Evaluation of Indian retail

INTRODUCTION

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INTRODUCTION

INTRODUCTION

Retailing is the final step in the distribution of merchandise-the last link in the supply chain-

connecting the bulk producers of commodities to the final consumers. Retailing covers diverse

products such as food products, apparels, consumer goods, financial services and leisure.

A retailer typically, is someone who does not effect any significant change in the product execs

breaking the bulk. He/she is also the final stock point who makes products or service s available

to the consumer whenever required. Hence, the valuable proposition a retailer offers to a

consumer is easy availabilities of the desired product in the desired sizes at the desired times.

In the developed countries, the retail industry has developed into a full fledged industry where

more than three fourths of the total retail trade is done by the organized sector. Huge retail chains

like wall-Mart, Carr four groups, Sears, K-Mart, McDonalds etc have now replaced the

individual retail stores. Large retail formats, with high quality ambiance and courteous and well

trained sales staff are regular feature of these retailers.

Retailing is the second largest industry in the world, one of the largest employers in the world

and an index of economic growth. In India there are about 5 million retail outlets varying in size

and nomenclatures. India has the highest number of retail outlets per capita in the world but

lowest number of retail space per capita in the world (2 ft/person).

Out of these 5 million outlets 96% are smaller than 500 square ft in area. There are about 3

million outlets in India’s 3700 designated towns and more than 6, 00, 000 villages. About 350

million people live, with in one minute walk of these retail shops. According middle to retail

census conducted by market researcher ORG-MARK, Rs 4,

79,586 crore worth of chain stores are springing up in urban areas to market consumer goods to

the class in a much similar style as malls around the globe. At present about 8% of the Indian

population are employed in the retailing industry as against 20% in U.S.A. As India moves

towards the service oriented economy, a rise in this percentage is expected. The number of retail

outlets is growing at about 8.5% annually in the urban areas in towns with population between 1,

00,000 to 1 million; the growth rate is about 4.5%.

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Retailing Overview:

Worlds Largest Private industry

Largest Employer after agriculture

Highest outlet density in World

Still evolving as an industry

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Weekly MarketsVillage FairsMelas

Convenience StoresMom and Pop/Kiranas

PDS OutletsKhadi StoresCooperatives

Exclusive Brand OutletsHyper/Super MarketsDepartment StoresShopping Malls

Traditional/

Pervasive Reach

Government

Supported

Historic/Rural Reach

Modern Formats/ Internatio

nal

Evolution of Indian retail

Source of

Entertainment

Neighborhood

Stores/Convenience

Availability/ Low Costs /

Distribution

Shopping Experience/Efficiency

Evolution

Informal Retailing sector:

Typically small retailers

Evasion of taxes

No monitoring of labor laws

Formal Retailing Sector:

Typically large retailers

Greater enforcement of taxation mechanism

High level of labor usage monitoring

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RETAIL SECTOR

The retail sector in India is witnessing a huge revamping exercise as traditional markets make

way for new formats such as departmental stores, hypermarkets, supermarkets and specialty

stores. Western-style malls have begun appearing in metros and second-rung cities alike

introducing the Indian consumer to a shopping experience like never before. Rated the fifth most

attractive emerging retail market, India is being seen as a potential goldmine. It has been ranked

second in a global retail development index of thirty developing countries drawn up by A T

Kearney. The list was developed as a response to requests from retail chains facing saturated

demand in most western markets. India’s vast middle class and its almost untapped retail

industry are key attraction for global retail giants wanting to enter newer markets.

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Organized Retail Formats in India

Each of the retail stars has identified and settled into a feasible and sustainable business model of

its own.

Shoppers' Stop - Department store format

Westside - Emulated the Marks & Spencer model of 100 per cent private label, very good

value for money merchandise for the entire family.

Food World and Nilgiris – Supermarket format

Pantaloons and The Home Store - Specialty retailing

Tanishq has very successfully pioneered a very high quality organized retail business in

fine jewellery

Structure of the retailing industry according to ownership patterns:

An unaffiliated or independent retailer

A chain retailer or corporate retail chain

A franchise system

A Leased Department (LD)

Vertical Business System (VMS)

Consumer Co-operatives

A new entrant in the retail environment is the 'discounter' format. It is also is known as cash and-

carry or hypermarket. These formats usually work on bulk buying and bulk selling. Shopping

experience in terms of ambience or the service is not the mainstay here. RPG group has set up the

first 'discounter' in Hyderabad called the Giant. Now Pantaloon is following suit.

Two categories of customers visit these retail outlets.

1. The small retailer. For example, a customer of Giant could be a dhabawala who needs to buy

edible oil in bulk.

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2. The regular consumer who spends on big volumes (large pack sizes) because of a price

advantage per unit.

Retailing in India is still evolving and the sector is witnessing a series of experiments across the

country with new formats being tested out; the old ones tweaked around or just discarded. Some of

these are listed in Table below.

Table 3:

Retailer Current Format New Formats

Shoppers' Stop Department Store Quasi-mall

Ebony Department Store Quasi-mall, smaller outlets, adding

food retail

Crossword Large bookstore Corner shops

Pyramid Department Store Quasi-mall, food retail

Pantaloon Own brand store Hypermarket

Subhishka Supermarket Considering moving to self service

Vitan Supermarket Suburban discount store

Foodworld Food supermarket Hypermarket, Foodworld express

Glob us Department Store Small fashion stores

Bombay Bazaar Super market Aggregation of Kiranas

Efoodmart Food super market Aggregation of Kiranas

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Metro Departmental store Cash and carry

S Kumar's Departmental store Discount store

Relaince retail Departmental store Considering moving to self

Service

Source: www.indianretail.com

Retailers are also trying out smaller versions of their stores in an attempt to reach a maximum

number of consumers. Crossword bookstores are experimenting with Crossword Corner, to

increase reach and business from their stores. FoodWorld is experimenting with a format of one-

fourth the normal size called FoodWorld Express.

2.5 Trends in Retail Business

At this point, I can summarize the main development retailers and manufacturers need to take

into account as they plan their competitive strategies.

In India the trends are mainly in three sectors. These sectors are:

Trends in retail Business

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Urban Suburban

Rural

1. New retail forms and combinations continually emerge. Bank branches and ATM counters have

opened in supermarkets. Gas stations include food stores that make more profit than the gas

operation. Bookstores feature coffee shops.

2. The electronic age has significantly increased the growth of non store retailing, consumers

receive sales offers in the mail and over television, computers, and telephones, to which they can

immediately respond by calling a toll-free number or via computer.

3. Competition today is increasingly intertype, or between different types of store outlets. Discount

stores, catalog showrooms, and department stores all compete for the same consumers. The

competition between chain superstores and smaller independently owned stores has become

particularly heated. Because of their bulk buying power, chains get more favorable terms than

independents, and the chains’ large square footage allows them to put in cafes and bathrooms. In

many locations, the arrival of a superstore has forced nearby independents out of business.

4. New retail forms are facing a shorter life span. They are rapidly copied and quickly lose their

novelty.

5. Business channels are increasingly becoming professionally managed and programmed. retail

organizations are increasingly designing and launching new store formats targeted to different

lifestyle groups. They are not sticking to one format, such as department stores, but are moving

into a mix of retail formats.

6. Technology is becoming critical as a competitive tool. Retailers are using computers to produce

better forecasts, control inventory costs, order electronically from suppliers, send e-mail between

stores, and even sell to customers within stores. They are adopting checkout scanning systems,

electronic funds transfer, and improved merchandise-handling systems.

