Project Report on Vishal and Bigbazar

7/30/2019 Project Report on Vishal and Bigbazar

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A COMPARATIVE ANALYSIS OF

& SUBMITTED IN FULFILLMENT FOR DEGREE OF

B.B.A

Under the Guidance of:MR. Ravi Verma

SUBMITTED BY: -Mayank Jaiswal

ROLL NO-11110522 ,

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http://www.vishalmegamart.net/index.htm


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INDEXSr No. Contents Pg. No.1 Executive Summary 5

2 Introduction 6

3 Present scenario of retail sector in India. 9

4 Literature Review 11

5 Major Formats Of Retail In India 14

6 Evolution of organized retailing 17

7 Retail Model 19

8 Critical success factors in retailing 20

9 Key strategic factors in retailing 23

10 Retailing In India 25

11 Recent trends of retailing in India 30

12 Major players in Retailing in India 37

13 Challenges of Retailing in India 39

14 Barriers of Retailing in India 41

15 Guideline for establishing a new retail business 44

16 FDI in retailing 45

17 Introduction of Big Baazar 48

18 SWOT Analysis of Big Baazar 51

19 Introduction of Vishal Mega Mart 52

20 SWOT Analysis of Vishal Mega Mart 5621 Objective of the study & research methodology 57

22 Data Analysis 58

23 Survey discussions 71

24 Recommendation 73

25 Conclusion 75

26 Appendix(Questionnaire) 79

27S Bibliography 82

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CERTIFICATE

This is to certify that Mr./Ms. hascarried out the Market Survey Report / Project Report titled........in partial fulfillment of requirements of Under Graduate Degree in BBA6 th Semester under my supervision.

..Signature Guide

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ACKNOWLEDGEMENT

It is high privilege for me to express my deep sense of gratitude to all those peoplewho helped me in the completion of the project, especially my guide Mr. RaviVerma faculty management KCMT, Bareilly . who was always there at hour of need.

My special thanks to KCMT staff and faculty for helping me in the completion of project work and its report submission.Finally, I would like to thank all the people, without whose insights and opinions, thisproject would have been impossible.

MAYANK JAISWAL

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EXECUTIVE SUMMARY

So far, it has been seen that retailing is a vital and involuntary actionperformed by the living structure of the market economy (as opposed tothe case in a barter economy). In a barter economy, bane; transactionstake place between consumers themselves. Consumers interactdirectly whereas in a centralized market economy, transactions takingplace at a larger scale (both in terms of volume and variety)necessitate an interface between the manufacturers and finalconsumers. Hence we reinforce the fact that retailing is not a new deal.This industry is extant as an interface between production andconsumption, from times immemorial, benefiting us - consumers or producers in the various ways discussed above.

Our study concentrates on organized retailing, which consists of shopping malls, super markets, chain stores, and like. In the last fewyears a shift has occurred in India from individual retail outlets ownedseparately and managed distinctively to professionally managedretailing. This is an industry, which has now started attracting better

investments and talent. Things changed primarily because of the risingexpectations of Indian consumers and the corporates respondingquickly.

Today the industry (in India) seems to be functioning somewherebetween the accelerated development and maturity stages, with highgrowth rates, intense competition and moderate profitability.

In order to get an idea of the magnitude of the issue we are dealingwith, we look at the international scenario. During 1992, the largest 100

retailers in the world generated over $1.1 trillion in revenues.

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INTRODUCTION

Retailing consists of those business activities involved in the sale of goods and services to consumers for their personal, family or household use. It is the final stage in a channel of distribution, whichcomprises all of the businesses and people involved in the physicalmovement and transfer of ownership of goods and services fromproducer to consumer.

Any business that directs its marketing efforts towards satisfying thefinal consumer based upon the organization of seiting goods and services as a means of distribution"

A typical distribution channel is shown below

In a distribution channel, retailing plays an important role as anintermediary between manufacturers, wholesalers, and other suppliersand final consumers. The retailer collects an assortment of goods andservices from various sources and offers them to consumers. Thisprocedure is called the sorting process. To maximize their efficiency,many manufacturers would like to make one basic type of item and sellthe entire inventory to as few buyers as possible. Yet, many customerswant to choose from a variety of goods and services and purchase alimited quantity. Through the sorting process, the retailer bridges thegap between manufacturers and final consumers.

Another distribution function that retailers perform is to communicatewith their customers and with their manufacturers and suppliers.Customers are informed about the availability and characteristics of goods and services, special sales etc. via ads, sales personnel andstore displays. Manufacturers and wholesalers are informed aboutsales forecasts, customer complaints, defective products etc. fromretailers. Many goods and services have been modified as a result of retailer feedback to suppliers.

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Manufacture Final ConsumerRetailerWholesaler


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Over the last twenty years, retailing has changed as a result of following developments:

The development of a 'motor car economy'. This has led to onestop shopping where families buy all of their supplies at oneshop.

Own branding- large retailers have developed brands of their ownmade by large leading manufacturers,

New technology at the checkout and in the packaging andpreserving of food has been developed, which has speeded upthe checkout process and reduced the delivery times fromsuppliers.

Faster transport links across the world, which has made availablea wider range of goods.

The growing sophistication of the customers and a general rise inthe standard of living, which has led to the fierce competition inthe market.

New technology in the home, which may cause a revolution in theshopping methods in the future.

Since the consumer is God, he has to be kept in mind when decidingon a retailing strategy. Consumers do not want something to be sold tothem; it is enough to merely facilitate a sale. They want their retailoutlets to do more for them in terms of service and convenience. Theyknow what they wish to buy even before they enter a store, and, often,even before they leave the house. So, despite whatever marketers say

about impulse-purchases, they are actually rare occurrences. The largenumber of repeat customers in a store implies that customers aredriven more by their feelings towards the store than those towards thebrand. This presents super-retailers with an opportunity to build store-brands.

However, supermarkets would do well to start with non-store brands,build a loyal customer-base through schemes similar to frequent-flier programmes, and then, launch store-brands. Significantly, since theexpectations of most customers from super markets have notcrystallized yet, a super-retailer can, actually, drive expectations bydeveloping need- based retail formats.

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There were 5.13 million retail outlets in 1996; today, the figure is closer to 6 million. Most of them are either grocers or paan-plus stores thatstock everything from cigarettes to smuggled Scotch. But these figurescould be misleading. Just 3 per cent of the country's retail outlets canbe called large; 64 per cent are small.

