Emerging Opportunity in Retail Sector 1.0 THE INDIAN RETAIL SECTOR I n d i a i s t h e c o u n t r y h a v i n g t h e m o s t unorganized retail market.

Traditionally it was a family's livelihood, with their shop in the front andhouse at the back, while they run the retail business. More than 99%retailer's function in less than 500 square feet of shopping space.Global retail consultants KSA Technopak have estimated that Indianr e t a i l s e c t o r i s e s t i m a t e d a t a r o u n d R s 9 0 0 , 0 0 0 c r o r e , o f which theorganized sector accounts for a mere 2 per cent indicating a hugep o t e n t i a l m a r k e t o p p o r t u n i t y t h a t i s l y i n g i n t h e w a i t i n g f o r t h e consumer-savvy organized retailer. Purchasing power of Indian urbanc o n s u m e r i s g r o w i n g a n d b r a n d e d m e r c h a n d i s e i n c a t e g o r i e s l i keApparels, Cosmetics, Shoes, W atches, Beverages, Food and eve n Jewellery, are slowly becoming lifestyle products that are widelya c c e p t e d b y t h e u r b a n I n d i a n c o n s u m e r . I n d i a n r e t a i l e r s n e e d t o advan tage of this growth and aiming to grow, diversify and introducenew formats have to pay more attention to the brand building process. The emphasis here is on retail as a brand rather than retailers sellingbrands. The focus should be on branding the retail business itself. There is no doubt that the Indian retail scene is booming. A number of l a r g e c o r p o r a t e h o u s e s R e l i a n c e , T a t a ' s , R a h e j a ' s , P i r a m a l s ' s , Goenka's have already made their foray into this arena, with beautyand health stores, supermarkets, self-service music stores, new agebook stores, every-day-lowprice stores, computers and peripheralsstores, office equipment stores and home/building construction stores. Today the organized players have attacked every retail category. The Indian retail scene has witnessed too many players in too short at i m e , c r o w d i n g s e v e r a l c a t e g o r i e s w i t h o u t l o o k i n g a t t h e i r c o r e competencies or having a well thought out branding strategy. The growth rate of super market sales has been significant in recenty e a r s b e c a u s e g r e a t e r n u m b e r s o f h i g h e r i n c o m e I n d i a n s p r e f er tos h o p a t s u p e r m a r k e t s d u e t o h i g h e r s t a n d a r d s o f h y g i e n e a n d attractive ambience. W ith growth in income levels, Indians ha v e started spending more on health and beauty products. Here also small,s i n g l e o u t l e t r e t a i l e r s d o m i n a t e t h e m a r k e t . I n r e c e n t y e a r s , a f e w retail chains specialised products have come into the market.

Although these retail chains account for only a small share of the totalmarket, their business is expected to grow significantly in the futuredue to the growing quality consciousness of buyers for these products.N u m e r o u s c l o t h i n g a n d f o o t w e a r s h o p s i n s h o p p i n g c e n t r e s a n d markets operate all over India. Traditional outlets stock a limited rangeof cheap and popular items; in contrast, modern clothing and footwearstores have modern products and attractive displays to lure customers.With rapid urbanization, and changing patterns of consumer tastes andpreferences, it is unlikely that the traditional outlets will survive thetest of time. Despite the large size of this market, very few large andmodern retailers have established specialized stores for products. There seems to be a considerable potential for the entry or expansionof specialized retail chains in the country. The Indian durable goodss e c t o r h a s s e e n t h e e n t r y o f a l a r g e n u m b e r o f f o r e i g n c o m p a n i e s during the post liberalization period. A greater variety of consumerelectronic items and household appliances became available to theIndian customer. Intense competition among companies to sell theirbrands provided a strong impetus to the growth for retailers doingbusiness in this sector. Increasing household incomes due to bettereconomic opportunities have encouraged consumer expenditure onleis ure and personal goods in the country. There are specialized retailers for each category of products (books,music products, etc.) in this sector. Another prominent feature of thissector is popularity of franchising agreements between establishedmanuf acturers and retailers. A strong impetus to the growth of retailindustry is witnessed by economic boom and driver of key trends inurban as well as rural India. T h e I n d i a n r e t a i l i n d u s t r y i n v a l u e d a t a b o u t $ 3 0 0 b i l l i o n a n d i s expected to grow to $427 billion in 2010 and $637 billion in 2015. Onlythree percent of Indian retail is organised. Retailers of multiple brandscan operate through a franchise or a cash-and-carry wholesale model.Retail is Indias largest industry, accounting for over 10 percent of thecountrys GDP and around eight percent of employment. Retail in Indiais at the crossroads. It has emerged as one of the most dynamic andfast paced industries with several players entering the market. Thatsaid, the heavy initial investments required make break even hard toachieve and many players have not tasted success to date. However,the future is promising; the market is growing, government policies arebecoming more favourable and emerging technologies are facilitatingoperations.