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7. Retailers with unique formats and strong brand positioning are increasingly moving into other

countries. McDonald’s, The Limited, Gap, and Toys “R” Us have become globally prominent as a

result of their great Business powers. Many more Indian retailers are actively pursuing overseas

markets to boost profits.

Retail Breaking News

NATIONAL

April 10 REALTY WATCH: Ranchi getting ready for malls

Even Ranchi is getting ready to be part of the mall map of India. Called, Firayalal Veevo City, the

Rs 450 cr, 9.5 lakh sqft, eight storey mall will be set up in three years by M & J Associates in

association with Singapore's Landmark Architects Associates. The mall would include a

supermarket, department and speciality retail stores, amusement centre, food courts, restaurants,

Cineplex, hotel, private club, banquet and conference hall.

The Parsvnath Group is building an iconic modern City Centre in the Jharkhand capital. The Rs

400 cr, 10 lakh sqft project will include a hotel, residential zone and a shopping mall with a

multiplex.

April 10 Rajkot kiranas combine to compete with goliaths In an interesting

development, 150 shopkeepers in Rajkot have come together to help improve their

competitiveness. They have approached a Delhi based consultancy firm to develop joint buying

and to computerize their operations.

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April 07 Godrej tolaunch new specialty chain Not to be left out of the retail revolution, the Godrej

Group is planning to launch a new specialty store chain this year itself. The 1500 sqft format will

focus on four categories: home appliances, home furniture, office furniture and non-apparel

lifestyle products. Godrej & Boyce Manufacturing Co, who already operate 47 Godrej Lifespace

stores that showcase Godrej branded hard goods, will open six stores in the first year and 20 by

2010. Eight markets are being targeted: Mumbai, Delhi, Kolkata, Chennai, Ahmedabad,

Bangalore, Hyderabad and Pune. Unlike the Godrej Lifespace stores, this chain will not be limited

by Godrej branded products.

April 07 Damas-Flemingo JV bags AAI duty free Dubai based Damas Jewellery and Indian arm of

Flemingo International have formed a JV (Flemingo Jewellery India) to take up duty-free retailing

of jewellery and luxury watches at Indian airports. Damas holds 51% of the stake while the

balance is with Flemingo. The JV has bagged the contract from the Airports Authority of India for

opening stores at Chennai, Thiruvanathapuram and Jaipur international airports.

April 07 Subhiksha ties up digital signage. A sign of the times, Subhiksha has tied up with Jive

Networks to set up and operate a chain wide network of digital signage. The ‘out-of-home’ media

network covering Subhiksha’s 650 shops will be the largest such

network in India. The screens will constantly display advertorial

content to shoppers.

INTERNATIONAL

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April 10 Claire’s Stores sold for $3.1 bil Jewellery and accessories retailer Claire’s Stores is being

acquired by private equity firm Apollo Management for $3.1 bil. Claire’s Stores target girls and

young women with accessories and trinkets. The retailer put itself up for sale in Dec and hired

Goldman Sachs to look for a suitor. The company was hit by weak international sales and a

general shift to lower-priced accessories.

April 10 Tesco unlocks property value in $1.3 bil deal

In a unique move, Tesco, Britain’s largest retailer, has formed a $1.27 bil

(650 mil pounds) real estate JV with British Land covering 21 of its

supermarkets. The deal is part of a property sale and leaseback program announced last year.

Tesco expects that the deal will make available net proceeds of 570 mil pounds which will be used

to fund further growth outside the UK. Tesco has taken advantage of rising UK real estate value

April 07 Wal-Mart to open 26 store in Canada this year

The world’s largest retailer, Wal-Mart plans to make its largest annual investment in Canada by

opening 26 stores this year. This will comprise 21 supermarkets and five discount stores.

ITC's Big Bang

Blending diverse skills and leveraging its distribution muscle, the tobacco giant is unleashing a

welter of new businesses. An inside account of the silent revolution.

Ashtrays are ubiquitous inside the pristine white Virginia House, ITC's imposing corporate

headquarters in Chowringhee, Kolkata. That's because puffing cigarettes is de rigueur here in the

heart of India's largest cigarette maker. On the second floor-where the directors of the Rs 8,816

crore company sit in their burnished wood panelled chambers-each closet in the private wash-

rooms has a porcelain ashtray discreetly placed next to the WC. So it's a bit curious when you're

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sitting in Chairman Y.C. 'Yogi' Deveshwar's sprawling room and one of his senior colleagues

hands you plastic jars filled with unmarked sachets. One of the jars is labelled 'wild banana',

another, 'cinnamon mint' and a third, 'pineapple toffee'. ''Try them,'' urges Deveshwar, like a proud

father as you tentatively pop a 'wild banana' into your mouth and taste the strange, but likeably

flavoured boiled sweet.

Confectionery, like the exotically named three, is just one of the dozen-odd projects that are in the

incubation stage at ITC, where more than 80 per cent of the company's sales come from cigarettes

and tobacco. But that won't last. In the next five to seven years, ITC wants to change that

proportion and generate as much as 40 per cent of its sales from non-tobacco diversifications.

Many of those will be brand new businesses. Like ITC's lifestyle retail business, which it recently

kicked off with the Wills Sport brand of relaxed apparel, the Expressions range of greeting card

and gifts business, and the upscale ready-to-eat packaged foods business, where it has just tip-toed

in with a couple of soft launches like that of the canned Dal Bukhara. In consultant-speak, ITC is

leveraging competencies from its existing businesses-the most notable is the tobacco business'

distribution-expertise-to tap new opportunities.

If all goes well, these diversifications will add Rs 2,000 crore to ITC's topline

by 2006. But many others contributing to the non-tobacco revenues are old businesses-some re-

purposed beyond recognition, like the group's international business and its infotech venture, and

others completely turned around and revitalised like the paper and paperboards business.

Yet, it's the clutch of new businesses, many of them still in the nascent stage, that Chairman

Deveshwar seems excited about. He's not the only one. About 800 km away from Virginia House's

throwback-to-the-Raj ambience, in sweltering Tillapudi village, 25 km from the eastern coast,

Bodapati Rama Rao, a 45-year-old aqua farmer, used to think a computer at home would attract

tax officials as it would lend an air of affluence that a farmer could ill-afford, especially when he

would be named a pratinidhi or lead farmer by ITC in his area. Locals say it took a bit of

explaining of the e-choupal concept before he saw the benefits of information flow. Today, Rama

Rao refers to ITC as the talli (mother) company and is at ease with the mouse and keyboard and

his fluent Telugu is meshed with words like 'market trends', 'exporters', and 'price patterns'.

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Well, aquachoupal.com is one of the three web-based initiatives (e-choupals in company-speak)

that ITC's international business division has launched as part of its strategy to vertically integrate

its sourcing operations. Apart from the aquachoupal, launched in February 2001, there is the

soyachoupal.com launched for soya farmers in Madhya Pradesh in June 2000, and plantersnet.com

for coffee growers in Karnataka in December 2000. ''The aim is to help enhance farm productivity,

improve farm-gate price realisation and to cut transaction costs,'' says S. Sivakumar, chief

executive, International Business Division, ITC. The choupals act as facilitators for inputs to

farmers-in the aqua, soya, and coffee domains.

On the entry of MNCs and Reliance in the retail market

Everybody has been asking me, are you worried about Wal-Mart coming to India? Ultimately

Wal-Mart is also going to be run by people like us. The point is you need not worry about

anybody's entry. There is a huge potential for growth in India. There is potential for another ten

people to come in.