For functional products like plain-vanilla FMCGs, traditional formats willdo. For innovative products, like high-value FMCGs, cosmetics,garments, or consumer durable, innovative formats are a must.

It has been noticed that, while supermarkets have a computerizedbilling system, they make no effort to capture any other informationabout their customers. Marketers will find this information invaluable:''Data on preferences, family background, and purchase-patterns willhelp companies address specific consumer needs.''

Keeping the consumer in mind, the study attempts to find whether ashift from the kirana store to the supermarket exists today or not.

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PRESENT SCENARIO IN RETAIL SECTOR IN INDIA

The organized retail sector is expected to grow at 6% by 2010 andtouch a retail business of $ 17 billion as against its current growth levelof 3% which at present is estimated to be $ 6 billion, according to theStudy undertaken by The Associated Chambers of Commerce andIndustry of India (ASSOCHAM). The Study has revealed that the retailsector will grow at GDP 7% by 2010 and enlarge its market share to $280 billion from its present estimated level of $ 200 billion. Cities andmetropolitans in which retailing will show booming prospects includeMumbai, Delhi, Chennai, Kolkata, Bangalore and Kanpur and thepopular mode adopted for building shopping malls in these cities will bebased on build, operate, lease and sell basis. This system, as per thefindings of ASSOCHAM will lead to establishments of closer linkagesand relationship between real estate developers, state governments,financial institutions and retail industry. As per ASSOCHAMsestimates, investment opportunities that the retail sector will create innext 4-5 years will result into continued urbanization and increase theper capita income of Indian populace which will finally lead to greater consumerism. The growth of retail sector will lead to greater shifttowards service economy in which need for real estate will beparamount. Franchising in retailing will emerge as a popular mode of retailing as their will be proliferation of availability of brands with bothforeign and Indian companies acquiring strong brand equity for their

products in near future.

The retail boom currently being witnessed in India is likely to have asignificant impact on the commercial real estate sector as the largemetropolitans will have sizable retail construction projects underway.

However, there will be few stumbling blocks that may restrict thegrowth of retail sector. These include very high stamp duties ontransfer of property which vary from state to state level. A case inexample is Gujarat, Uttar Pradesh and few other states where the

stamp duty is charged at 12.5%, while there are certain states likeDelhi in which the stamp duty levied is within the range of 8%.

Urban Land Ceiling Act, Rent Control Act and Land Acquisition Act untilamended will continue to distort property markets and cities, leading toexceptionally high property prices. Presence of strong pro-tenancylaws will also make it difficult for retailers to grow as this problem iscompounded by lack of clarity over titles to ownership.

The government should encourage People of Indian Origin (PIO) to

invest in real estate and township building should encourage People of Indian Origin (PIO) to invest in real estate and township building and

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foreign investment in real estate business and retailing should also beopened up.

On the domestic taxation front, sales tax rates differ across the various

Indian states, making supply chain management a challenging task for organized retailers. Inter-state sales attracts Central Sales Tax whilefor some categories of products, certain states levy import dutiesnamely entry tax on entry of goods into their territory. Simultaneously,states levy export duties where goods are moved for sale outside stateborder.

Sales tax evasion by small retailers to offer lower prices, fetch higher margins is also commonplace in local markets. In addition to statetaxes, certain local authorities also levy octroi.

All these things put together cause irritation and therefore, restrict thegrowth of our economy. If retailing has to grow than the correctivemeasures will be needed to be initiated for correcting the aforesaidanomalies to lure investment in Indian retailing.

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LITERATURE REVIEW

Retail has played a major role world over in increasing productivityacross a wide range of consumer goods and services .The impact canbe best seen in countries like U.S.A., U.K., Mexico, Thailand and morerecently China. Economies of countries like Singapore, Malaysia, HongKong, Sri Lanka and Dubai are also heavily assisted by the retailsector.

Retail is the second-largest industry in the United States both innumber of establishments and number of employees. It is also one of the largest world wide. The retail industry employs more than 22 million

Americans and generates more than $3 trillion in retail sale annually.

Retailing is a U.S. $7 trillion sector.

Wal-Mart is the worlds largest retailer. Already the worlds largestemployer with over

1million associates, Wal-Mart displaced oil giant Exxon Mobil as theworlds largest company when it posted $219 billion in sales for fiscal2001. Wal-Mart has become the most successful retail brand in theworld due its ability to leverage size, market clout, and efficiency tocreate market dominance. Wal-Mart heads Fortune magazine list of top

500 companies in the world. Forbes Annual List of Billionaires has thelargest number (45/497) from the retail business.

Retailing is the final step in the distribution of merchandise - the lastlink in the Supply Chain - connect ing the bulk producers of commodities to the final consumers. Retailing covers diverse productssuch as foot apparels, consumer goods, financial services and leisure.

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A retailer, typically, is someone who does not effect any significantchange in the product execs breaking the bulk. He/ She is also the finalstock point who makes products or services available to the consumer whenever require. Hence, the value proposition a retailer offers to aconsumer is easy availabilities of the desired product in the desiredsizes 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 tradeis done by the organized sector. Huge retail chains like Wal-Mart, Carr four Group, Sears, K-Mart, McDonalds, etc. have now replaced theindividual small stores. Large retail formats, with high quality ambianceand courteous, and well-trained sales staff are regular features of these retailers.

Top Ten Retailers Worldwide

Rank Retailer No of stores owned

1 Wall-Mart Stores Inc. (USA) 4178

2 Carrefour Group (France) 8130

3 The Kroger Co. (USA) 3445

4 The Home Depot, Inc. (USA) 1134

5 Royal Ahold (Netherlands) 7150

6 Metro AG (Germany) 2169

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7 Kmart Corporation (USA) 2105

8 Sears, Roebuck and Co. (USA) 2231

9 Albertson's, Inc. (USA) 2512

10 Target Corporation (USA) 1307

Broadly the organized retail sector can be divided into two segments,In-Store Retailers, who operate fixed point-of-sale locations, locatedand designed to attract a high volume of walk-in customers, and thenon-store retailers, who reach out to the customers at their homes or offices.

Apart from using the internet for communication (commonly called e-

tailing), non-store retailers did business by broadcasting of infomercials, broadcasting and publishing of direct-responseadvertising publishing of traditional and electronic catalogues, door-to-door solicitation and temporary displaying of merchandise (stalls).

Major formats of In-Store Retailing have been listed in Table givenbelow :

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Format Description The Value Proposition

SpecialityStores

Focus on a specificconsumer need, carrymost of the brandsavailable.