Indian consumer is also witnessing some changes in its demographicswith a large working population being under the age group of 24 -35,there has been an increasing number of nuclear families, increase inworking women population and emerging opportunities in the servicesector during the past few years which has been the key growth drivero f t h e o r g a n i z e d r e t a i l s e c t o r i n I n d i a . T h e e m e r g e n c e o f a l a r g e r middle and upper middle classes and the substantial increase in theirdisposable income has changed the nature of shopping in India from need based to lifestyle dictated. T h e s e l f e m p l o y e d s e g m e n t h a s r e p l a c e d t h e e m p l o y e d s a l a r i e d segment as the mainstream market, thus resulting in an increasing consumption of productivity goods, especially mobile phones and 2 - 4wheeler vehicles. There is also an easier acceptance of luxury and ani n c r e a s e d w i l l i n g n e s s t o e x p e r i m e n t w i t h t h e m a i n s t r e a m f a s h i o n , r euslting in an increased willingness towards disposability and castingo u t f r o m a p p a r e l s t o c a r s t o m o b i l e p h o n e s t o c o n s u m e r d u r a b l e s . Indians spend over USD 30,000 a year (in PPP terms) on conspicuousconsumption that represents 2.8% of the entire population (which isa p p r o x 3 0 m i l l i o n p e o p l e ) m a k i n g i t t h e 4 th largest economy in PPPterms next only to USA, Japan and China.With reference to the map of India's income class, it can be noticed that the real driver of the Indian retail sector is the bottom 80% of thefirst layer and the upper half of the second layer of the income map. This segment of about 40 million households earns USD 4,000-10,000per household and comprises salaried employees and selfemployedp r o f e s s i o n a l s a n d i s e x p e c t e d t o g r o w t o 6 5 m i l l i o n h o u s e h o l d s b y 2010. In addition to this, facilities like credit friendliness, availability of cheap finance and a drop in interest rates have changed consumer markets. Capital expenditure (jewelry, homes, and cars) has shifted tobecoming redefined as consumer revenue expenditure, in addition toconsumer durables and loan credit purchases. How has the Indian consumer changed over the years? In the past few years the whole concept of shopping has been alteredin terms of format and consumer buying behavior. With the increasingu r b a n i z a t i o n , t h e I n d i a n c o n s u m e r i s e m e r g i n g a s m o r e t r e n d - conscious. There has also been a shift from price considerations todesigns and quality as there is a greater focus on looking and feelingg o o d ( a p p a r e l a s w e l l a s f i t n e s s ) . A t t h e s a m e t i m e , t h e I n d i a n consumer is not beguiled by retail products which are high on price butcommensurately low on value or functionality. However, it can be saidthat the Indian consumer is a paradox, where the discount shopper loyalty takes a backseat over price discounts 6

Indians have grown richer and thus spending more on vehicles, phonesand eating out in restaurants. The spending is focused more outsidet h e h o m e s , u n l i k e i n o t h e r A s i a n c o u n t r i e s w h e r e c o n s u m e r s havet e n d e d t o s p e n d m o r e o n p e r s o n a l i t e m s a s t h e y g r o w richer 7 .S p e n d i n g o n l u x u r y g o o d s h a v e i n c r e a s e d t w i c e a s f a s t w i t h 2 / 3 o f India's population is under 35, consumer demand is clearly growing. T h e m a l l m a n i a h a s b o u g h t i n a w h o l e n e w b r e e d o f m o d e r n r e t a i l formats across the country catering to every need of the value-seekingI n d i a n c o n s u m e r . An average Indian would s ee a mall as a p e r f e c t weekend getaway with family offering them entertainment, leisure,fo od, shopping all under one roof. 1.1 Key Trends in Urban India : * Retailing in India is witnessing a huge revamping exercise. * Estimated to be US$ 200 billion, of which organized retailing (i.e.modern trade) makes up 3 percent or US$ 6.4 billion. * India is rated the fifth most attractive emerging retail market: apotential goldmine * Ranked second in a Global Retail Development Index of 30developing countries drawn up by AT Kearney. * India is rated the fifth most attractive emerging retail market: apotential goldmine * Food and apparel retailing key drivers of growth. * Organized retailing in India has been largely an urban phenomenonwith affluent classes and growing number of double-incomehouseholds. 1.2 Key Trends in Rural India:* Rural markets emerging as a huge opportunity for retailers reflectedin the share of the rural market across most categories of consumption * ITC is experimenting with retailing through its e-Choupal andChoupal Sagar rural hypermarkets.M o r e t h a n h a l f o f r e t a i l m a r k e t i n I n d i a i s i n t h e r u r a l a r e a s ( 5 5 % ) ; although share of urban market is increasing by almost 5% every 810years. Accommodating almost twothird of the country's consumersa n d g e n e r a t i n g a l m o s t h a l f o f t h e n a t i o nal income, the rural India

offers tremendous opportunities for organized retailers which manycompanie s have failed to access. According to the study conducted byNCEAR, the number of `lower middle income' group in rural areas isa l m o s t d o u b l e a s c o m p a r e d t o t h e u r b a n a r e a s , h a v i n g a l a r g e consuming class with 41% of the Indian middle class and 58% of thetotal disposable income.S o u r c e : C e n s u s ; N a t i o n a l C o u n c i l o f A p p l i e d E c o n o m i c R e s e a r c h (NCAER).A l o o k a t t h e d e m o g r a p h i c s r e v e a l s t h a t t h e h i g h e s t i n c o m e l e v e l s households in the rural areas are 1.6 million as compared to 2.3 millionin urban areas. It has also been forecasted that the middle and thehigher income households are expected to grow to 111 million by 2007from the current levels of 80 million. Thus, it can be said that with 128m i l l i o n h o u s e h o l d s , t h e r u r a l p o p u l a t i o n i s n e a r l y t h r e e t i m e s t h e urban. This vast demand base and size offers a huge opportunity thatMNCs cannot afford to ignore. Traditionally, the small store (kirana) retailing has been one of theeasiest ways to generate selfemployment, as it requires minimuminvestments in terms of land, labour and capital. These stores are nota f f e c t e d b y t h e m o d e r n r e t a i l i n g a s i t i s s t i l l c o n s i d e r e d v e r y convenient to shop. In order to keep pace with the modern formats,kiranas have now started providing more valueadded services likestocking ready to cook vegetables and other fresh produce. They alsoprovide services like credit, phone service, home delivery etc. T h e o r g a n i z e d r e t a i l i n g h a s h e l p e d i n p r o m o t i n g s e v e r a l n i c h e categories such as packaged fruit juices, hair creams, fabric bleaches,shower gels, depilatory products and convenience and health foods,which are generally not found in the local kirana stores. Looking at thevast opportunity in this sector, big players like Reliance and K Rahejash a s a n n o u n c e d i t s p l a n s t o b e c o m e t h e c o u n t r y ' s l a r g e s t m o d e r n retainers by establishing a chain of stores across all major cities