Ultimately the share of the unorganised kiranas will come down and the share of organised sector

will go up because of the efficacy in buying and distributing. Also, this is an extremely low margin

business. Ultimately, everybody has to sell within the cost. It is not that we are geniuses; we have

been in the business for ten years, and we have made enough mistakes and learnt from them.I don't

think any child will learn to walk without falling down first, however good the parent is.We made

our mistakes when we were small. The bigger you are, the mistakes will cost you more.

There are two kinds (of satisfaction). We genuinely believe that through efficiency, we are helping

the consumers save more. We are also happy that we are bringing in a model that is Indian,

capable of supporting the middle class of India.

On what he does other than thinking about Subhiksha

I would like to say I think of Subhiksha all the time, but I do not. I read a lot, mainly online. I lead

a reasonably balanced life. Working 12-13 hours a day six days a week, is my working pattern. I

keep Sunday evenings and afternoons only for family. But I travel 12-15 days a month visiting all

the Subhiksha regions.

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I am a pretty cool person, relaxed all the time. I am not hassled about anything. Personally I am

not a very ambitious person; I am happy with my curd-rice! What gives me a kick is to show that a

business model from India is superior to a business model imported from the West.We are living

in an age where we do not have to be taught by the West what we should do in our country.

Organized Retail Models

High population density in the metropolitan cities and surrounding tier-1 towns is driving the

geographic penetration of modern retail. Nationwide, the retail penetration has been the highest in

the South in Tamil Nadu, Kerala, Karnataka, and Andhra Pradesh, moving towards the West along

, Punjab, and Western Uttar Pradesh. The fresh crop of modern retail in the late 1990s started in

the southern region as South India has clusters of metro cities and tier-1 towns. In addition, less

complicated licensing regulations by the state and local authorities have played an important role

in the spatial penetration along the regions. In AndhraPradesh, the licensing process is now online,

thereby reducing the time lag. Broadly, retail firms are following three routes for their market

entry: (a) the acquisition route which gives a jump-start to take advantage of the already

experienced manpower, infrastructure, front-end property of the acquired firm; (b) the JV

partnerships, a preferred route for firms seeking foreign collabouration fortechnical know-how and

assistance in the back-end operations as well as future export opportunities; and (c) the green-field

investment route for market entry. A few firms are also following a mixture of acquisition and JV

routes for quick market access.Additionally, firms are strategically expanding verticals by forming

subsidiaries or holding firms that act as catalysts to their retail business.Typically, firms are

positioning themselves in one or both of the segments: lifestyle13and value retailing14 under

multiple retail formats. Retail firms are adopting a combination of formats including, mega (hyper

and/or super), medium (department and/or speciality), and small size (convenience and/or

discount) for expansion. This13 Lifestyle retailing is category-specific retail of lifestyle-oriented

products, such as fashion apparel,high-end consumer durables, home décor, etc. In the Indian

scenario, lifestyle retailing is more focused on apparel brands, but changing lifestyle aspirations of

Indians have also seen a sizeable increase in demand for branded furniture and furnishings.

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14 Value retail is related to the pricing strategy, i.e. discount and value-for-money formats and

hence it can be present across all product categories. Discount stores, a form of value retail, deal in

a variety of goods ranging from food articles, household durables, electrical appliances, to apparel.

54 strategy benefits firms in several ways. It helps to: (i) attain critical mass; (ii) economies of

scope in sourcing by accruing costs across stores; and (iii) reach out to consumers in the local

neighbourhood locations.Regardless of the route followed, the domestic retail industry is

witnessing an increase in domestic investment, technical know-how expertise, improvements in

supply chain and logistics, and demand for store brand private labels.Table summarizes the

business models of the key organized retailers.

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Growth Factors in Indian Organized Retail sector

The growth factors in Indian organized sector are various but it is mainly due to the fact that

India's economy is booming.

Also, the rise in the working population which is young, pay- packets which are hefty, more

nuclear families in urban areas, rise in the number of women working, more disposable income

and customer aspiration, western influences and growth in expenditure for luxury items. All these

are the factors for the growth in Indian organized retail sector.

In fact, India retail industry is the fastest growing industry in India and it accounts for 10% of the

country's GDP. In 2006, the retail industry in India amounted to US$ 200 billion and out of this,

the organized retail sector in India amounted to US$ 6.4 billion. By 2010, the Indian organized

retail sector is expected to rise to US$ 23 billion. In 2003, the Indian organized retailing sector

accounted for more than 4.5 million sq. ft of space absorption by malls.

Many Indian companies have entered the retail industry in India and this is also a factor in the

growth of Indian organized retail sector. Reliance Industries Limited is planning to invest US$ 6

billion in the organized retail sector in India by opening 1500 supermarkets and 1000

hypermarkets. Bharti Telecoms is planning a joint venture worth £ 750 million with Tesco a global

retail giant. Pantaloons is planning to invest US$ 1 billion in order to increase its retail space to 30

million square feet. Such huge investments is also a factor in the growth of the organized retail

sector in India.

Global retail giants are also entering the retail industry in India and this is also one of the factors in

the growth of the organized retail sector in India. The global retail giants who are entering the

organized retail sector in India are:

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Opportunities in Indian Organized Retail sector

The opportunities in Indian organized retail sector are many for this sector is witnessing a boom.

The retail industry in India amounted to US$ 200 billion in 2006, and out of this amount the Indian

organized retail sector amounted to US$ 6.4 billion. The opportunities in India organized retail

sector can be judged from the fact that by 2010 it is expected to rise to US$ 23 billion.

The various opportunities in the organized retail sector in India are mainly there for the Indian

consumers behavior pattern has changed. Now the Indian consumer gets more hefty pay-

packages, is younger, a large number of women are working, western influences, and more

disposable income have opened a lot of opportunities in Indian organized retail sector. The Indian

consumer wants to shop, eat and get entertainment in one place and is have also given Indian

organized retail sector an opportunity to grow.

The Indian government in 2005 allowed foreign direct investment (FDI) in single brand retail to

51%. This has opened up a lot of opportunities in India organized retail sector. In fact 325

departmental stores, 300 new malls, and 1500 supermarkets are being built which shows the

tremendous opportunities in the organized retail sector in India.

Many Indian companies seeing the various opportunities in organized retail sector in India have

entered it. Pantaloons have decided to increase its retail space to 30 million square feet with an

investment of US$ 1 billion. Reliance Industries Limited is targeting for annual sales of US$ 25

billion by 2011. It is planning to invest US$ 6 billion in order to open 1,500 supermarkets and

1000 hypermarkets. Bharti Telecoms is planning a joint venture with Telco a global retail giant

worth £ 750 million.

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FDI IN RETAIL

Retailing is the largest private sector industry in the world economy with the global industry size

exceeding $6.6 trillion and a latest survey has projected India as the top destination for retail

investors. And the further upsurge is anticipated in the retail sector as the Government of opened

up 51% FDI in single brand retail outlets. And as the government is in a process to initiate a

second phase of reforms, it is cautiously exploring the avenues for multi-brand segment. The

Government is seeking for these options keeping in view the existing social framework of India

and the will ensure that the entry of global retail giants do not displace the existing employment in

the retail business.

Industry experts are sensitive to the point that local markets have an edge over the retail investors

in India as they have unique advantages such as an understanding of local needs and extended

service like home delivery. As the FDI influence on the Indian retail sector sets in, the total size of

the retail trade is expected to grow extensively in the coming years and the consumer segments

patronizing the big malls will create frenzy for organized retailing predicting a growth of 25-30 per

cent per annum over the next decade. Moreover, Indian retail chains would get integrated with

global supply chains since FDI will bring in technology, quality standards and marketing thereby,

leading to new economic opportunities and creating more employment generation.