Greater choice to theconsumer, comparisonbetween brands possible

DepartmentStores

Large stores having awide variety of products,organized into differentdepartments, such asclothing, house wares,furniture, appliances,toys, etc.

One stop shop catering tovaried consumer needs.

Supermarkets Extremely large self-services retail outlets.

One stop shop catering tovaried consumer needs.

Discount Stores Stores offering discountson the retail price throughselling high volumes andreaping the economies of

scale.

Low prices.

Hyper-mart

Larger than aSupermarket, sometimeswith a warehouseappearance, generallylocated in quieter parts of the city

Low prices, vast choiceavailable includingservices as cafeterias.

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ConvenienceStores

Small self-service formatslocated in crowded urbanareas.

Convenient location andextended operating hours.

Shopping Malls An enclosure havingdifferent formats of in-store retailers, all under one roof.

Variety of shops availableclose to each other.

Branded Stores Exclusive showroomseither owned or franchised out by amanufacturer.

Complete range availablefor a given brand,Certified product quality.

THE GROWTH DRIVERS

The United States of America (USA) has been a forerunner in theevolution of retailing. Today, the organized players handle 80% of theretail trade in the US. Wal-Mart alone handles 6% of the total retailtrade and the top 50 retailers control 36% of the organized retail. Thefactors that contributed towards the growth and consolidation of organized retailing in the US are described below:

Baby boomers

The single largest contributor to the growth of organised retailing wasthe boom in consumer spending after the Second World War. This wascaused largely due an increasing population, when America witnessed64 million births in an 18 year period. Consumer preferences changedand spending patterns became significant drivers for detail expansionthus making retailing an attractive business.

Increased per capita spending

The effect of population increase was further accentuated by an

increase in per capita spending. Per capita personal consumptionexpenditure in the US, rose form $1,796 in 1959 to $22,391 in 1999.

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Even after adjusting for inflation, the per Capita Expenditure in 1999,was more than double of that in 1959.

Dual income families

Advent of dual income families also helped in the growth of retailsector. A dual family can spend more but has very little time availablefor shopping. Thus, convenience and speed of service became crucialparameters.

Urbanization

Increased urbanization has led to high customer density areas thusenabling retailers to use lesser number of stores to target the samenumber of customers. Aggregation of demand that occurs due tourbanization helps a retailer in reaping the economies of scale.

Covering distances has become easier

With increased automobile penetration and an overall improvement inthe transportation infrastructure, covering distances has become easier than before. Now a customer can travel miles to reach a particular shop, if he/she sees value in shopping from there.

From the supply side also, a number of developments fueled thegrowth of the retail industry. Retailers understood the needs of thecustomers and realized efficiencies through investments in TechnologyInfrastructure and Employees. The outcomes were improved supplychains, increased service levels and satisfied customers.

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Evolution of Organized Retailing

American mass retailing began in the late 1800s with MontgomeryWard marketing its products through general merchandise mail order catalogs, which was very effective at that time for reaching a largelyrural society.

In the 1940s, the population began its movement to the suburbs as theeconomy shifted from an agricultural base to an industrialised nation.The first shopping center was opened, which would eventually be asignificant factor in the decline of downtown retailing in the 1960s and

70s. JCPenney and Sears began their national mass retailingexpansion, and the use of credit cards as major retail chains began.

The 1950s witnessed the reaffirmation of the traditional family. The firstplanned mall and franchised food restaurant opened. As peoplecontinued to flock to the suburbs, the downtown areas began todecline. Larger suburban malls were created and anchored bytraditional downtown department store merchants. Freeways wereexpanded and the sales of private automobiles grew, giving theconsumer a wider accessible area in which to shop. Discounters wereborn, Korvetta being one of the firsts.

The 1960s witnessed the growth of enclosed shopping centers, withdepartment stores anchors and specialty retail chains. The babyboomers were teenagers at this point, leading to the growth of juniors-oriented stores and vendors. Women became targets not just asmothers or wives as they entered the workforce and consumersbecame more demanding in their expectation of quality and service.

In the 1970s, promotional pricing started to pick up the departmentstores as off-price retailer emerged. The growth of retail space slowed,as sales increase came at the expense of competition, not of marketgrowth. This competitive market led to the under performance of several retailers as gross margins experienced downtown pressurefrom increased competition. Retailers in large upscale marketsrecognised the time shortage created by dual-career families andbegan to offer more services to assist in saving time.

The 1980s witnessed the growth of off price retailing as a distinct,enduring retail format. Retailers began to drop low profit lines.

Acquisitions and mergers were actively utilised as growth strategies,

private brands were redeveloped to enhance uniqueness and marginsand offshore sourcing was developed to compensate for margins.

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No. of retail outlets/ in Million Country12.0 IndiaI. 18 Mexico1 .07 Brazil0.91 United States0.32 Argentina0.19 Malaysia0.04 Hong Kong

Retail Statistics

Worldwide retailing is the single biggest industry. It has an annual sales

figure of $6.6 trillion.

In US alone the industry employs 17% of the total work force of the country.In Poland it is 15%, in China it is 12% while in tndia it is just 6% of the totalwork force.

Indian market is worth $180bn annually and it contributes to 6% to 8% of thetotal workforce employed. The industry is expected to grow to more than$300bn by 2010.

In US there are 44000 malls serving a population of 273mn, in EU there are3600 malls serving 380mn while in India there are just 3-4 shopping mallscatering to a population of 65-70mn across 6 metros in the country.

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RETAIL MODEL

On a basic level, retail is a combination of three components; Product, Process and

People. Within these components are elements that when put together form a retailmodel. Here are the model's main components and elements.

1. Product Selection

Product selection is made up of three elements:Market segment-this determines the type of products to be sold Scope-the range of the segmentsQuality-the characteristics of the segment and scope .

2. Price

The price the consumer pays for the goods offered by the retailer.Process

3. Operational activity

Includes inventory procurement, inventory management, and all necessaryadministrative activity

4. Structure

The organizational structure is necessary to operate the retail enterprise.

5. Location and site management

The physical plant and location

6. The customer experience

What the customer experiences when conducting business with the retailer.

7. The employee experience

What the employee does and experiences when working for the retailer andinteracting with the customer

8. Services

Services such as delivery, installation, in home sales, and personal shoppers are just a few examples. Services are considered a people component as they are most

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often performed by people and their quality is determined as such share of themarket, its image and status and finally its survival.