Apart from metro cities, several small towns like Nagpur, Na sik,Ahmedabad, Aurangabad, Sholapur, Kolhapur and Amrava ti asw i t n e s s i n g t h e e x p a n s i o n o f m o d e r n r e t a i l s . S m a l l t o w n s i n Maharashtra are emerging as retail hubs for large chain stores likePantaloon Retail because many small cities like Nagpur have a studentpopulation, lower real estate costs, fewer power cuts and lower levelsof 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 thats t e p s a r e t a k e n f o r r e w r i t i n g l a w s , r e s t r u c t u r i n g t h e t a x r e g i m e , accessing and developing new skills and investing significantly in India. 1.3 An Overview of the Retail sector: The Indian retail sector is highly fragmented with 97% of its businessbeing run by the unorganized retailers like the traditional family runstores and corner stores. The organized retail however is at a veryn a s c e n t s t a g e t h o u g h a t t e m p t s a r e b e i n g m a d e t o i n c r e a s e i t s proportion to 9-10% by the year 2010 bringing in a huge opportunityf o r p r o s p e c t i v e n e w p l a y e r s . T h e s e c t o r i s t h e l a r g e s t s o u r c e o f employment after agriculture, and has deep penetration into ruralIndia generating more than 10% of India's GDP

Source: Ernst &Young, The Great Indian Retail Story, 2006.A look at the statistics shows that the retail sector in India is worth USD394 billion and is growing at the rate of 30% annually. An ICRIER studyhas found that retailing ($180 billion) contributes to 10 per cent of GDPand employs 7 per cent (21 million) of the workforce. According to ATKearney, India is given the top ranking as the next foreign investmentdestination, as markets like China become increasingly saturated. Indiai s t h e 4 th l a r g e s t e c o n o m y a s r e g a r d s G D P ( i n P P P t e r m s ) a n d i s expected to rank 3 rd by 2010 just behind US and China 1 . Over the pastfew years, the retail sales in India are hovering around 33-35% of GDPas compared to around 20% in the US. The table gives the picture of India's retail trade as compared to the US and China.

Source: Economist, Let gradualism guide FDI in retail, 2006. The last few years witnessed immense growth by this sector, the keydrivers being changing consumer profile and demographics, increasein the number of international brands available in the Indian market,e c o n o m i c i m p l i c a t i o n s o f t h e g o v e r n m e n t i n c r e a s i n g u r b a n i z a tion,credit availability, improvement in the infrastructure, increasing i n v e s t m e n t s i n t e c h n o l o g y a n d r e a l e s t a t e b u i l d i n g a w o r l d c l a s s shop ping environment for the consumers. In order to keep pace withthe increasing demand, there has been a hectic activity in terms of entry of international labels, expansion plans, and focus on technology,operations and processes. This has lead to more complex relationshipsinvolving suppliers, third party distributors and retailers, which can bedealt with the help of an efficient supply chain. A proper supply chainwill help meet the competition head-on, manage stock availability;supplier relations, new value-added services, cost cutting and mostimportantly reduce the wastage levels in fresh produce.Large Indian players like Reliance, K Rahejas, Bharti AirTel, ITC andmany others are making significant investments in this sector leadingto emergence of big retailers who can bargain with suppliers to reap

economies of scale. Hence, discounting is becoming an acceptedpr actice. Proper infrastructure is a prer e q u i s i t e i n r e t a i l i n g , w h i c h would help to modernize India and facilitate rapid economic growth. This would help in efficient delivery of goods and valueadded servicesto the consumer making a higher contribution to the GDP. . Segment analysis: The structure of Indian retail is developing rapidly with shopping mallsbecoming increasingly common in the large cities and developmentplans being projected at 150 new shopping malls by 2008. However,the traditional formats like hawkers, grocers and tobacconist shop sc o n t i n u e t o c o e x i s t w i t h t h e m o d e r n f o r m a t s o f r e t a i l i n g . M o d e r n retailing has helped the companies to increase the consumption o f their products for example: Indian consumers would normally consumethe rice sold at the nearby kiranas viz. Kolam for daily use. With theintroduction of organized retail, it has been noticed that the sale of Basmati rice has gone up by four times than it was a few years back;as a superior quality rice (Basmati) is now available at almost the sameprice as the normal rice at a local kirana. Thus, the way a product isd i s p l a y e d a n d p r o m o t e d i n f l u e n c e s i t s s a l e s . I f t h e c o n s u m p t i o n continues to grow this way it can be said that the local market wouldgo through a metamorphoses of a change and the local stores woulds o o n b e c o m e t h e t h i n g s o f t h e p a s t o r r e s t r i c t e d t o l a s t m i n u t e unplanned buying. 4.1 Food and grocery retail: The food business in India is largely unorganized adding up to barelyRs. 40,000 crore, with other large players adding another 50% to that. The All India food consumption is close to Rs. 900,000 crore, with thetotal urban consumption being around Rs.330,000 crore. This meansthat aggregate revenues of large food players is currently only 5% of t h e t o t a l I n d i a n m a r k e t , a n d a r o u n d 1 5 2 0 % o f t o t a l u r b a n f o o d consumption. Most food is sold in the loc a l ` w e t ' m a r k e t , v e n d o r s , roadside push cart sellers or tiny kirana stores. According to McKinseyreport, the share of an Indian household's spending on food is one of the highest in the world, with 48% of income being spent on food andbeverages. 4.2 Apparel retail: The ready-mades and western outfits are growing at 40-45% annually,as the market teems up with international brands and new entrantse n t e r i n g t h i s s e g m e n t c r e a t i n g a n R s . 5 0 0 c r o r e m a r k e t f o r t h e premium grooming segment. The past few years has seen the sector