Industry trends for retail sector indicate that organized retailing has major impact in controlling

inflation because large organized retailers are able to buy directly from producers at most

competitive prices. World Bank attributes the opening of the retail sector to FDI to be beneficial

for India in terms of price and availability of products as it would give a boost to food products,

textiles and garments, leather products, etc., to benefit from large-scale procurement by

international chains; in turn, creating jobs opportunities at various levels.

As foreign investors exploring their potentials in the retail sector, are keen on developing malls in

India, the size of organized retailing is expected to touch $30 billion by 2010 or approximately 10

per cent of the total. This has initiated market-entry announcement from some retailers and has

signaled to international retailers about India’s seriousness in promoting the sector. While there are

reports of international retailers like Wal-Mart analyzing business opportunities in India; Reliance,

the largest Indian conglomerate is investing $3.4 billion to become India’s largest contemporary

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retailer. There are also reports of investments for ‘Hypercity Retail’ by K.Raheja Group to

establish 55 hypermarkets by 2015. All these factors will contribute in taking Indian retail business

to unexpected growth based on the consumer preference for shopping in congenial environs and

also availability of quality real estate.

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Benefits of larger FDI

The benefits of larger FDI can be tangibly felt in the domains pertaining to technological

advancements, generation of export, production improvements, and hastening of manufacturing

employment. Capital inflow into India has increased and so have the exports from the country.

Thanks to the economic boom India is experiencing, some Indian companies are doing better than

even the multinational corporations.

The benefits of larger FDI have been briefly elaborated below:

1. Improved human capital: Indian industries are predominantly labor based but there is

also a significant number of capital based companies. A capital intensive set up is indeed

an expensive proposition but with the existing as well as potential labor intensive

industries, India can look forward to more professional and sophisticated number of

workers and employees at every level. Human capital, in terms of quantity was never a big

problem in India, thanks to its huge population and quality and efficiency in work has been

ushered in by the MNCs.

2. Competition Effect: The benefits of larger FDIs will include the launching and marketing

of new products and brands in the Indian market. New products are used by the

multinational corporations and then demonstrated in the Indian market. The processes

followed by MNCs in India serve to have a demonstration effect on Indian companies

which in turn improves market competition and the standard of products. This had started

in the 1980s due to Japanese firms and as a result, Indian firms started inculcating the

practices of QC, JIT, and QA.

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3. Manufacturing Employment: Larger FDIs definitely generate more and more

employment opportunities. The opportunities are highly experienced in the manufacturing

area. This not only includes the quality human resource but also provides for quick and

efficient work and effective outcomes.

4. New Technology: Technological advancements take place as larger FDIs come in. In fact,

three-fifths of the FDIs result in new and advanced technologies. The local industry is

benefiting from this to a large extent. This as a result, would encourage more and more

foreign firms for investment.

The benefits of larger FDI are, however, very few in number but as India capitalizes on the

above mentioned benefits, there will be more competition in the market at large and the rural

sector of the country will be in the process of reformation, thus bringing about a socio-

economic stability

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Political impact of larger FDI

The political impact of larger FDI in India has transformed the Indian investment scenario in

various areas. The fact that more multinational corporations are investing in India signifies that

India is increasingly focusing on the industrial sector.

The increase in Foreign Direct Investments resulted in the Government of India making critical

reforms in 1991 and since then, the emphasis on Indian industry has been constantly on the rise.

The political impact of larger FDI is influencing the government to initialize and support concepts

like liberalization. The political climate is focusing on liberalization of banking, telecom,

infrastructure, and insurance sectors. The political scenario is changing gradually, and is accepting

the concept of Foreign Direct Investment widely within the country. The government is looking

forward to working on the rural areas and bringing about equality in terms of investment and

wealth distribution with the urban areas.

In November, 1991 there was tremendous activism against opening up the Indian market to

multinational corporations. But now, the situation is completely different since there has been an

increase in the investment of multinational corporations. The political scenario too is learning to

accept globalization and privatization with an open and progressive outlook. Reformation in this

regard is taking place in the public sector, financial services, and tax structures as well.

The political scenario of India is looking forward to Foreign Direct Investment as a mechanism for

development. In fact, there has been development in the fields of land use, water, power

generation, and roads. This points towards the great political impact of larger FDI.

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The increase in FDI flow has strengthened the foreign political relations and now foreign

companies are trying to persuade the Indian Parliament to increase FDI capital depending on the

sector. There are some chief bodies and boards that have been set up for the purpose of Foreign

Direct Investment, such as:

Project Approval Board (PAB)

Licensing Committee (LC)

District Industries Centers

Investment Promotion and Infrastructure Development Cell

Foreign Investment Promotion Board (1991)

Foreign Investment Promotion Council (1996)

Foreign Investment Implementation Authority (1999)

Investment Commission (2004)

Thus, the political impact of larger FDI has made prospects for India's future relationships with

foreign companies really bright and exciting

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Social Impact of Larger FDI

The social impact of larger FDI is dependent on India's policies and institutions. The flexibility of

the labor market would determine employment opportunities. The extent to which the lower

income groups can take advantage of the growth policies determine the growth-poverty

relationship.

The production in the fields of physical and social infrastructure determine the regional

developments. The Indian industries are predominantly labor based but there are also many capital

based companies. Capital intensive set up is an expensive proposition but India can look forward

to more professional and sophisticated number of workers and employees at all levels. Human

capital in terms of quantity was never a big problem in India due to its huge population added

emphasis must be laid on the quality and efficiency in work. This is brought about by MNCs.

Foreign Direct Investments foster relations, co-operation, and harmony between India and foreign

countries. The social impact of larger FDI include the product market as well because many new

products come into the market as a consequence of FDIs. As a result, the people of India enjoy

unprecedented exposure to branded and quality goods. In fact, various training methods,

personality grooming, and soft skills are given by multinational corporations which impart value to

human resources.

Owing to social impact of larger FDI, India also enhance its educational system. Since 2003, the

Indian government has been allowing 100% FDIs in education, which means that foreign schools,

colleges, and universities can set up wholly owned subsidiaries in India. Students passing out of

these institutes will be awarded foreign degrees and certificates. The social impact of larger FDI in

25

education is such that the number of foreign students pursuing higher education in India has

increased by a large margin. Also, the 'brain-drain' issue has also been checked to a significant

extent since the number of students going out of India has also reduced.

Even the civil society can work with the government and help in reducing bureaucratic hassles and

interferences. The increase in FDI in India is also helping in the liberalization of labor through

which the inequality in wage earnings will be reduced.

There is implementation of higher education and training for the laborers. The health facilities also

increase with better and sophisticated products and processes. India is definitely developing in a

much faster pace now than before but in spite of that, it can be identified that developments have

taken place unevenly. This means that while the more urban areas have been tapped, the poorer

sections are inadequately reached out to. To get the complete picture of growth, it is essential to

make sure that the rural section has equal amount of development as the urbanized ones. FDI helps

to focus in this area thus,fostering social equality and at the same time a balanced economic

growth.

The social impact of larger FDI brings about a more broadminded outlook in the Indian society,

leaving alone a few who would be a bit conservative. However, the condition of the Indian urban

sector has improved drastically thereafter, which we still await the developments from other areas

of the Indian economy.

26

ORGANISED RETAILING IN INDIA

The retail market size in India is estimated to be around $180Billion. Retailing provides jobs to

almost 15 percent of employable Indian adults and is the largest contributor to India’s GDP.