CRITICAL SUCCESS FACTORS IN RETAILING

Sourcing the Right Merchandise : In an ideal world, before the worldbeats a path to his door, a retailer would have the right quantity of the rightmerchandise in the right place, at the right time, while meeting the needs of the customer and maximizing the financial gains at the same time.Sophisticated techniques and advanced technology are being put to use toensure that the merchant understands what the customer wants, the supplier produces that and the customer gets the merchandise of choice.

Breadth and Depth of Merchandise: This deal with the merchandisemix that the merchandise manager feels would sell in the coming year. Thekey factors considered while making an assortment plan are the range of prices, brands and sizes to be purchased, based on the merchandisestrategy of the store. This assortment plan differs from category to category.Today's reality of a large assortment of merchandise is the biggest challengefor retailers worldwide. It requires technology and people 10 manage, withlots of real-life experience of understanding the consumer and his/her shopping behavior.

Pricing: The pricing policy is a key element of the overall store positioningand merchandising strategy. Most customers today are looking for goodvalue for money, which is often embedded in their demand for lower prices,acceptable quality and service. Retail cost structures in India are similar tothose of the western world, but the retail price and the margin structure arelower by about IO per cent. For the retail chains to become successful,retailers have to exhibit very high cost efficiency and get higher marginsthrough private labels or greater cash margins by faster rotation and higher output.

Psychological dimensions: The objective dimensions include amongothers, credit, physical facilities, warranties, repair services and packaging.The psychological dimensions, which are intangible, include courtesy,attention, knowledge, trust and a sense of security and confidence.

Customer support services : A primary way in which retailersdifferentiate their outlets from those of the competitors. Many outlets offer thesame merchandise at the same price with similar promotion programs.Services provide an opportunity to create a unique image in consumers'minds.

Integrated Marketing: Efficient service and appropriate merchandiseare only part of the story to draw in repeat customers. In addition, retailcommunication that is clear, focused and fully comprehended by the targetcustomer is a must. Most retailers' favor integrated marketing

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communications, which is the strategic integration of multiple communicationmethods to form a comprehensive, consistent message. The elements in theretail communication program must work together and reinforce each other so the retailer can achieve its objectives. Without this coordination, thecommunication methods might work at cross purposes. For example, theretailer's TV advertising campaign might attempt to build an image of exceptional customer service, but the firm's sales promotions might allemphasize low prices.

Promotional Plan: A crucial step in the retail management decision-making process is developing and implementing a promotion program toattract customers to stores and encourage them to buy merchandise. Thepromotion program informs customers about the store as well as themerchandise and services it offers. The ultimate aim of the retail promotionprogram is to generate sales from customers in the retailer's target market.

To accomplish the goal, retailers use a variety of methods to inform,persuade, and remind customers about the retailer. Promotion is any form of communication from the retailer to the consumer and includes mass mediaadvertising, coupons, price discounts, premium offers, point of purchasedisplays and publicity. Retailers must decide on who to reach, the messageto get across, the number of messages to reach the audience, and themeans of reaching the audience. Promotion should be viewed as a salesbuilding investment.

Operational Economies of Scale: All retailers are concerned aboutthe costs of providing their retail offering. Costs are important even toretailers that offer excellent service and sell high priced merchandise tocustomers who aren't very price sensitive. If a retailer can offer the samemerchandise quality of service as its competitor at a lower cost, then it willmake either a higher profit margin .fits to attract more customers andincrease sates.Space constraints limit stores to narrow product mixes .Companies can leverage cost benefits of all kinds from a larger store base.Corporate overheads can be spread over a larger volume of sales, loweringexpense ratios. Greater size can also mean lower occupancy costs, wider product mix, greater buying power and clout- to negotiate with manufacturesfor volume discounts and cooperative advertising. The lower product costs

can be passed on to the consumers in the form of lower prices.

Location: The right location decision for a retailer means being at the rightplace at the right time. For several reasons, store location is often the mostimportant decision made by a retailer. First, location is typically the primeconsideration in a customer's store choice. Second, location decisions havestrategic importance because they can be used to develop a sustainablecompetitive advantage. The important issues in location decisions are thesite's accessibility, terms and rates of occupancy and legal considerations.Choosing a site involves evaluation of a series of tradeoffs, in terms of costand value of the site for a particular retailing format.

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Store design and ambience: There is more to selling than locations,merchandise and customer service, for which most organizations can

develop procedural codes. According to a study by A.T. Kearney, retaildesign is responsible for about 10% increase in sale. The biggest challengefor a mega-mall or a hypermarket is to create an environment that pulls inpeople and makes them spend more time shopping. Two major factors thatset one store apart from another-store layout (the design or interior architecture), and visual merchandising. Interiors and display are effectivetools for store differentiation.

Store design refers to the style or atmosphere of a store that helps project animage to the market. Store design elements include such exterior factors as

the storefront and window displays and such interior factors as colors,lighting, flooring and fixtures. It is an important image-creating element andshould begin with an understanding of preferences, desires and expectationsof the store's target market. When designing a store, managers mustconsider three objectives. First the store's atmosphere must be consistentwith the store's image and overall strategy. Second, it should help influencecustomer's buying decisions. And finally, the productivity of the retail space-how many sales can be generated out of each square foot of space.

Supply Chain Management and Logistics: Logistics is the organizedprocess of managing the flow of merchandise from the source of supply-thevendor, wholesaler, or distributor-through the internal processing functionswarehousing and transportation -until the merchandise is sold and deliveredto the customer. Today, many retailers work closely with their vendors topredict customer demand, shorten lead times for receiving merchandise, andreduce inventory investment. They've established on line systems that linktheir point of sale cash registers to computer terminals on their desks. Theycan determine exactly what's selling by item classification, store, or vendor on a minute by-minute basis. As a result, inventory investment can bereduced and customer service levels improved

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KEY STRATEGIC FACTORS IN RETAILING

The key to success is identifying a superior value-promise and who is in a better position to do it than retailers? Retailers are the closest to the point of purchase andhave access to a wealth of information on consumer shopping behavior. Retailershave some unique advantages for managing brands such as continuous andactionable dialogue with consumers, control over brand presentation at point-of sale, control over shopping environment, display location/adjacencies, and signage.

And they have used this advantage with tremendous success.