aligning itself with global trends with retailing compani e s l i k e Shoppers' stop and Crossroads entering the fray to entice the middleclass. However, it is estimated that this segment would grow to Rs. 300crore in the next three years. 4.3 Gems and Jewellery retail: The gems and jewellery market is the key emerging area, accountingfor a high proportion of retail spends. India is the largest consumer of g o l d i n t h e w o r l d w i t h a n e s t i m a t e d a n n u a l c o n s u m p t i o n o f 1 0 0 0 to nnes, considering actual imports and recycled gold. The market for jewellery is estimated as upwards of Rs. 65,000 crores 9 . 4.4 Pharma retail: The pharma retailing is estimated at about Rs. 30,000 crore, with 15%of the 51 lakh retail stores in India being chemists. According to VikasBali, Principal, A.T. Kearney (India) Ltd, "Pharma retailing will follow thetrend of becoming more organised and corporatised as is seen in otherr e t a i l i n g f o r m a t s ( f o o d , a p p a r e l e t c ) " . A f e w c o r p o r a t e s w h o h a v e already forayed into this segment include Dr Morepen (with Lifespringand soon to be launched Tango), Medicine Shoppe, Apollo pharmacies,98.4 from Global Healthline Pvt Ltd, and the recently launched CRS Health from SAK Industries. In the south, RPG group's Health & Glow isalready in this category, though it is not a pure play pharma retailerbut more in the health and beauty care business 10 . 4.5 Music Retail: The size of the Indian music industry, as per this Images-KSA Study, isestimated at Rs.1100 crore of which about 36 percent is consumed bythe pirated market and organized music retailing constitutes about 14percent, equivalent to Rs.150 crore 11 . 4.6 Book retail: The book industry is estimated at over Rs. 3,000 crore out of which organized retail accounts for only 7% (at Rs.210 crore). This segment isseen to be emerging with text and curriculum books accounting toabout 50% of the total sales. The gifting habit in India is catching onfast with books enjoying a significant share, thus expecting this sectorto grow by 15% annually

4.7 Consumer durables retail The consumer durables market can be stratified into consum e r electronics comprising of TV sets, audio systems, VCD players a n d others; and appliances like washing machines, microwave ovens, airc o n d i t i o n e r s ( A / C s ) . T h e e x i s t i n g s i z e o f t h i s s e c t o r s t a n d s a t a n estimated USD 4.5 Billion with organized retailing being at 5%

Source: E&Y, The Great Indian Retail Story, 2006.As noticed in the figure above, the organized retail penetration (ORP) isthe highest in footwear with 22% followed by clothing. Though foodand grocery account for largest share of retail spend by the consumera t a b o u t 7 6 % , o n l y 1 % o f t h i s m a r k e t i s i n t h e o r g a n i z e d s e c t o r . However, it has been estimated that this segment would multiply fivetimes taking the share of the organized market to 30 perce nt in thecoming years 1 . 5. Industry analysis of the Indian retail sector: Modern retailing has entered India in form of sprawling malls and hugecomplexes offering shopping, entertainment, leisure to the consumeras the retailers experiment with a variety of formats, from discountstores to supermarkets to hypermarkets to specialty chains. However,kiranas still continue to score over modern formats primarily due to theconvenience factor

Source: IT Retailing: Are You In The Loop?, July 16, 2006. T h e o r g a n i z e d s e g m e n t t y p i c a l l y c o m p r i s e s o f a l a r g e n u m b e r o f r e t a i l e r s , g r e a t e r e n f o r c e m e n t o f t a x a t i o n m e c h a n i s m s a n d b e t t e r la bour law monitoring system. It's no longer about just stocking ands e l l i n g b u t a b o u t e f f i c i e n t s u p p l y c h a i n m a n a g e m e n t , d e v e l o p i n g vendor relationship quality customer service, efficient merchandisinga n d t i m e l y p r o m o t i o n a l c a m p a i g n s . T h e m o d e r n r e t a i l f o r mats areencouraging development of welle s t a b l i s h e d a n d e f f i c i e n t s u p p l y chains in each segment ensuring efficient movement of goods fromfarms to kitchens, which will result in huge savings for the farmers aswell as for the nation. The government also stands to gain throughmore efficient collection of tax revenues.Along with the modern retail formats, the non-store retailing channelsare also witnessing action with HLL initiating Sangam Direct, a direct tohome service. Network marketing has been growing quite fast and hasa few large players today. Gas stations are seeing action in the form of convenience stores, ATMs, food courts and pharmacies appearing inmany outlets.I n t h e coming years it can be said that the hypermarket route wille m e r g e a s t h e m o s t p r e f e r r e d f o r m a t f o r i n t e r n a t i o n a l r e t a i l e r s stepping into the country. At present, there are 50 hypermarke t s operated by four to five large retailers spread across 67 cities cateringto a population of half-a-million or more. Estimates indicate that thissector will have the potential to absorb many more hypermarkets inthe next four to five years.