But the other side of the coin is that the average size of each of the retail outlet in India is 50

square feet, and though a large employer, the industry is very unorganized, fragmented and with a

rural bias.

The Indian retail industry is organized

There are nearly 12 million retail outlets in India and the number is still growing. Two third of

these stores are in rural location. The vast majority of the twelve million stores are small “father

and son” outlets

According to the organised retailing in India report published by PwC global retail intelligence

program, share of the organized sector is 58%.

The retail industry is fragmented

Retail stores in India are mostly small individually owned business. The average size of an outlet

is 50 square feet. And though India has the highest number of retail outlets per capita in the

world, the retail space per capita at 2 square feet per person is lowest in the world.

27

THE CHANGING INDIAN CONSUMER

Indian consumer has shown a great change in their buying behavior and has spent much more on its lifestyle in the ongoing scenario. Organized retail has been able to attract these consumers to a great deal. There are several reasons for this change in behavior of Indian consumer, some of which are

Greater Per capita income

o Growing high and middle income population

o Growing at a pace of over 10% per annum over the last decade.

Affordability Growth

o Falling interest rates.

o Easier consumer credit.

o Greater variety and quality at all price points.

The urban consumer

o Getting exposed to international lifestyle.

o Inclined to acquiring assets.

o More discerning and demanding than ever.

No longer need based shopping

o Changing Mindset

Increasing tendency to spent

Greater level of education

28

GOVERNMENT REGULATIONS FOR ORGANISED RETALING

FDI not permitted in retail trade sector except in:

Private labels

Hi-tech items( Items requiring specialized after sale service)

Medical and Diagnostic items

Items sourced from the Indian small sector

For two year test marketing

Entities established prior to 1997

o Allowed to continue with their existing foreign equity components.

o No restriction in the retail sector pre-1997.

29

BENEFITS TO GOVERNMENT

TRENDS IN ORGANISED RETAILING

30

Increasing Tax Paying Population

Greater consumer Spending

Greater Sourcing From India

Reduced Tax Evasion

Employment GDP Growth

Greater ExportsIncreased Tax

Revenues

Retailing in India is at the nascent stage of its evolution, but with in a small period of time

certain trends are clearly emerging which are in line with the global experience. Organized retail

is witnessing a wave of player entering the industry and these players are experimenting with

various retail formats. Yet Indian retailing has not been able to come up with many successful

formats that can be scaled up and applied across India. Some of the notable exceptions have been

garments retailers like Madura garments and Raymonds who was scaled their exclusive

showroom formats across the country. The Indian economy is highly regulated and the most

significant regulation is the restriction of foreign ownership.

A strong FDI presence in retail sector is expected to not only boost the retail scenario, but also

act as a driving force in attracting FDI in upstream activities as well. This will be more

prominent in food processing and packaging industries because many large retail chains also

promote their own brands by way of backward integration/contract manufacturing.

IMPECT OF FDI IN ORGANISED RETAIL

31

India can become a giant in a short time span in food processing and textiles, for which we have

the potential because Indian agricultural production is the lowest cost in the world and textile

labour is the cheapest internationally. Allowing FDI in retail trade, especially in groceries and

garments marketing, is one sure way of doing it. Food processing and textiles will grow very

substantially from the linkage effects of a modernized; globalize retail trade that only FDI can

ensure. The employment generation for Indian youth would also be enormous.

Indian retail trade is of enormous size ($180 Billion), nearly 10 percent of GDP, employing

21 million persons, which is about 7 percent of the labour force. It is six times bigger than

Thailand and five times bigger than South Korea and Taiwan. China’s retail trade is 8

percent of GDP and 6 percent of employment. But the trade in India is fragmented,

unorganized, un-networked and individually small. The 12 million kirana shops are mostly

family or ‘ma-pa’ owned with little capital for expansion or credit to receive or to extend to

consumers. About 96 percent of these shops have 500 sq ft or less of space with limited

stock or choice to offer. During all these years, instead of shedding tears for indigenous

trade and resisting FDI, had the government declared it an industry, it would done the

trade a world of good. Now it is being said that allowing FDI in retail trade would destroy

this commerce! Will it?

A study by the associated chambers of commerce of industry of India, New Delhi, concluded

that at least for the next years that will not happen. Thereafter, the present fragmented system

may get phased out or evolved into more integrated networked units.

Modern retailing is designed not only to provide consumer with a wide variety of products under

one roof, but also of assured home delivery and information feedback between consumers and

producers. A modern retail outlet will also make it easy to buy on credit and provide for

servicing and repair of products sold. With IT application the modern retail store can cut

transaction cost such as due to inventory, delivery and handling. That is precisely how the US

based Wall-mart grew to be a giant because it reduced its distribution costs to 3 percent of sales

compared to 4.5 percent of others.

32

With MIT professor Sanjay Sharma’s epochal innovation of RFID(Radio Frequency

Identification), which will do away with cash registers and clerks who are required to operate it,

Wal-Mart will further reduce its costs.

India today is only major economy that still does not permit FDI in retail trade. In China, 35 of

the world’s top 70 retailers have already entered and set up business. They have helped boost

exports. Wal-Mart alone exported in 2002 about $12 Billion worth of goods. These retailers

source their goods from inside China. India is targeting its GDP to grow by 8 to 10 percent per

year. This requires raising the rate of investment as well as generating demand for the increased

goods and services produced. Exports are one way of producing demand. Encourage private

consumption expenditure is another way.

The retail giant houses can bring their better management practices and IT-friendly technology to

cut wastage and set up integrated retail chain to gradually replace the present unorganized and

fragmented retail market. According to McKinsey, India wastes nearly 50,000 crore in the food

chain itself. These international retail outlets can help develop the food processing industry,

which requires $28 Billion of modern technology and infrastructure.

FDI in retail trade has forced the wholesalers and food processors to improve, raise exports and

triggered growth by outsourcing supplies domestically. The availability of standardized products

ahs also boosted tourism in these countries.

Impact on Consumers

• Consumers have definitely gained from organized retail on multiple counts.

33

• Overall consumer spending has increased with the entry of the organized

retail.

• While all income groups saved through organized retail purchases, the survey

revealed that lower income consumers saved more. Thus, organized retail is

relatively more beneficial to the less well-off consumers.

• Proximity is a major comparative advantage of unorganized outlets.

• Unorganized retailers have significant competitive strengths that include

consumer goodwill, credit sales, amenability to bargaining, ability to sell loose

items, convenient timings, and home delivery.

Impact on Farmers

• Farmers benefit significantly from the option of direct sales to organized

retailers.

• Average price realization for cauliflower farmers selling directly to organized

retail is about 25 per cent higher than their proceeds from sale to regulated

government mandi.

viii

• Profit realization for farmers selling directly to organized retailers is about 60

per cent higher than that received from selling in the mandi

• The difference is even larger when the amount charged by the commission

agent (usually 10 per cent of sale price) in the mandi is taken into account.

UNORGANIZED RETAILING IS GETTING ORGANIZED

34

To meet the challenges of organized retailing that is luring customers away from the unorganized

sector, the organized sector is getting organized. 25 stores inn Delhi under the banner of

provision mart is joining hands to combine monthly buying. Bombay bazaar and Efoodmart have

also been formed, which are aggregations of kiranas. In a novel move, six Delhi based

restaurants have come together and formed a consortium: NFC to promote new friends colony, a

posh locality in the capital, as a branded place in town. The aim is to increase footfalls in the

area, which is fastly losing its sheen to its closest and upcoming destinations such as large

cineplexes and malls, which are backed by the corporate house such as ‘Ansals’ and ‘PVR’.

