Powerpoint Slides to Chapter 02

CHAPTER 2

RETAIL IN INDIA

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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

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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

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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

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The Evolution Of Retail In India

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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

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TMH Swapna Pradhan Retailing Management 3ed.

The Size Of Retail In IndiaSegment Composition Size (Rs.) Key players

Food and Grocery Fresh groceries, branded packaged foods, personal hygiene products and toiletries and dry unprocessed groceries

Total-1200,000 croreOrganised- 5000 crore

Food Bazaar, Subhiksha, Reliance Fresh

Food Services Fast Food, cafes, restaurants, locations offering catering services

Total-57,000 croreOrganised- 3,940 crore

McDonald’s, KFC, Jumbo King, Barista, Café Coffee Day

Clothing & Textiles Fabric manufacturers and readymade garments

Total-113,500 croreOrganised- 21,400 crores

Arvind Brands, Madura Garments, Raymond’s, Park Avenue

Consumer Durables Televisions, refrigerators, washing machines, air conditioners and microwaves

Total-41,500 croreOrganised- 4,300 crore

Strong regional players- Videocon Plaza, BPL Gallery, Vijay Sales

Footwear Footwear for men, women and children

Total-13,750 croreOrganised- 5200 crore

Bata, Metro Shoes, Lakhani, Adidas , Reebok

Jewellery Mainly, Gold Jewellery & diamonds

Total-52,000 croreOrganised- 1,450 crore

Tanishq, Gili

Books, Music and Gifts Various Books, Music and Gifts

Total-11,500 croreOrganised- 1,450 crore

Land Mark, Crossword, Higginbothams, Oxford Bookstore

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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 BazaarsTMH Swapna Pradhan Retailing

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Foreign Direct Investment In Retail

IMF-OECD Glossary of FDI terms and definitions

“Foreign direct investment reflects the objective of obtaining a lasting interest by a resident entity in one economy (‘‘direct investor’’) in an entity resident in an economy other than that 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.

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In India, FDI in retail is not allowedAn 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

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Foreign Direct Investment In Retail

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

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Potential Entrants

Substitutes

Suppliers Buyers

Industry Competitors

Rivalry among existing firms

Source: Competitive Strategy, Michael Porter, pg 4

Bargaining power of suppliers

Threat of new entrants

Threat of substitute products or services

Bargaining power of buyers

Five Forces Of Competition