The 3 stages of evolution of the trade channel are shown in the exhibit below:

As seen, the role of the intermediary is being diminished gradually, which hasobvious Implication of backlash of the trade channel upwards towards the suppliers.This is more severe in countries such as India, where the channel economics infavor of the middlemen is still strong enough given the segmentation of the retailsector. Therefore when Food World, the largest grocer in India has a "direct supply"contract with over 20% of its key suppliers, it gives rise to conflict of interest with thedistribution infrastructure that suppliers have painstakingly built over the years.Thus companies like HLL have evolved a distinct distribution channel altogether (called "Modern Trade") to service the needs of such large grocers. Even the momand Manufacturer pop stores (known as kirana shops) are affected due to this"unfair" back-end advantage extended by the supplier to its leading accounts (theemerging supermarket chains).

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The strategies adopted by the retailer to compete with branded goods are illustratedin the diagram above. Branding the store and following a private label strategy isthe key strategy which helps the retailer to compete with branded products.

Requirements for a great show:

Strong private label strategy Optimize assortment

Leverage brands

Maximize customer traffic and profitability

Keep formats constant Brand the store

Loyalty cards

Pricing and promotion strategy

Online shopping

Develop new formats

Reinvigorate existing formats

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Retailing in India

The retail market size in India is estimated to be around $180 billion.Retailing provides jobs to almost 15 percent of employable Indianadults and it is perhaps the largest contributor to India's GDP.

But the flip side of the coin is that the average size of each of the retailoutlets in India is only 50 square feet and though a large employer, theindustry is very unorganized, fragmented and with a rural bias.

The Indian retail industry is unorganized

There are nearly twelve million retail outlets in India and the number isgrowing. Two thirds of these stores are in rural location. The vastmajority of the twelve million stores are small "father and son" outlets.

According to the "Retailing in India" report published by the PwCGlobal Retail Intelligence Program, share of the unorganized sector is98%.

Some Key Facts about Indian Retail Industry

INDIA A Vibrant Economy & Resplendent Market

4 th Largest economy in PPP terms after USA, China & Japan.

To be the 3 rd largest economy in terms of GDP in next 5 years.

2nd fastest growing economy in the world.

The US $ 580 billion economy grew 8.2 percent in the year 03-04

Among top 10 FDI destinations

Stable Government with 2 nd stage reforms in place

Growing Corporate Ethics (Labour laws, Child Labour regulations,

environmental protection lobby, intellectual and property rights, social

responsibility).

Major tax reforms including implementation of VAT.

2nd Second most attractive developing market, ahead of China

5th among the 30 emerging markets for new retailers to enter

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With over 600 million effective consumers by 2010 India to emerge as one of the

largest consumer markets of the world by 2010.

Five Reasons why Indian Organized Retail is at the brink of Revolution:

Scalable and Profitable Retail Models are well established for most of the

categories

Rapid Evolution of New-age Young Indian Consumers

Retail Space is no more a constraint for growth

Partnering among Brands, retailers, franchisees, investors and malls

India is on the radar of Global Retailers SuppliersLooking Ahead

Many strong regional and national players emerging across formats and product

categories Most of these players are now geared to expand far more rapidly than

the initial years of starting up Most have regained / improved profitability after going

through their respective learning curves.

Malls in India

A decade ago not a single mall

A year ago less than half a dozen

Today 40 malls

2 years from now 300 malls

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THE INDIAN RETAIL INDUSTRY

Retail stores in India are mostly small individually owned businesses.The average size of an outlet is 50 sq.ft. ft. and though India has thehighest number of retail outlets per capita in the world, the retail spaceper capita at 2 sq.ft. ft per person is amongst the lowest in the world.

Nearly two thirds of the stores are located in rural areas. The retailindustry in rural India has typically two forms: "Haats" and "melas".Haats are the weekly markets: they serve groups of 10-50 villages andsell day-to-day necessities. They are frequently used as replenishmentpoint for the small village retailer. Melas are larger in size and moresophisticated in terms of the goods sold. Mela merchandise would

include more complex manufactured products such as televisions.

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THE EVOLUTION OF INDIAN RETAIL INDUSTRY

For Indian retailing, things startedto change slowly in the 1980s,when India first began opening

its economy. Textiles sector (which companies like

Bombay Dyeing, Raymond's, S

Kumar's and Grasim) was thefirst to see the emergence of retail chains. Later on, Titan,maker of premium watches,

successfully created anorganized retailing concept inIndia by establishing a series

of elegant showrooms.For long, these remained the only organized retailers, but the latter half of the 1990s saw a fresh wave of entrants in the retailing business.This time around it was not the manufacturer looking for an alternativesales channel. These were pure retailers with no serious plans of getting into manufacturing. These entrants were in various fields, like -

Food World, Subhiksha and Nilgiris in food and FMCG; Planet M andMusic World in music; Crossword and Fountainhead in books. As of theyear ending 2000 the size of the Indian organized retail industry wasestimated at around Rs. 13,000 crore. The various segments that makeup the organized retail industry along with their size are in table givenbelow. Retail growth is already gathering momentum and the organizedretail industry is expected to grow by 30 per cent in the next five yearsand is expected to touch Rs. 45,000 crore in 2005. Thus, the growthpotential for the organized retailer is enormous.

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Segment Market Size (Rs. Crore)

Textiles and clothing 4050

Jewellery 2,000-2,500

Consumer Durables 1500

Footwear 1,300-7,500

Food and personal care 1000

Non-Store retail 900

Luggage, watches and tyre 500

Books and music 390

Retail formats in India

Some of the prevalent relating formats in India include :

Malls

Most malls give floor space out to individual shops on lease, and theseare enticed by the economies resulting from the sharing of costs.India's largest shopping arcade Spencar Plaza (600,000-sq-ft) in

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Chennai is an example. In malls like these, the combined brand pull of all outlets is used to create a pull for the mall.

Branded Stores

Exclusive showrooms run by premium brands have been the catalystsin pushing up the Indian retail scenario. This concept is now beingused to introduce organized retailing to the second rung towns. MaduraGarments has started setting up exclusive outlets in cities like Trichyand Thanjavur.

Departmental Stores

Departmental Stores are expected to take over the apparel businessfrom exclusive brand showrooms. Among these, the biggest success isK Raheja's Shoppers Stop, which started in Mumbai and now has morethan seven large stores (over 30,000 sq. ft) across India and even hasits own in store brand for clothes called Stop!.