2.0 The Hidden Challenges Modern retailing is all about directly having "first hand experience"w i t h c u s t o m e r s , g i v i n g t h e m s u c h a s a t i a b l e e x p e r i e n c e t h a t t h e y would like to enjoy again and again. Providing great experience tocustomers can easily be said than done. Thus challenges like retaildifferentiation, merchandising mix, supply chain management andcomp etition from supplier's brands are the talk of the day. In India, aswe are moving to the next phase of retail development, each endeavort o o f f e r e x p e r i e n t i a l s h o p p i n g . O n e o f t h e k e y o b s e r v a t i o n s b y customers is that it is very difficult to find the uniqueness o f r e t a i l stores. The problem: retail differentiation. The next problem in setting up organized retail operations is that of s u p p l y c h a i n l o g i s t i c s . I n d i a l a c k s a s t r o n g s u p p l y c h a i n w h e n compared to Europe or the USA. The existing supply c h a i n h a s t o o many intermediaries: Typical supply chain looks like:- Manufacturer National distributor - Regional distributor - Local wholesaler - Retailer -Consumer. This implies that global retail chains will have to build as u p p l y c h a i n n e t w o r k f r o m s c r a t c h . T h i s m i g h t r u n f o u l w i t h t h e existing supply chain operators. In addition to fragmented suppl y c h a i n , t h e t r u c k i n g a n d t r a n s p o r t a t i o n s y s t e m i s a n t i q u a t e d . T h e con cept of container trucks, automated warehousing is yet to take rootin India. The result: significant losses/damages during shipping .Merchandising planning is one of the biggest challenges that any multistore retailer faces. Getting the right mix of product, which is storespecific across organization, is a combination of customer insight,allocation and assortment techniques. The private label will continue to compete with brand leaders. Sos upplier's brand wiil take their own way because they ha v e a established brand image from last decades and the reasons can bea t t r i b u t e d t o b e t t e r c u s t o m e r e x p e r i e n c e , v a l u e v s . p r i c e , aspiration, innovation, accessibility of supplier's brand.Logistics: The focus of major retail expansions will be around the foodand grocery segment, with all major corporates entering retail throught h i s s e g m e n t . W i t h t h e o b j e c t i v e t o h a v e b e t t e r c o n t r o l o v e r p r i c e , consistency in product supply as well as quality, there will be hugeinvestment in supply chain infrastructure. Worldwide, IT has been onthe forefront in SCM initiatives as it plays an integral role in automationand information sharing during the whole chain. Warehousing: As retai lers t ake control o ve r the in ven to r ymanage ment as well as distribution across the supply chain,

warehousing will play a pivotal role in the distribution proces s . Advanced computerized systems such as Real Time Warehouse ControlSystems would offer enhanced integration of information flow on a realtime basis, leading to more accurate inventory planning processes andelimination of wastages. Merchandising: The growth in the size of the formats brings in thec o m p l e x i t y o f m a n a g e m e n t o f s t o c k k e e p i n g u n i t s , w h i c h i n c l u d e s planning of merchandise from sourcing till phasing out of the item. Theproblem becomes more intricate with in -house private labels wherer e t a i l e r s t a k e t h e r i s k o f p r o d u c t d e v e l o p m e n t a n d c o m m i t o n t heproduction quantities. Private label not only brings in additionalm argins for retailers, but also competitive edge in terms of positioningo f p r o d u c t s i n r e s p e c t i v e c a t e g o r i e s . I t i s a b i g o p p o r t u n i t y , a s internationally 17% of the sales are generated through private labels. T h o u g h m e r c h a n d i s i n g d e c i s i o n s a r e l a r g e l y t a k e n w i t h h u m a n intervention, IT plays an important role as a decision support system,h e l p i n g u s e r s i n t a k i n g w e l l i n f o r m e d d e c i s i o n s f o r m e r c h a n d i s e management. Multi-formats: As retailers grow big and consumers' expectationchange, they will h a v e t o c o m e u p w i t h d i f f e r e n t f o r m a t s o f f e r i n g different value preposition to consumers. Managing of stores acrossf o r m a t s , c i t i e s , r e g i o n s a n d e v e n c o u n t r i e s t h r o u g h a s i n g l e merchandising office can be a daunting task witho ut requisite ITinfrastructure to facilitate the flow of information bet w e e n s t o r e s , warehouses and the central merchandising office. Customer Engagement: With increasing options in terms of formatsand increased penetration of the stores, customers will always havethe option to select from many stores. Retailers will have to devisem u l t i p l e w a y s o f r e t a i n i n g t h e i r c u s t o m e r s b y b r i n g i n g i n e v e n t s , l o y a l t y p r o g r a m s , a n d b e t t e r c u s t o m e r s e r v i c i n g t h r o u g h d e e p e r un derstanding of consumers' preferences. Multi-channel Retail: On the lines of international models, there isa n e v o l v i n g m o d e l o f C l i c k a n d B r i c k s , w h e r e i n b r i c k a n d m o r t a r retailers are strengthening their presence through supporting channelslike Web stores for reaching out to new customers as well as servicingof existing customers. All these other supporting channels like Web, catalog or Kiosk rely heavily on technology for execution. Store Experience: Apart from basic store process automation, thetechnology can be deployed for better consumer experience in thestore. For instance, information kiosks within the store for comparing

between different models of technology products can be a b i g differentiator for consumers to shop from a particular store.Similarly, even simpler technology initiatives can make consumers' in-store shopping experience more meaningful. Retail Applications With large corporate houses entering the retail sector and th e consequent entry of IT professionals from other industry verticals, awareness levels of IT managers in the retail indu stry have grown. T h e r e i s s t i l l a n e e d t o d i s p l a y t h e b e n e f i t s t h a t a c c r u e f r o m implementing ERP and CRM applications in a retail organization.

4.0 Strategies4.1: Right Positioning The effectiveness of the mall developer's communication of t h e offering to the target customers determines how well the mall getspositioned in their minds. At this stage, the communication has to bemore of relative nature. This implies that the message conveyed to the

arget customers must be effective enough in differentiating the mall'soffering from that of its competitors without even naming them. Themessage should also clearly convey to the target audience that themall offers them exactly what they call the complete shopping-cumentertainment point that meets all their expectations. The co r e purpose is to inform the target customers about the offering of the mall, persuade them to visit the mall and remind them about the mall. The mall developer can create awareness about the offering amongthe target customers in a number of ways. Various communicationt o o l s a v a i l a b l e t o t h e m a l l d e v e l o p e r f o r t h i s p u r p o s e m a y i n c l u d e advertising, buzz marketing (WoM), celebrity endorsement, use of printmedia, press releases and viral marketing .Once the message is beingc o n v e y e d t h r o u g h t h e s e c h a n n e l s , t h e m a l l d e v e l o p e r m u s t a d d ap e r s o n a l t o u c h t o h i s m e s s a g e b y c a r r y i n g o u t a d o o r - t o d o o r campaign in order to reinforce the message. 4.2: Effective Visual Communication Retailer has to give more emphasis on display visual merchandising,lighting, signages and specialized props. The visual commun icationstrategy might be planned and also be brand positioned. Theme orl i f e s t y l e d i s p l a y s u s i n g s t y l i z e d m a n n e q u i n s a n d p r o p s , w h i c h a r e based on a season or an event, are used to prom ote collections andh a v e t o c h a n g e t o k e e p t o u c h w i t h t h e t r e n d . T h e m e r c h a n d i s e presentation ought to be very creative and displays are often on non-standard fixtures and forms to generate interest and add on attitude tothe merchandise. 4.3:

Strong Supply Chain Critical components of supply chain planning applications can helpm a n u f a c t u r e r s m e e t r e t a i l e r s ' s e r v i c e l e v e l s a n d m a i n t a i n p r o f i t margins. Retailer has to develop innovative solution for managing thes u p p l y c h a i n p r o b l e m s . I n n o v a t i v e s o l u t i o n s l i k e p e r f o r m a n c e management, frequent sales operation management, d e m a n d planning, inventory planning, production planning, lean systems andstaff should help retailers to get advantage over competitors. 4.4: Changing the Perception Retailers benefit only if consumers perceive their store brands to havec o n s i s t e n t a n d c o m p a r a b l e q u a l i t y a n d a v a i l a b i l i t y i n r e l a t i o n t o branded products. Retailer has to provide more assortments f o r private level brands to compete with supplier's brand. New produc

development, aggressive retail mix as well as everyday low pricing strategy can be the strategy to get edge over supplier's brand. 5.0 Conclusion: In their preparation to face fierce competitive pressure, Indian retailersm u s t c o m e t o r e c o g n i z e t h e v a l u e o f b u i l d i n g t h e i r o w n s t o r e s a s brands to reinforce their marketing Positioning, to communicate qualityas well as value for money. Sustainable competitive advantage will bedependent on translating core values combining products, image andreputation into a coherent retail brand strategy. Key Opportunities in RetailEmployment opportunities in this sector: The Indian retail sector offers an economic opportunity on a massivescale both as a global base and a domestic market. This sector yieldsmany positive results like generating more jobs and bringing numerousg o o d s t o t h e c o n s u m e r s a t r e a s o n a b l e p r i c e s . A c c o r d i n g t o E r n s t &Young's report `The Great Indian Retail Story' this sector is expectedto create 2 million jobs by 2010.A b o u t 4 c r o r e p e o p l e a r e e m p l o y e d i n r e t a i l t r a d e , a s s u m i n g e a c h person supports a family of 5, this, implies that about 20 crore peopleare dependent on this sector. For a vast majority of the households,r e t a i l i n g i s a e u p h e m i s m f o r a m a r g i n a l e x i s t e n c e . M o d e r n r e t a i l formats have generated huge employment for the young and evensenior citizens and women wanting to work part -time (even in smalltowns). People have greater exposure to the technical aspects, trainingand also earn higher salaries along with bonuses and incentives. Withforeign companies opening expanding in India, employees are beingre-trained according to international standards and practices that arebeing bought in. T h e r e i s a l s o a n i n c r e a s e i n t h e n u m b e r o f r e t a i l m a n a g e m e n t programmes and institutes. This will bridge the gap in availability

of talented professionals at the middle and lower levels. Successful Indianretailers are creating a robust second and third level of managementby hiring aggressively for these key roles. Talented professionals willput increased pressure on wage costs. Therefore operating margins, especially for mid-sized retailers, are becoming a poaching ground forinternational retailers once they enter India.

With private companies getting into retail, there are people employedfrom diverse cultures (no room for reservations unlike governmento wned stores) where there is a sense of unity in diversity. Th e companies are also employing people who are physically handicapped. The next few years are expected will see the sector offering new jobsto 50,000 young graduates and diploma holders. 9. IT and latest development: Technology has played a key role in retailers' efforts to compete in thisvolatile market. With e-tailing channels making its presence felt inIndia companies are using either their own web portal or are tying upwith horizontal players like Rediff.com and Indiatimes.com to offertheir products on the web 15 (www.alexa.com). IT has been used byr e t a i l e r s r a n g i n g f r o m A m a z o n . c o m t o e B a y , i n o r d e r t o r a d i c a l l y ch ange the buying behavior across the globe 16 .Retailers worldwide are looking forward to increase their IT spendingb y a l m o s t 1 5 % i n 2 0 0 6 , a l l o c a t i n g a l m o s t h a l f o f t h i s i n c r e a s e toapplication software with a particular focus on tools that facilita t e multi-channel customer relationships, point of sale systems, strategicmerchandising and supply chain management 17 . T h e l a s t 2 - 3 y e a r s have seen several retailers ranging from F&B operations to discountclothing implementing supply chain management (SCM) solutions toimprove core business processes such as global sourcing, distribution,l o g i s t i c s , i n n o v a t i o n s , t r a n s p a r e n c y a n d v i s i b i l i t y i n f i n a n c i a l s a n d inventory, compliance and management of point of sale (POS) data.However, organized retailers have not taken well to the concept of 3PL(third party logistics) due to their apprehensions of losing control overthe supply chain. Currently, the transportation is carried out partly byo r g a n i z e d s e r v i c e p r o v i d e r s a n d p a r t l y b y t r u c k e r s a n d l o c a l transporters.In conclusion, it can be said that in order to deliver the levels of qualityand service that consumers are demanding; the organized retailers arein a pressing

need for a single enterprise wide IT platform to manageoperations, which will become increasingly complex once the marketexpands. RFID as Savior In a retail store, RFID assists in inventory management. All items in aretail outlet sport read-only tags that contain the product code and itsdescription, including the batch number, expiry date and price. The shelves, exit gates, and warehouses are fitted with sensors that read