ORGANIZED RETAIL EMERGING OPPORTUNITY FOR INDIAN EXPORTERS

35

Opening up of organized retail sector in India will have a major impact on Indian export. If you

are an exporter its time to take stock of emerging opportunity and prepare yourself accordingly.

How big is the opportunity?

Global retailers buy about US Dollar 60 billion of goods each year from China alone. India has

so far managed to export only about US dollar 1 Billion worth of goods to global retailers.

Obviously, scope of exports through the global retail chain is enormous. The reason of such

high optimism lies in the government decision of allowing global retailers to open shop in India.

In a major decision, the government decides to allow international brands to set up their retail

chains with majority stake instead of having to depend on local franchisees.

So Mark and Spencer have their own stores in India. The move will also help companies which

already have a sizable presence in India but have to operate through a network of franchisee

stores at present like- Nokia and Adidas. While detailed guidelines is yet to be issued. The

government has also decided not to cap the number of stores to be opened.

Why FDI in retail will help Indian Exporters:

Major retail chains are already procuring from India. How their direct presence does go to effect

Indian exporters in a significant way? After all, Wal-Mart can buy from India without opening

their store here. Though theoretically, Wal-Mart or any other global retail chain can source from

India without opening their shops here-in reality, they do not work that way. That is the reason

why India’s export to global retailer is so meager today.

A global chain would buy large quantities for exports on a sustained basis only when it

establishes a close linkage with the local market and the suppliers. This happens after they open

local stores.

By being close to local suppliers and customers, the global chain remains in far better position to

control and monitor the supply chain including product design, quality of inputs, manufacturing

process, standardization, labeling and packaging, transportation, storage warehousing,

distribution network etc. Such closeness with supply chain enables them to change product mix

quickly in response to changing global fashions and establishing the right kind of captive

suppliers who would not be selling to their competitors.

36

Establishment of efficient supply chain and related infrastructure, which global retailers develop

for their local stores, would yield significant cost economies. When the same infrastructure is

used to procure supplies for their global needs. Resultant efficiency and economy of scale cannot

be expected from their existing lot of Indian suppliers.

Today, Wal-Mart sources some $18 billion of goods from China for their global operations.

How-ever this happened only after Wal-Mart was allowed substantial presence in Chinese local

retail market.

ORGANISED RETAIL AS AN EMPLOYMENT GENERATOR

37

The retail stores can generate huge amount of opportunities, and can lead to job-led economic

growth. In most major economies, ‘Services’ form the largest sector for creating employment.

US alone have 12 percent of its employable workforce engaged in the retail sector. The retail

sector in India employs nearly 21 million people, accounting for roughly 6.7% of total

employment. However employment in organized retailing is still very low, because of small

share of organized retail business in the total Indian retail trade. The share of organized retail

trading in India is about 3% and is abysmally low, compared to 80% in USA, 40% in

Thailand and 20% in China, thus leaving the huge market potential largely untapped. A modern

retail service sector has the potential of creating over two million new (direct) jobs with in the

next 6 years in the country ( assuming only 8-10 percent share of the organized retailing),

according to Arvin Singhal CMD, KSA Technopark.

Retail can create as many new jobs as the BPOs/ITs sector in India. A strong retail front end can

also provide the necessary fillip to agriculture and food processing, handicrafts and small and

medium manufacturing enterprises, creating million of new jobs indirectly. Through its strong

linkages with sectors like tourism and hospitality, retail has the potential of creating jobs in these

sectors also. Though the planning commission has identified retail as a prospective employment

generator, in order to strengthen the multiplier effect of growth in organized retailing upon the

overall employment situation, a proactive government support mechanism needs to evolve for

nurturing the sector.

The opening up of retail trade for foreign direct investment (FDI) promises to usher in

revolutionary changes to the Indian consumer market in the days to come.

Recently, in a significant step towards liberalizing India's retail trade, the government had decided

to partially open the retail sector by announcing 51 percent FDI in single brand retailing - a move

that should pave way for big names like Nike, Versace, Addidas, Marks & Spencer to set up their

own stores in India.

38

However, experts are still divided on the problems and prospects of this move. Some say it will

shrink employment opportunities, completely alter the retail distributional structure and deal a

death blow to the corner shop structure.

The optimists, on the other hand, see a whole range of opportunities -- from improved collection,

processing and better distribution of farm products to generation of more opportunities for the

rural and urban unemployed.

Until now, global retailers were required to sell their products through franchises or wholesale

trading. This move will help them setting their own base in India and will attract foreign capital

along with better quality products and services for the consumers.

The Indian retail market currently estimated to be worth $250 billion is presently dominated by

millions of mom-and-pop stores that cater to 97 percent of the total market.

According to a recent study, the Indian retail Industry is expected to grow at about 36 percent by

2008 and with the increase in foreign investment the industry is expected to do a business of Rs.

1.60 trillion by the year 2008.

With the new regulations in place, the debate is that what will happen to these stores? Will the

entry of global retailers wipe out these local stores or will it make no impact? If we take China's

example, the FDI in retail has little or no impact on the local retailers and they still dominate the

retail sector.

Secondly, the decision may not trigger the FDI flow as such as single brand retailers who wanted

to be in India like Nike and Reebok are already here through franchise and may find it tough to

find local partners willing to invest in the business.

Indian retail sector is the second largest employer after agriculture in the country and the entry of

foreign companies will not only increase the number of employment opportunities but also

exports.

39

With foreign companies setting up their own stores in India, the consumer will get access to some

of the major global brands. Entry of foreign brands would also improve the quality and variety of

products, increase competition and expand manufacturing.

Organised retailing holds the promise of lowering the prices of foreign goods sold through these

large stores. This also means that some of these retail chains will eventually have to start

manufacturing locally or outsource from domestic manufacturers in order to be in the competition.

This is more so considering the fact super and corner markets are very likely to co-exist in the

Indian market and it would make the latter more competitive and skilled in terms of operations.

Also, several Indian corporates such as the Tatas, ITC, the RPG Group and the Rahejas have

already established their outlet chains. Others such as Viveks in Chennai have established multi-

brand stores. Mukesh Ambani's Reliance, too, is reported to be planning a major foray into retail

business.

All this promises to make the Indian retail market a real happening place in the days ahead while at

the same time offering immense business opportunities to the domestic entrepreneurs. In fact, this

is likely to transform the whole contours of the India market, making it a part of the overall global

market.

40

MORE FDI ORGANISED RETAIL NEEDED

The need of the hour is for the government to device pragmatic policies for FDI in the retail

business. The fear expressed on the possible danger to the traditional retailer is entirely

unjustified. Why do we need FDI in any sector? Primarily, for two reasons- Either domestic

capital formation sector in the sector is not adequate to meet the need, as in the case in certain

infrastructure sectors like power, or there is need for technical know how, which otherwise is not

available in the case of chip manufacturing. In the retailing business, the need for FDI is on the

account of the need for capital.

It is important to appreciate that modern retailing is essential for growth, for it induces

tremendous efficiency into the entire chain, beginning from, say, the farmer to the end consumer.

The farmer can plan better and more efficiently in sowing crops when he has confirmed bulk

order. Further it cuts out the intermediaries and thereby reduces costs. Meanwhile the buyer can

put up distribution network which will reduce costs, which can be transferred to the end

consumer. Hence, nobody can accuse them of increasing prices. And, a virtuous cycle starts at

the consumer end.

Currently retailing in India is at a very nascent stage, with minimal penetration and 98%

consumption through the traditional channels. And, given the size of the retail market, of around

Rs13,75,000 crore, FDI is clearly needed for servicing even a fraction of this market. For if all

retail sales were to be undertaken through supermarkets, the investment requirement would be of

the order of Rs 2,60,000 crore. In the past 10 years, the total capital in the modern retail in the

country is of the order of Rs 10,000 crore. Given the consumption which is rising at around 8%

per year, by 2011, the market would be worth Rs 18 lakh crore and the investment require to

service this would be of the order of 4,00,000 to 4,50,000 crore. Assuming a generous FDI flow

of around Rs 20,000 crore, its impact on traditional retail market will be next to nothing.

Hence, the argument repeatedly made by certain quarters-of killing the domestic traditional retail

channel by opening of the retail route is entirely unjustified. A glance at the FDI flow in other

sectors reaffirms this point. This has hardly been around $4 billion to $6 billion in all the sectors

put together.

41

CHALLENGES OF ORGANISED RETAILING IN INDIA

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

industry, retailing needs to cross the following hurdles:

Automatic approval is not allowed for foreign investment in retail

Regulations restricting real estate purchases and cumbersome laws

Taxation, which favours small retail businesses

Absence of developed supply chain and integrated IT management.

Lack of trained work force.

Low skilled level for retailing management.

Intrinsic complexity of retailing- Rapid price changes, constant threat of product obsolescence and low margins.

The retailers in India have to learn both the art and science of retailing by closely following how

retailers in other parts of the worlds are organizing, managing and coping up with new

challenges in an ever changing market place. Indian retailers must use innovative retail formats

to enhance shopping experience and try to understand the regional variations in the consumer

attitude to retailing. Retail market efforts have to improve in the country- advertising,

promotions and campaign to attract customers, building loyalty by identifying regular shoppers

and offering benefits to them; efficiently managing high value customers; and monitoring

customers needs constantly are some of the aspects which Indian retailers need to focus upon a

more proactive basis.

Despite the presence of basic ingredients required for the growth of the retail industry in India, it

still faces substantial hurdles that will retard and inhibit its growth in the future. One of the key

impediments is the lack of FDI. This has largely limited capital investments in the supply chain

infrastructure, which is a key for development and growth of food retailing and has also

constrained access to world class retail practices. Multiplicity and complexity of taxes, lack of

proper infrastructure and relatively high cost of real estate are other impediment to the growth of

retailing.

42

While the government and the industry are trying to remove many of these hurdles, some of

roadblock will remain and will continue to affect the smooth growth of this industry. Organized

retailing in India is gaining wider acceptance. The development of the organized retail sector,

during the last decade, has began to change the face of retailing, especially, in the major metros of

the country. Experiences in the developed and developing countries prove that performance of

organized retail is strongly linked to the performance of the economy as a whole. This is mainly on

account of the reach and penetration of this business and its scientific approach in dealing with

customers and their needs. In spite of the positive prospect of this industry, Indian retailing faces

some major hurdles.

43

Organised retail benefits consumers and farmers:

Indian Council for Research on International Economic

Relations (ICRIER), in its report on the 'impact of big retail on

neighbourhood stores' has supported organised retail in the

country.

According to the report submitted to the Department of

Industrial Policy and Promotion today, both consumers and

farmers benefit from organised retailers. The low income

consumers save more from purchases from organised retailers.

The farmers benefit from organised retailers as they have the option to sell directly to organised

retailers.

Besides, as a result of the entry of the organised retailers, there is no evidence of decline in the

overall employment in the unorganised sector. However, the report admitted that initially, mom-

and-pop stores, in the vicinity of big outlets, have seen drop in their sales and profits.

The report says that unorganised retail business is likely to grow at 10 per cent per annum from

$309 billion in 2006-07 to $496 billion in 2011-12. The report also adds that the unorganised

retailer will not be able to meet its growing demand and hence the share of organised retail is

going to increase at a rate of 45-50 per cent per annum.

According to the report, organised retail, which currently contributes around 4 per cent of total

retail sector, is likely to grow at much faster pace to increase its share of total retail trade to 16 per

cent by 2011-12.

The study, however, did not deal with the impact of foreign direct investment (FDI) on traditional

retailers. "This study has nothing to do with the impact of FDI on retail," ICRIER CEO and

director Rajiv Kumar told media. .

44

OBJECTIVE OF RESEARCH

To study the impact of FDI in organized retail stores.

To study the opportunities of organized retail stores.

To study the consumer perception in organized retail stores.

To study the factors affects the organized retail stores.

To study the grievance handle systems in organized retail stores.

45

SCOPE OF RESEARCH

This research work will help us to understand the present position of retail and how much the

environment is supportive for FDI in organised retail sector in India. What are the impacts that

government have foreseen and hence has formulated strict and non supportive policies? How

other economies are gaining through FDI and FII in retailing. Is there any way that government

can make use of these investors and can secure the interest of existing players?

46

RESEARCH METHODOLOGY

Research Methodology:

Research work is descriptive type.

Source of Data:

In the research both primary and secondary data is used. Primary data is collected through small

retail outlets and secondary data is collected through Magazines, Journals, News Papers and

Internet Etc.

Research Type:

Research type applied over here is descriptive research because the purpose is to find out the

perception of consumer and retailer regarding home delivery system. The main characteristic of

this method is that the researcher has no control over the variable. He can only report what has

happened or what is happening.

Data Collection:

There are several ways of collecting the appropriate data:-

Primary method

Secondary method

Primary Method:

Primary method can be collected either through experiment or through survey. If the researcher

conducts an experiment, he observes some quantitative measurement, or data, with the help of

which he examines the truth contained in his hypothesis. But in this case of a survey, data can be

collected by any one or more of the following ways:-

47

By Questionnaires

By Observations

Secondary method:

Through internet

Through news paper Through magegine

Sample size:

The sample size is-100

In this strata is made on the basis of income and the people are selected from each income group

on the basis of random sampling. So, the entire procedure of first stratification and then simple

random sampling is known as stratified random sampling.

Research design:

48

The research design used over here is stratified sampling. If the population from which a sample

is drawn does not constitute a homogenous group, the stratified sampling technique is applied so

as to obtain a representative sample. In this technique, the population is stratified into a number

of non-overlapping, sub population or strata and sample items are selected from each stratum. In

this stratum is made on the basis of random sampling. So the entire procedure, first stratification

and then simple random sampling is known as stratified random sampling.

49

DATA ANALYSIS

And

INTERPRETATION

50

Graphical representation

1. Data analysis

As far the consumer buying behavior is considered towards the organized shop may be classified on the basis of.

(a) Location

(i) Village

(ii) City

(iii) Town

(b) Requirement

(i) Bulk

(ii) Small quantity

(iii) Immediate require / after some time

(C)Education

(i) Literate

(ii) Illiterate

(iii) Aware / not aware

51

(a) Location

Location is an important part of the organized retailing because the location creates a lots effect

on the market. When we take the example of the Village there is no scope of the organized retail

sector because the people think about the organized retailer the retailer give the costly product &

the rich person buy that product these organized retail shop not made for us.

Now we see the town there also the poor response now a days because the malls and the big retail

showrooms are not situated in the area of the town and some people have that mentality, which

have the villagers. So we can say there is no more effect on the town.

When we move towards the city then we see the craze of the organized shop how the organized

retailing creating more effect on the people.