Specialty Stores

Chains such as the Bangalore based Kids Kemp, the Mumbai booksretailer Crossword, RPG's Music World and the Times Group's musicchain Planet M, are focusing on specific market segments and haveestablished themselves strongly in their sectors. Absence of discountingas a dominant format of retailing in India is a glaring peculiarity. The reasonsare two-fold. Unlike most Western countries, Indian retailers have much lessbargaining power. They thrive as small store and don't have the clout tonegotiate terms with the manufacturers. The other reason is that the retailersthemselves have no economies of scale to offer discounts on their own.However, the scenario is now changing. Increased investments and the entryof big business houses in retailing is leading to the emergence of bigger retailers, who can both bargain with the suppliers, as well as, reap economiesof scale. Hence, discounting is becoming an accepted practice.

RECENT TRENDS IN RETAILING

Retailing is the second largest industry in the world, one of the largestemployers of the world and an index of economic growth. In India thereare about 5 million retail outlets varying in sizes and nomenclatures.India has the highest number of retail outlets per capita in the world buthas the lowest retail space per capita in the world (2 ft / person). Out of

these 5 million outlets 96% are smaller than 500 sq. ft. in area 3. Thereare about 3 million outlets in Indias 3700 designated towns and more

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than 6,00,000 villages. About 350 million people live, within one-minutewalk of these retail shops. According to retail census conducted bymarket researcher ORG-MARK, Rs.4,79,568 crore worth of productswere sold through theses million retail outlets Manufacturers ownedand retail chain store are springing up in urban areas to marketconsumer goods to the middle class in a much similar style as mallsaround the globe. At present about 8% of the Indian population isemployed in the retailing industry as against 20% in USA. As Indiamoves towards the service oriented economy, a rise in this percentageis expected. The number of the retail outlets is growing at about 8.5%annually in the urban areas and in towns with population between 1,00,000 to I million; the growth rate is about 4.5%.

Retailing in India is at a nascent stage of is evolution, but within asmall period of time certain trends are clearly emerging which are in

line with the global experiences. Organised retailing is witnessing awave of players entering the industry. These players are experimentingwith various retail formats. Yet, Indian retailing has still not been ableto come up with many successful formats that can be scaled up andapplied across India. Some of the notable exceptions have beengarment retailers like Madura Garments & Raymonds who was scaledtheir exclusive showroom format across the country.

According to Kurt Salmon Association, a global management consultingfirm, organized retailing seems all set to power ahead from Rs. 5000crore currently to about Rs.30,000 crore in next live years. A. T.Kearney reports that organized retailing will account for about 20% of the total $8 trillion retail market in India in the next 5-7 years as against1-2% today.

Format Of Retailing Consumer Spend by 2006

(in Rs. crore)

Unorganized Retailing 7,08,836

Organized Retailing

Food and grocery 5,956

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Non food 23,886

Source: Shah, Jindal Shop at Leisure Economic Times (4th Feb 2000)

Different Forms of Retailing:Emergence of new formats of Retailing in India

Retailing in India is still evolving and the sector is witnessing a seriesof experiments across the country with new formats being tested out;the old ones tweaked around or just discarded. Some of these arelisted in Table:-

Retailer Current Format New Formats.

Experimenting With

Shoppers' Stop Department Store Quasi-mall

Ebony Department Store Quasi-mall, smaller outlets, adding food retail

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Crossword Large bookstore Corner shops

Piramyd Department Store Quasi-mall, food retail

Pantaloon Own brand store Hypermarket

Subhiksha Supermarket Considering moving toself service

Vitan Supermarket Suburban discount store

Foodworld Food supermarket Hypermarket, Foodworldexpress

Globus Department Store Small fashion stores

Bombay Bazaar Aggregation of Kiranas

Efoodmart Aggregation of Kiranas

Metro Cash and carry

S Kumar's Discount store

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Retailers are also trying out smaller versions of their stores in anattempt to reach a maximum number of consumers. Crosswordbookstores are experimenting with Crossword Corner, to increasereach and business from their stores. FoodWorld is experimenting witha format of one-fourth the normal size called FoodWorld Express.

Popular Formats

HypermarketsLarge supermarkets, typically (3,500 - 5,000 sq. ft)Mini supermarkets, typically (1,000 - 2,000 sq. ft)Convenience store, typically (7,50 - 1,000 sq. ft)Discount/shopping list grocer Traditional retailers trying to reinvent by introducing self-service formatsas well as value-added services such as credit, free home delivery etc.

The Indian retail sector can be broadly classified into:

a) FOOD RETAILERS

There are large number and variety of retailers in the food-retailing sector.Traditional types of retailers, who operate small single-outlet businesses mainlyusing family labor, dominate this sector .In comparison, super markets account for asmall proportion of food sales in India. However the growth rate of super marketsales has being significant in recent years because greater numbers of higher

incomeIndians prefer to shop at super markets due to higher standards of hygiene andattractive ambience.

b) HEALTH & BEAUTY PRODUCTS

With growth in income levels, Indians have started spending more on health andbeauty products .Here also small, single-outlet retailers dominate the market.However in recent years, a few retail chains specializing in these products have

come into the market. Although these retail chains account for only a small share of the total market , their business is expected to grow significantly in the future due tothe growing quality consciousness of buyers for these products .

c) CLOTHING & FOOTWEAR

Numerous clothing and footwear shops in shopping centers and markets operate allover India. Traditional outlets stock a limited range of cheap and popular items; incontrast, modern clothing and footwear stores have modern products and attractivedisplays to lure customers. However, with rapid urbanization, and changing patternsof consumer tastes and preferences, it is unlikely that the traditional outlets willsurvive the test of time.

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d) HOME FURNITURE & HOUSEHOLD GOODS

Small retailers again dominate this sector. Despite the large size of this market,very few large and modern retailers have established specialized stores for theseproducts. However there is considerable potential for the entry or expansion of specialized retail chains in the country.

e) DURABLE GOODS

The Indian durable goods sector has seen the entry of a large number of foreigncompanies during the post liberalization period. A greater variety of consumer electronic items and household appliances became available to the Indiancustomer.Intense competition among companies to sell their brands provided a strongimpetus to the growth for retailers doing business in this sector.

f) LEISURE & PERSONAL GOODS

Increasing household incomes due to better economic opportunities haveencouraged consumer expenditure on leisure and personal goods in the country.There are specialized retailers for each category of products (books, musicproducts, etc.) in this sector. Another prominent feature of this sector is popularity of franchising agreements between established manufacturers and retailers.

