CHAPTER 2

RETAIL IN INDIA
Learning Objectives
 The evolution of retail in India
 Key sectors in Indian retail
 Factors affecting the growth of retail in India
 The aspect of FDI in retail
 Challenges faced by Indian retail
Retail In India: Some Facts & Figures

 India has emerged as the fourth largest economy in

the world in terms of Purchasing Power Parity
 It is the twelfth largest consumer market in the world
 Almost 21 million people are believed to be
employed in the retail sector, which is 7% of the
total national workforce

But, retail has not yet been accorded the status of an

industry
The Concept Of Organised Retail

 Unorganised sector- units whose activity is not

regulated by any statute or legal provision, and/or
those which do not maintain regular accounts
 Unorganised form of retail - those forms of trade
which sell an assortment of products and services
ranging from fruits and vegetables to shoe repair
 Organised form of retail- typically a multi-outlet
chain of stores or distribution centres run by
professional management
The Evolution Of Retail In India
Drivers Of Retail Change In India
 Socio-economic factors
 Changing income profiles
 The age factor
 The changing role of women and the evolving
family structure
 The changing consumption basket
 Increased credit friendliness
 Geographical dispersion of market potential
 The Size Of Retail In India
Segment Composition
Food and Grocery Fresh groceries, branded
packaged foods, personal
hygiene products and toiletries
and dry unprocessed groceries
Food Services Fast Food, cafes, restaurants,
locations offering catering services
Clothing & Textiles Fabric manufacturers and
readymade garments
Consumer Durables Televisions, refrigerators, washing
machines, air conditioners and
microwaves
Footwear Footwear for men, women and
children
Jewellery Mainly, Gold Jewellery &
diamonds
Books, Music and Gifts Various Books, Music and Gifts
Size (Rs.) Key players
Total-1200,000 crore Food Bazaar, Reliance Fresh
Organised- 5000 crore
Total-57,000 crore McDonald’s, KFC, Jumbo King,
Organised- 3,940 crore Barista, Café Coffee Day
Total-113,500 crore Arvind Brands, Madura Garments,
Organised- 21,400 crores Raymond’s, Park Avenue
Total-41,500 crore Strong regional players- Videocon
Organised- 4,300 crore Plaza, BPL Gallery, Vijay Sales
Total-13,750 crore Bata, Metro Shoes, Lakhani,
Organised- 5200 crore Adidas , Reebok
Total-52,000 crore Tanishq, Gili
Organised- 1,450 crore
Total-11,500 crore Land Mark, Crossword,
Organised- 1,450 crore Higginbothams, Oxford Bookstore
Rural Realities: Beyond Urban Boundaries

What is rural?
- Any habitation where the population density is less than 400 per sq.km
- Where at least 75 per cent of the male working population is engaged in
agriculture
- Where there isn’t any municipality on board

Rural Retail opportunities

- Spurt in the purchasing capacity of farmers
- Marketable surplus of farm produce
- High incomes combined with low cost of living
- Consists of approximately 128 million households
Current key players- ITC- e-choupal, Hariyali Kisan Bazaars
Foreign Direct Investment In Retail

IMF-OECD “Foreign direct investment reflects the objective of obtaining

Glossary of a lasting interest by a resident entity in one economy (‘‘direct
FDI terms and investor’’) in an entity resident in an economy other than that
definitions of the investor (‘‘direct investment enterprise’’). The lasting
interest implies the existence of a long-term relationship
between the direct investor and the enterprise and a
significant degree of influence on the management of the
enterprise. Direct investment involves both the initial
transaction between the two entities and all subsequent
capital transactions between them and among affiliated
enterprises, both incorporated and unincorporated."

In short, FDI is a method of allowing external finance into

an economy.
Foreign Direct Investment In Retail
In India, FDI in retail is not allowed
An international retailer can enter the Indian retail
market through-
 Hi-Tech items/ items requiring specialized after sales

service
 Social sector items

 Medical and diagnostic items

 Items sourced from the Indian small sector

 Two-year test marketing

Challenges To Retail Development In India

 Lack of recognition as an industry

 High costs of real estate
 Very high stamp duties on transfer of property
 Lack of adequate infrastructure
 Multiple and complex taxation system
Five Forces Of Competition

Bargaining power Potential Entrants Threat of new

of suppliers entrants

Industry
Competitors
Suppliers Rivalry among Buyers
existing firms

Threat of substitute Bargaining power

products or services of buyers
Substitutes

Source: Competitive Strategy, Michael Porter, pg 4