the information from the RFID tag and help in updating the inventorysystem in realtime. This way it helps in total asset visibility and trackst h e i n v e n t o r y s t o c k i n g . I t a l s o e n s u r e s b e t t e r p r o c e s s c o n t r o l f o r products in the store. In warehouses and container depots, containersare marked with RFID chips that contain details of origin, destination,and other details. Entry and exit gates, vehicles, and cranes are fittedwith an antenna that senses the RFID tags, and records and updatesthe system to check for any deviation in the schedule. W ith precisetracking of the location of pallets and containers within the warehouse,i t i s e a s y t o p i n p o i n t u n s c h e d u l e d m o v e m e n t s . T h e s y s t e m a l s o considerably helps reduce costs and time for check-in and check-out. There was only one issue with RFID technology-it was unable to workon vessels holding liquids or made of metal. Now Wal-Mart's tech teama n d i t s v e n d o r s h a v e o v e r c o m e t h i s p r o b l e m , i n v i t i n g m a j o r deployments. In India Globus, Pantaloons, and Madura Garments havealready Started testing RFID. Point of Sale In the retail industry, Point of Sale (POS) solutions have replaced thePC or cash registers to a great extent. Many POS systems connect toin -store computers that, in turn, link to computers at the company'sh eadquarters. And, POS today has come of age. "Now the POS is notonly a billing machine, but has also become more intelligent. Today, POS can display advertisements and do data mining," says Sanat Rao,director of marketing, Emerging Markets, Embedded Markets Division,I n t e l . A l s o , w i t h w e l l designed software, POS can provide a simple, e a s y - t o u s e m e c h a n i s m f o r c a s h i e r s t o h a n d l e j u s t a b o u t a n y trans action, reducing training time, while improving productivity andcustomer service. Touch screens are popular in the hospitality andc o n v e n i e n c e s t o r e i n d u s t r y , a n d a r e r a p i d l y g a i n i n g a c c e p t a n c e i no t h e r r e t a i l m a r k e t s . S o m e b u s i n e s s e s c h o o s e t o c o m b i n e o t h e r options with a touch screen POS. Security Concerns Fraud and theft, including employee pilferage, shoplifting, vendorfr auds, and inaccuracy in supervision and administration cost theI n d i an retail industry about Rs 5506 0 0 c r o r e e v e r y y e a r . T h i s i s despite the fact that most large modern

format retailers use standardsecurity features such as CCTVs, POS systems, and anti-shopliftingsystems for greater control over fraud and theft. In financial terms,cost of this fraud constitutes about 2% of the organized retail sector'srevenues.

W i t h s t a n d a l o n e n e t w o r k i n g s y s t e m s , r e t a i l e r s r u n t h e r i s k o f n o t getti ng information quickly enough. According to Gupta, "We are usingLAN and WAN set-up connected by MPLS and VPN. All our stores are connected through IP VPN."M o s t r e t a i l e r s f a i l t o p r o v i d e c o m m u n i c a t i o n b e t w e e n w o r k e r s , customers, managers, vendor partners, and stores due to lack of directlines. This shortage of real-time information exchange takes a toll onthe quality of service, inventory, policy changes, and managementdecision-making. Here a converged solution that includes data, voice,and video communications becomes essential. This can include mobilec o m m u n i c a t i o n s p r o v i d i n g i n f o r m a t i o n a c c e s s t o w o r k e r s a t e v e r y level, from stockroom to store to executive offices. Other Technologies HyperCITY have deployed I-Scan solution in all its stores. I-Scan allowscustomers to scan merchandise as they pick products off the shelf. Once customers finish shopping, they can hand over the device to thecustomer service desk and cash-out quickly.W a l M a r t p l a n s t o i n v e s t i n t a g s t h a t s e n s e t h e t e m p e r a t u r e o f sen sitive products, making sure products on the shelf are safe, rotatedcorrectly, and in the right place. Internet protocol (IP) surveillance ispicking up steam. With IP cameras going for as low as Rs 7,000, thetechnology is ripe for deployment. CIOs can use it to monitor remotelocations over a LAN or the Internet.Haryali Kisan Bazaar, one of the country's first retail initiatives by DCMShriram Consolidated, has created a retail solution in partnership withSAP and Polaris. The initiative, e -STARR (Systems and Technology inAgriculture and Rural Retail), offered a retail solution that helps Haryaliserve rural customers better, while creating a strong infrastructure foroperations spread over multiple locations. The SAP solutions, IS-Retailand SAP Retail store, were implemented by Polaris, which integrated itwith Polaris POS and Agriculture Service modules. The Unconventional Player E x c e p t I n d i a n P o s t a l D e p a r t m e n t , a l l o t h e r p l a y e r s , w h o a r e i n t h e re tail area, have prior experience in some kind of business. India Postwas serving people to a great extent. Now, they feel they can take upthe retail business in their own way. "We have got the best network, we have got experience in servicing people, and above all we have got

Opportunities in Retail Sector - China (2007-2011) "Opportunities in Retail Sector - China (2007-2011), a report by RNCOS, provides extensiveresearch and rational analysis on the retail industry in China. This report helps clients to analysethe opportunities and factors critical to the success of retail industry in the country. It underlinesthe key issues the industry is facing and provides a prudent analysis on its various aspects.The report analyses various market segments and retail formats present in the industry. Theoverview on opportunities and future forecast helps the clients analyse the future course of direction and major growth areas of the industry. Market Analysis Retail is one of the major industries in the world. It has played a key role in improving theworld's productivity and has been a major contributor to the economic growth of developingcountries. In 2006, total sales of retail industry across the world are expected to have reached the phenomenal value of around US$ 12.1 Trillion. China retail industry is third largest emergingretail markets in the world and in past, the market has forged ahead with the CAGR of 12.38%.The booming economy, increasing income levels, deregulation of retail sector and increasedconfidence of Chinese consumer makes china a lucrative market for international retail players. Key Findings - Hypermarkets will have the highest growth potential among different store formats.Cosmetics and toiletries, apparel, furniture, washing machines and computers will be thetop five fastest growing categories in the forecasted period.- Organic food sales will remain buoyant in the coming years. It is expected that theorganic food turnover will be US$ 400 Million by 2007.- Per head disposable income will increase with the CAGR of 11.52% during theforecasted period and will give thrust to the overall retail industry. Key Issues Analyzed - The research report addresses some vital issues critical to the success of retail industryin China, like:- The market size and scope of the retail industry.- Evaluation of current market trends.- Analysis of various challenges and opportunities for the industry.- The factors driving growth in this sector.- Various retailing formats in China retail industry.- Detailed discussion of consumer behaviour.- Market position of key players in this sector. Key Players Analyzed