RETAILING, INDIA'S LARGEST INDUSTRY AND ONE OF THE BIGGESTSOURCES OF EMPLOYMENT IN THE COUNTRY GENERATES MORE THAN 10PER CENT OF INDIA'S GDP. ORGANISED RETAILING HOWEVER. OCCUPIESA MINISCULE TWO TO THREE PERCENT OF THE OVERALL INDIANRETAILING INDUSTRY. WITH AROUND 13/ CONTRIBUTION TO THE GDP

AND 7% EMPLOYMENT OF THE NATIONAL WORKFORCE. RETAILING NODOUBT IS A STRONG PILLAR OF THE INDIAN ECONOMY. WHAT ITREOUIRES IS MORE CORPORATE BACKED RETAIL OPERATIONS THATHAVE STARTED TO EMERGE OVER THE PAST COUPLE OF YEARS.

Store design

Irrespective of the format, the biggest challenge for organized retailingis to create an environment that pulls in people and makes them spendmore time shopping and also increases the amount of impulse

shopping. Research across the world shows that the chances of senses dictating sales are as much as 10-15% for certain categories.

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This reason is good enough for organized retailers to bring inprofessional designers while developing a new property. And, that iswhy retail chains like MusicWorld, Barista, Pyramid and Globus andlaying major emphasis & investing heavily in store design.

MusicWorld spent three months in college campuses and metrosstudying the market and talking to youngsters before starting work. Thebrand identity was created after extensive research: a logo wasdesigned and the look of the stores across the country was decidedupon. Apart from the visual impact, the functionality of the store designwas also taken care of. Listening posts have been created for people tolisten to their favorite album and an area in the center of the stores hasbeen earmarked for celebrity visits and promotions.

Emergence of Discount Stores

What does Subhiksha In Chennai, Margin Free in Kerala and recententrants like Bombay Bazaar in Mumbai, RPG's - Giant in Hyderabad,Big Bazaar in Kolkata, Hyderabad and Bangalore have in common?Their products are below MRP.

Discount stores have finally arrived in India and they are expected tospearhead the revolution in organization retailing. Though this segmentis growing, it is small compared to international standards wherearound 60 per cent of the business comes from this format.Internationally, the largest retailer in the world Wal-Mart is adiscounter. These discount stores have advantages of price,assortment dominance and quality assurance and have the ability toquickly build scale and pass on the benefits. However, the successwould be for retailers who are able to build the scale fast and managetheir operations efficiently while offering value to the customer consistently.

Unorganized Retailing is getting Organized

To meet the challenges of organized retailing that is luring customersaway from the unorganized sector, the unorganized sector is gettingorganized. 25 stores in Delhi under the banner of Provision mart are

joining hands to combine monthly buying.Bombay Bazaar andEfoodmart have also been formed which are aggregations of Kiranas.

In a novel move, six Delhi based restaurants have come together andformed a consortium: NFC, to promote New Friends Colony, a poshlocality in the Capital, as a branded place in town. The aim is toincrease footballs in the area, which is fast losing its sheen to its

closest and upcoming destinations such as large Cineplexs, and malls,which are backed by the corporate house such as 'Ansals' and 'PVR'.

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The Indian retail sector is estimated to have a market size of about $180 billion; but the organized sector represents only 2% share of thismarket. Most of the organized retailing in the country has just startedrecently, and has been concentrated mainly in the metro cities. India isthe last large Asian economy to liberalize its retail sector. In Thailand,more than 40% of all consumer goods are sold through the super markets and departmental stores. A similar phenomenon has sweptthrough all other Asian countries. Organized retailing in India has ahuge scope because of the vast market and the growing consciousnessof the consumer about product quality and services.

A study conducted by Fitch, expects the organized retail industry tocontinue to grow rapidly, especially through increased levels of penetration in larger towns and metros and also as it begins to spreadto smaller cities and B class towns. Fuelling this growth is the growth indevelopment of the retail-specific properties and malls. According tothe estimates available with Fitch, close to 25mn sq. ft. of retail spaceis being developed and will be available for occupation over the next36-48 months. Fitch expects organized retail to capture 15%-20%market share by 2010.

McKinsey report on India says organized retailing would increase theefficiency and productivity of entire gamut of economic activities, and wouldhelp in achieving higher GDP growth. At 6%, the share of employment of retail in India is low, even when compared to Brazil (14%), and Poland (12%).

Present Indian Scenario - Retail Realities:

Unorganized market: Rs. 583,000 croresOrganized market: Rs.5,000 croresOver 4,000 new modern retail outlets in the last 3 years Over 5,000,000 sq.ft. of mall space under developmentThe top 3 modem retailers control over 750,000 sq. ft. of retail spaceOver 400,000 shoppers walk through their doors every weekGrowth in organized retail on par with expectations and projections of thelast 5 Years on course to touch Rs. 35,000 crores (US$ 7 Billion) or more by2005-06

Major players :

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FoodWorld

Shoppers' Stop

Subhiksha

Westside

Big Bazzar

Planet M

Nilgris

Vishal Mega Mart

Lifestyle

Music World

Adani-Rajiv's

Piramyd Crossword Nirma-Radhey

Globus

Lifespring Ebony

Pantatoon

A SNAPSHOT OF RETAIL OUTLETS IN INDIA

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Challenges of Retailing in India

Retailing as an industry in India has still a long way to go. To become a trulyflourishing 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 locallaws.Taxation, which favors small retail businesses.

Absence of developed supply chain and integrated IT management.

Lack of trained work force.Low skill level for retailing management.

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Intrinsic complexity of retailing rapid price changes, constant threatof product obsolescence and low margins.