(b) Requirement

Requirement also a main point because when a person who require a thing immediate then

there is no option to choose the unorganized retail because he has no time. But in other case we

can see people who have a time & the list of the product is also large then the people think

about the organized retail shop because the better & cheap quality available the retail shop.

(c) Education

Education is the main or common part of the customer choice because when

Customer is educated then he is able to take a good and valid decision, which

gives the satisfaction to the consumer.

When the people are not educated then he is not able to take the decision what

is good for purchase and where is the good place to purchase.

52

So according to the above study the shopper which are situated in the village they are not

interested to change in the shop or some modification because there is no another option in the

village and the customer are bound to purchase. Customers of villages are also not aware about the

outside thing.

Some town area shopper wants to change the shop they wants to modify the shop according to the

choice of customer but some remain thing there is no effect on them opening with the organized

retail showroom.

City shopper are most effective with the organized retailing because every person wants the all

things on a same place and the product should also cheep and the organized retailer provided to

easily and cheaper. The infrastructure of the shop also creates an effect on the consumer because

packaging of the any product should be good so they want to modification in their shops.

53

1. According to the location division of the population.

Location Percentage

Rural 70%

Urban 30%

70%

30%

Percentage

Rural Urban

54

Interpretation:

Most of the respondents are group of location rural 70% and urban 30%, the reason are they are not start savings and also they are just started earning which causes them to spend more.

55

2. Interest of the rural & urban people in the organized retailing

People Percentage

Rural (town only) 20%

Urban 55%

Rural (village) 2%

Both 23%

20%

55%

2%

23%

Percentage

Rural (town only) UrbanRural (village) Both

56

Interpretation:

Most of the respondents are in group of interest of the rural (town only) 20%,urban 55%,rural(village) 2% and both 23%..

3. % Of Retailers who wants the change in the retail shop to become organized shop.

People Percentage

Rural (town)20%

Rural (Village) 5%

Urban 75%

57

Interpretation:

Most of the respondents wants the change in the retail shope of to become organized in group of interest of the rural (town only) 20%,urban 75%,rural(village) 5% .

4. Is it a good for the Indian market and Indian people?

58

20%

5%

75%

Percentage

Rural (town) Rural (Village) Urban

People Percentage

Very good45%

So So 25%

Bad 30%

Very good

So So Bad0

0.050.1

0.150.2

0.250.3

0.350.4

0.45

Percentage

Percentage

59

Interpretation:

Most of the respondents are in Indian market very good .4% ,so so .2% and bed .28%.

5.The organized retailing according to the customer point of view considers all the category of the customer.

People Percentage

Rural customer 22%

Urban customer 55%

Both 38.5%

60

Rural cus-

tomer

Urban cus-

tomer

Both0

0.1

0.2

0.3

0.4

0.5

0.6

Percentage

61

FINDINGS & SUGGESTIONS

Thus it is found that FDI as a strategic component of investment is needed by India for its

sustained economic growth and development. FDI is necessary for creation of job, expansion for

existing manufacturing industries and development of new one. Indeed, it’s also needed in

healthcare, education, infrastructure, retail and in long term financial project. So, the study

recommends the following suggestion.

The study urges the policy maker to focus more on attracting diverse types of FDI.

The policy maker should design polices where foreign investment can be utilized as means

of enhancing domestic production , saving and exports, as medium of technological leaning

and technology diffusion and also in providing access to the external market.

It is suggested that government should push for the speedy improvement of infrastructure

sector requirement which are important for diversification of business activities.

Government should ensure the equitable distribution of FDI inflows among status, so that

they can attract FDI inflows at their own level.

The government must promote policies which allow development process from within(i.e.

through productive capacity and by absorptive capacity )

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SUGGESTIONS

It is suggested that the government endeavor should be on the type and volume of FDI that

will significantly boost domestic competitiveness, enhance skills, technological learning

and invariable leading to both social and economical gain.

It is also suggested that government must promote sustainable development through FDI

by further strengthening of education, health and R&D system, political involvement of

people and by ensuring personal security of the citizens.

FDI should be guided so as to establish deeper linkage with the economy, which would

stabilize the economy (e.i. improves the financial position, facilitates exports, stabilize the

exchange rate, supplement domestic savings and foreign reserves etc ) and providing to

investor a sound and reliable macroeconomic environment.

Finally it is suggested that policy makers should ensure optimum utilization of fund and

timely implementation of projects. It is also observe that the realization of approved FDI

into actual disbursement is quite low. It is also observe that the government while pursuing

prudent policies must also exercise strict control over inefficient bureaucracy, red-tapism

and the rampant corruption, so that investors confidence can be maintain for attractive

more FDI inflows to India.

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LIMITATIONS OF FDI

There are many limitations of foreign direct investment in India. These are following:-.

Flow to high profit areas rather than main concern areas.

Through their power and flexibility, MNCs can undermine economic autonomy and

control.

Faced with the problems of various resources like time and money.

Sometimes interface in the national politics.

Sometime engage in unfair and unethical trade practices.

Sometime result in minimizing/eliminating competition and create monopolicies or

oligopolistic structure.

64

CONCLUSION

A large number of change that were introduced in the country ,s regulatory economic policies

heralded the lebralization era of the FDI policies regime in India and brought about a structural

break through in the volume of the FDI inflows into the economy maintained a fluctuating and

un study trend during the study period. It might of intrest to not that more than 50% of the total

FDI inflows recived by India, came from Marutius.

The main reason for higher levels of investments from Marutius was that the fact that India

entered into a duble taxtion aviodances agreement with Marutius were procted from taxtion

India, among the different sector. The service sector had recived large proportion followed by

computer softwere and hardwere sector and telecommuniction sector.

65

BIBLIOGRAPHY

1. Sharma, Sunil(2004), “The marketing services for telecom industry” published by

infocom media.

2. Kotler philip (2005), “Marketing management” Pearson Education, 12th Edition.

3. Shajahan, S(2011), “Research methods ” industrial newsprint.

4. Malhotrs K.Naresh, “Marketing research” 1st Edition published by Sharswati books.

5. Cravens David Piercy Nigel, “Strategic marketing ” 8th Edition pub 27-aug-09 By=Tata

Mc Graw Hill.

6. Lamb Cravens Charles David, “Strategic marketing management cases” 7th Edition Pub

Date 01-jan-01 By Tata McGraw Hill.

66

ANNEXURE

Questionnaire

Q1: How often you come to Vishal Mega Mart?

Every day or more

2-6 times a week

Once a week

Once a mont

Q2: What kind of product you shop mostly?

Garments

Home furnishing

FMCG

Others

67

Q3: Is Vishal Mega Mart is your first preference for shopping?

YES

NO

Q4: How you found the services in Vishal Mega Mart?

Excellent

Good

Fair

Average

Q5: Does the Sales person attend you?

YES

NO

Q6: Does Sales person satisfy you completely?

68

YES

NO

Q7: Where do you think Vishal Mega Mart should improve more?

Pricing

Customer services

Environment

Variety

YES

NO

Q9: Have you made any complaint before?

YES

NO

Q10: Customer satisfaction is not as important as customer delight?

TRUE

69

FALSE

Q11: CRM is all about retention of customers than acquisition?

TRUE

FALSE

Q12: CRM implementation requires a cultural change than rather than mind set change of people in Organization?

TRUE

FALSE

Q13: How you found your morale while working?

Excellent

Good

Fair

Average

Q14: Do we maintain enough customer data to retain them?

YES

70

NO

Q15: Does Vishal Mega Mart need more Schemes to retain Customers?

YES

NO

Q16: Where you want more improvement to retain customers?

Pricing

Customer Services

Environment

Variety

71