This section covers the key players currently operating in the China retail industry, includingWal-Mart Stores Inc., Carrefour SA, Wumart Stores, Inc., Shanghai Bailian Group Co. Ltd., etc. Research Methodology Used Information Sources Information in the report has been taken from various authentic sources like books, newspapers,trade journals, and white papers, industry portals, government agencies, trade associations,monitoring industry news and developments, and through access to more than 3000 paiddatabases. Analysis Method

The analysis methods include ratio analysis, historical trend analysis, linear regression analysisusing software tools, judgmental forecasting and cause and effect analysis

good relationships with them," says S Samant, GM, India Post. IndiaP o s t h a s g o t 8 3 5 h e a d p o s t o f f i c e s , 2 0 , 0 4 3 s u b p o s t o f f i c e s , a n d 145,975 delivery offices, thus becoming, by default, the largest retailchain in India. Though India Post is not looking at serving people withproduct portfolios that can match big names in the retail sector, thepostal department feels no one can match their reach. Though thep o s t a l department is not very tech savvy, it has some big plans t o computerize its offices. As of now, 7,488 sub-post offices have beenconnected with LAN and 239 administrative branches are connected tothe National Informatics Center. Also, the public service departmenthas plans to interconnect 1 lakh post offices.

n order to meet with this rapid growth in demand the government hasshown its concern by providing an induction of Rs.140 billion and Rs.300 billion in the rural sector through its development schemes in theSeventh and the Eight plan respectively. The large players like ITC,H L L , B P C L a r e r e a l i z i n g t h e p o t e n t i a l o f t h i s s e c t o r a n d a r e s e e n experimenting with new ways to tap this segment.ITC spent 3 years and Rs. 80 crore on r&d to come up with the conceptof E-choupal and Choupal Sagar-rural hypermarkets 18 . Through this,the farmers can access latest local and global information on weatherand market prices, scientific farming techniques at the village itself through a web-portal - all in Hindi. E-Choupal also facilitates supply of h i g h q u a l i t y i n p u t s a s w e l l a s p u r c h a s e o f c o m m o d i t i e s a t t heirdoorstep. The hypermarket (Choupal Sagar) provides the m w i t h another platform to sell their produce and purchase necessary farmand household goods under one roof.Next in line, HLL came up with Project Shakti in late 2000 to sell itsproducts through women self-help groups who operate like a direct-tohome team of sales women in inaccessible areas where H L L ' s conventional sales system does not reach. Another step to tap ther u r a l m a r k e t w a s ` O p e r a t i o n B h a r a t ' w h e r e i n l o w -

p r i c e d s a m p l e packets of toothpastes, fairness creams, Clinic Plus s h a m p o o s a n d Ponds face creams to 20mn households.A s a p a r t o f t h e i r r u r a l s t r a t e g y , B P C L i n t r o d u c e d R u r a l M a r k e t i n g Vehicles (RMVs) that move from village and village and filling cylinderson the spot for rural consumers keeping in mind the low-income of therural population. The Company also introduced a smaller size cylinderto reduce both the initial deposit cost as well as the recurring refillcost. Challenges faced by this sector The industry is facing a severe shortage of talented professionals,e specially at the middle-management level.Most Indian retail players are under serious pressure to make theirsupply chains more efficient in order to deliver the levels of quality andservice that consumers are demanding. Long intermediation chainswould increase the costs by 15%.Lack of adequate infrastructure with respect to roads, electricity, coldc h a i n s a n d p o r t s h a s f u r t h e r l e d t o t h e i m p e d i m e n t o f a p a n - I n d i a network of suppliers. Due to these constraints, retail chains have toresort to multiple vendors for their requirements, thereby, raising costsand prices. The available talent pool does not back retail sector as the sector hasonly recently emerged from its nascent phase. Further, retailing is yetto become a preferred career option for most of India's educated classthat has chosen sectors like IT, BPO and financial services.Even though the government is attempting to implement a uniformvalue-added tax across states, the system is currently plagued withdifferential tax rates for various states leading to increased costs andcomplexities in establishing an effective distribution network.Stringent labor laws govern the number of hours worked and minimumw a g e s t o b e p a i d l e a d i n g t o l i m i t e d f l e x i b i l i t y o f o p e r a t i o n s a n d employment of part-time employees. Further, multiple clearances arerequired by the same company for opening new outlets adding to thecosts incurred and time taken to expand presence in the country. The retail sector does not have 'industry' status yet making it difficultfor retailers to raise finance from banks to fund their expansion plans. List of resources: 1. Ernst & Young, The Great Indian Retail Story, 2006.2. FICCI - ICICI Property Services Study.3. Let gradualism guide FDI in retail, Economist, 2006.4. AT Kearney, GRDI 2006.5 . R e t a i l s c e n a r i o m o s t d e v e l o p e d i n B a n g a l o r e , D H N e w s s e r v i c e , According to Bijou Kurien, 6. President & Chief Executive - Life Style,Reliance Retail. 7. CII, Logistics and Freight News, March 2006.8 . K P M G a n a l y s i s , C o n s u m e r m a r k e t s i n I n d i a - t h e n e x t b i g t h i n g , September 2005.9. CII, Manufacturing Bulletin, June 2006.10. Pharma's retail push, Business Line, 2006.11. KSA Technopak, June 2006.12. CII, Retail scenario in India: Unlimited Opportunity

strategies for success in retail

1 smart pricing: