYATNAGAR
AMRUTHA MALL, SOMAJIGUDA
DR A S RAO NAGAR
TOLICHOWKI
ARROW PARKLANE
ROAD # 3, B'HILLS
G V K MALL, B'HILLS
SOMAJIGUDA
HIMAYATNAGAR
LEVIS CITY CENTER MALL, B'HILLS
AMEERPET, DHARAM KARAM ROAD
KUKATPALLY, JNTU
HIMAYATNAGAR
DR A S RAO NAGAR
PEPE DR A S RAO NAGAR
ROAD # 2, B'HILLS
CHAITANYAPURI, DILSUKHNAGAR
G V K MALL, BANJARA HILLS
HABSIGUDA
HIMAYATNAGAR
KHARKHANA
KUKATPALLY, KPHB
S R NAGAR
VANASTHALIPURAM
CITY CENTER MALL, BANJARA
HILLS
TOMMY HILFIGER TRIMULGHERRY
ROAD # 2, B'HILLS
77
Retailers
G V K MALL, BANJARA HILLS
CHARLES & KEITH G V K MALL
MANGO G V K MALL
UNITED COLORS OF G V K MALL, BANJARA HILLS
BENETTON ROAD # 36, JUBILEE HILLS
BEGUMPET
HIMAYATNAGAR
FORUM SUJANA MALL,
KUKATPALLY
KPHB, KUKATPALLY
KHARHANA
Source: Author’s own research and company websites.
2.8.2 Foreign Brand Footwear Retailers in twin cities of

Hyderabad and Secunderabad
Table 2.20 shows the presence of Foreign Brand Footwear retailers in the twin cities
of Hyderabad and Secunderabad.
Table 2.20: No. of Stores of Foreign Brand Footwear Retailers in the twin cities
of Hyderabad and Secunderabad1
Foreign Brand footwear retailers No of Stores
REEBOK 22
FILA 3
PUMA 5
NIKE 8
CLARKS 2
ADIDAS 10
PAVERS 1
WOODLAND 5
HUSH PUPPIES 2
Total 58
Source: Author’s own research and Company Websites
1
78
Reebok has a significant presence with 22 stores followed by Adidas with 10 stores
and Nike with 8 stores in the twin cities of Hyderabad and Secunderabad.
The other foreign brand retail stores with significant presence in the twin cities of
Hyderabad and Secunderabad are Puma and Woodland with 5 stores each.
Table 2.21 shows the presence of Foreign Brand Footwear Retailers area-wise in the
twin cities of Hyderabad and Secunderabad.
Table 2.21: Area-wise location of Foreign Brand Footwear Retailers in the twin
cities of Hyderabad and Secunderabad1
Foreign Brand footwear retailers Area
REEBOK S R NAGAR
BHEL
JUBILEE HILLS
HIMAYATNAGAR
KUKATPALLY
HITEC CITY
A S RAO NAGAR
MEDCHAL
G V K MALL BANJARA HILLS
TRIMULGHERRY
HABSIGUDA
YOUSUFGUDA
TOLICHOWKI
KHARKHANA
BEGUMPET
AMEERPET
NAGARJUNA CIRCLE,
PUNJAGUTTA
ROAD # 1, BANJARA HILLS
DILSUKHNAGAR
MALAKPET
VIDYANAGAR
FILA VIKRAMPURI, KHARKHANA
HIMAYATNAGAR
PUMA HIMAYATNAGAR
DILSUKHNAGAR
KHARKHANA
1
79
Foreign Brand footwear retailers Area
A S RAO NAGAR
KUKATPALLY
CITY CENTER, BANJARA
HILLS
NIKE JUBILEE HILLS, ROAD # 36
HABSIGUDA
HIMAYATNAGAR
KHARKHANA
BEGUMPET
ROAD #2, BANJARA HILLS
ADIDAS JUBILEE HILLS, ROAD # 36
GVK MALL, BANJARA HILLS
ABIDS
KHARKHANA
DILSUKHNAGAR
A S RAO NAGAR
VANASTHALIPURAM
CLARKS INORBIT MALL, MADHAPUR
PAVERS INORBIT MALL, MADHAPUR
WOODLANDS TRIMULGHERRY
BEGUMPET
S P ROAD, BEGUMPET
M G ROAD
BANJARA HILLS
HUSH PUPPIES ROAD # 1, BANJARA HILLS
KHARKHANA
Source: Author’s own research and company websites
From the table 2.21, it is quite evident that foreign brand footwear retailers are already
present in main shopping streets and in popular shopping malls.
80
2.9 Application of Michael Porter’s Five Competitive
Forces Framework to the Indian Retail Sector
The effect of 100% FDI in single brand retail can be assessed by applying the five
competitive forces framework to analyze the impact of FDI in single brand retail on
the Indian retail sector1.
Table 2.22 lists the Porter’s five competitive forces framework to assess the impact of
FDI in single brand retail on the Indian retail sector.
Table 2.22: Assessment of Impact of FDI in Single Brand Retail on Indian Retail
Sector using the Porter’s Five competitive forces framework2
Competitive Forces Effect of Competitive Force on Indian
Retail Sector
Threat of New Entrants The Indian retail sector was protected
from new foreign retailers by a restrictive
FDI in Retail policy i.e. FDI policy in
Retail served as a barrier to entry for new
foreign players. Now with 100% FDI in
Single-Brand Retail being allowed, many
new foreign retailers are expected to enter
the Indian retail sector and therefore, the
threat of new entrants is high with 100%
FDI in retail being allowed.
Threat of Substitutes Retail companies face a threat of
substitutes when the demand for their
product falls due to lower priced
substitutes or due to low brand loyalty or
low switching costs or latest fads/trends.
The Unorganized retail sector is the
1
New Delhi.
2
Ibid.
81
Competitive Forces Effect of Competitive Force on Indian
Retail Sector
largest and serves the lower and middle
income class consumers by offering them
cheaper products. Therefore the threat of
substitutes from foreign players is
moderate to low unless the foreign
retailers offer their products at a much
cheaper price or Indian consumers
become brand conscious.
Bargaining Power of Suppliers If foreign retailers such as Nike, Reebok
etc set up their own retail stores then they
would be able to offer their products at a
cheaper price then a local Multi-brand
outlet offering the same products. So the
threat from bargaining power of suppliers
is high for the Indian retail sector with
100% FDI in single brand retail being
allowed.
Bargaining Power of Buyers With the entry of new foreign players, the
bargaining power of consumers will
increase as they will have more buying
options. Therefore, threat from
bargaining power of buyers is high with
100% FDI in single brand retail being
allowed.
Intensity of Rivalry The entry of more foreign players will
intensify the existing competition and
therefore, the threat of intensity of rivalry
for the Indian Retail sector is high with
100% FDI in retail being allowed
Source: Adapted from Pradhan, 2010.
82
2.10 Challenges of Retailing in India
Many companies selling brands such as Nike, Marks & Spencers, Calvin Klein
opened stores in India with local partners because they were restricted to 51 percent
ownership1. The foreign retailers are reluctant to start solo ventures in India due to
some of the challenges listed below2:
1. India is a heterogeneous market with highly diverse consumers whose tastes and
choices differ from region to region.
2. India has a poor supply chain infrastructure and therefore heavy infrastructural
investments are needed upfront to avoid wastage.
3. The cost of real estate is very high in India and so is retail shrinkage.
4. Another challenge is finding, training and retaining the skilled personnel.
5. Huge competition from unorganized sector
6. Bureaucratic and legal hurdles coupled with multiple and complex taxation systems
pose enormous challenges to large retailers.
2.11 Attractions for the Global Retailers

India has become an attractive destination for foreign retailers because of the
following reasons3:
1. The 75 million households or 300 million individuals which comprise the
Indian middle class is the biggest attraction for foreign retailers
2. India has young ( less than 25 years) and affluent population of over 500
million
3. The number of millionaires in India is increasing at a faster rate.
4. The Indian rural population of over 700 million also presents a great
opportunity for Global retailers.
1
Voanews.com (2012), “India allows single brand retailers to open fully owned stores” Retrieved
from http://www.voanews.com/a/india-allows-single-brand-retailers-to-open-fully-owned-stores--
137272058/150621.htm
2
Price Waterhouse Report (2011), “Winning in India’s Retail Sector – Factors for Success”, Retrieved
from http://www.pwc.in/assets/pdfs/rc-publications/WinningSector.pdf
3
Ibid.
83

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Chapter 2 : Retailing in India

2.1 Introduction to Retailing

Table 2.1: Broader Classification of retail formats1

2.1.2 Environmental changes affecting Retailers

Retailers operate in a continuously changing socio-economic and competitive

Table 2.2: Socio-economic, Geographical and Technology trends affecting

2.1.4 Retail store location

2. Part of a business district: The store is located in a place which is

3. Part of a shopping center: The store is located alongside other similar

Table 2.3: Advantages and Disadvantages of store location1

2.1.5 Classification of Store-based Retail Formats in India

4. Leased Departments (Shop-in-Shop)

2.1.6 Classification of Store-based Retail Formats in India

Table 2.4: Retail formats in India based on Merchandise sold2

Table 2.5: Characteristics of Unorganized retailers and Organized retailers1,2

Unincorporated Vegetable and Fruit

Incorporated Modern retail stores such as

2. No regulations has made the retail sector a largely oversupplied sector

1. Retail is not regarded as an Industry in India and therefore unavailability

2.3 Unorganized Retailers vs. Organized Retailers

On the other hand, larger organized retail stores can:

2. remain open for 10 to 11 hours a day including Sundays and Holidays.

3. resort to predatory pricing to destroy small retailers as they enjoy purchasing

Table 2.7: Formats of Organized Retail in India1

Table 2.8: Comparison of competitive advantages of Unorganized and Organized

T he major retail segments in India is listed below1:

1. Food and Grocery

2. Clothing and Accessories

5. Catering Services (Food and Beverages)

6. Home and Office Improvement ( Furniture)

10. Books, Music and Gifts

13. Beauty and Wellness

Table 2.9: Types of retailers operating in different retail segments in India1,2

2. Increasing Incomes: The steady economic growth has led to increase in

6. Increasing Urbanization: India has been experiencing increasing urbanization

2.6 Apparel Retailing Segment in India

Apparel/Clothing refers to readymade garments which includes ready-to-made

1. Formal wear – Shirts, Trousers, Suit-Pant, Blazers

1. Traditional/Indian – Saree, Salwar, (Ghagra, Choli)

Table 2.11: Key Organized Indian Retailers in Apparel Segment2

2.6.1 Entry of Foreign Brand retailers in the Apparel

Table 2.12 lists selected foreign apparel brands operating in India

Table 2.12: Foreign Apparel Brands operating in India2

2.7 Footwear Segment in India

Table 2.14: Key Organized Indian players in the Footwear Segment2,3

2.8 Retailing Scenario in the twin cities of Hyderabad

Figure 2.1: Retail Map of twin cities of Hyderabad and Secunderabad1

1. Northwest Zone: Kukatpally, KPHB Road

Table 2.16: Main Streets of Hyderabad and Secunderabad3

Raj Bhavan Road, Somajiguda

Zone Malls Shopping streets

West 37% 63%

North West 52% 48%

Central 14% 86%

2.8.1 Foreign Brand Apparel Retailers in twin cities of

Table 2.18: Number of stores of Foreign Brand Apparel Retailers in Hyderabad

2.8.2 Foreign Brand Footwear Retailers in twin cities of

2.11 Attractions for the Global Retailers

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