The retailers in India have to learn both the art and science of retailing by closelyfollowing how retailers in other parts of the world are organizing, managing, andcoping up with new challenges in an ever-changing marketplace. Indian retailersmust use innovative retail formats to enhance shopping experience, and try tounderstand the regional variations in consumer attitudes to retailing. Retailmarketing efforts have to improve in the country - advertising, promotions, andcampaigns to attract customers; building loyalty by identifying regular shoppers andoffering benefits to them; efficiently managing high-value customers; and monitoringcustomer needs constantly, are some of the aspects which Indian retailers need tofocus upon on a more pro-active basis.Despite the presence of the basic ingredients required for growth of the retailindustry inIndia, it still faces substantial hurdles that will retard and inhibit its growth in thefuture. One of the key impediments is the lack of FDI status. This has largely limitedcapital investments in supply chain infrastructure, which is a key for developmentand growth of food retailing and has also constrained access to world-class retailpractices. Multiplicity and complexity of taxes, lack of proper infrastructure andrelatively high cost of real estate are the other impediments to the growth of retailing. While the industry and the government are trying to remove many of thesehurdles, some of the roadblocks will remain and will continue to affect the smoothgrowth of this industry. Fitch believes that while the market share of organized retailwill grow and become significant in the next decade, this growth would, however,not be at the same rapid pace as in other emerging markets. Organized retailing in

India is gaining wider acceptance. The development of the organized retail sector,during the last decade, has begun to change the face of retailing, especially, in themajor metros of the country. Experiences in the developed and developingcountries prove that performance of organized retail is strongly linked to theperformance of the economy as a whole. This is mainly on account of the reach andpenetration of this business and its scientific approach in dealing with customersand their needs. In spite of the positive prospects of this industry, Indian retailingfaces some major hurdles (see Table 1), which have stymied its growth. Early signsof organized retail were visible even in the 1970s when Nilgiris (food), Viveks(consumer durables) and Nallis (sarees) started their operations. However, as aresult of the roadblocks (mentioned in Table 1), the industry remained in a

rudimentary stage. While these retailers gave the necessary ambience tocustomers, little effort was made to introduce world-class customer care practicesand improve operating efficiencies. Moreover, most of these modern developmentswere restricted to south India, which is still regarded as a Mecca of Indian Retail.

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BARRIERS OF RETAIL INDUSTRY

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Presently, retailing in India is highly unorganized. There is no supply chainmanagement perspective and virtually no economies of scale. The major entrybarriers faced by modem retailers in tackling the Indian market are as listed below:

a) The unorganizedThe first and major challenge facing the organized retail industry in India iscompetition from the unorganized sector. Traditional retailing has been establishedin India for many centuries. The local kirana shop or the street grocer stillcommands the business. Estimates show that this unorganized sector accounts for nearly 95 to 99 percent of the total retail business in the country. This sector has alow cost structure; is mostly owner-operated; and little or no taxes to pay.Consumer familiarity that runs from generation to generation is a major advantagefor this traditional retailing sector.

In contrast, players in the organized sector have big expenses to meet, and yetneed to keep prices low enough to be able to compete with the traditional sector.High costs for the organized sector arise from higher real estate costs (as most of these retail stores are located on prime real estates in big cities), high labour costs,costs for providing comfort facilities such as air-conditioning, value added serviceslike home delivery, back-up power supply, high inventory costs, taxes etc.

b) Supply chain management

Product availability and efficient transportation systems have historically been

limited, which made merchandising difficult for large modem retailers.

c) Sourcing economics

The absence of large retail chains does not allow large purchases, and hence nosourcing economies are possible.

d) Automobile ownership

In India, automobile owners are limited to around 1 percent of the population. This

makes difficult, the development of out-of town shopping malls and superstores.This also limits the ability of customers to make large purchases; while largeshopping baskets from the very essence of shopping in retail superstores.Thus the retailers have to establish its store at the center of the town i.e. Mainmarkets which are very costly areas and thus add to high initial cost.

e ) Infrastructure

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Poor communications Infrastructure, as well as local government regulations likeoctroi, makes the development of an efficient logistics and inventory managementsystem difficult.This again makes the organized player at disadvantage as they have high cost,pays high taxes (unorganized players escapes from taxes) which add to high pricesof products whereas as in west, Big retailers maintains low cost of product due toefficient logistic & inventory management.

f) Middle class psyche (Big is Costly)

Another major bottleneck is the middle-class psychology that bigger and brighter sales outlets automatically translate to higher prices. While this is partially a myth;unlike the retail stores in the west, this is yet to be proven wrong in India. The localgrocer still continues to be cheaper than the large supermarkets.

g) Large-scale diversity

India is a large country with a wide diversity in language, culture, religion etc. Thepreferences of people evening neighboring town/cities may vary significantly. Thisdifference in life-styles and preferences also exist between neighborhoods withinthe same town. This diversity increases dependence on local suppliers for goods tomatch the preferences of the local customers, while hindering large-scalepurchases from consolidated sources. The above drawbacks, while discouragingsetting up of large retail chains, also presents a unique opportunity to internationaland/or professionally managed Indian corporations to pioneer a currently non-existent modem retailing industry in India, and subsequently benefit from it.

h) Timing

Another major pitfall for the retail Industry is Timings. According to shop Act, eachshop has to keep a day of as per Market Norms and also we are require to workstrictly under 9A.M to 8 P.M norm.

This restriction does not allow the retailer to draft the suitable time as per theconsumer as they would prefer to shop on Sundays and also late hours

FACTORS THAT WOULD LEAD TO GROWTH IN RETAIL SECTOR

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Increasing growth in disposable income.

Increasing demand of products by consumers,

Changing life styles.

Better product and shopping options available with consumers

Relaxation of a number of regulations by government.

Rethinking on existing Real estate laws (like governmental plans for ULCA).

Restructuring in Tax regime (like uniform sales tax for all states).

Increased investment and focus on infrastructure by Government.

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GUIDELINE FOR ESTABLISHING A NEW RETAIL BUSINESS

In a bid to provide a guideline to those who might be considering starting a new

retail business, we present a checklist to be followed by them:

A. Self-Assessment and Business Choice

Evaluate your strengths and weaknesses vis-a-vis your target segment. Answer the questions: Why should you be in business for yourself? Whyopen a new business rather than acquire an existing one or become amember of a franchise chain?Decide the differentiating factor for the business and the way in which youintend to capitalize on competitors' weaknesses.Consider the effect that owning this business will have on your life-style andyour family relationships.

B. Overall Retail Plan

State your philosophy of the business.Choose an ownership form (sole proprietorship, partnership or corporation).State long- and short-run goals,

Analyze customers from their point of view.Research your market size and store location.

Analyze your competition.Quantify your potential market share.Develop a specific retail strategy

C. Financial Plan

Decide the level of funds you will need to get started and to get through thefirst year and where they will come from.Determine the first year profit and return on investment.Project monthly cash flow and profit-and-loss statements for the first twoyearsFind out the amount of sales needed to breakeven in the time you stipulate.Decide upon the contingency plan if these sales are not reached in thespecified time period.

D. Organizational Details Plan (Administrative Management)

Describe your personnel plan (hats to wear), organizational plan andpolicies.Outline your inventory and accounting systems.

Note your insurance plans.

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Specify how day-to-day operations would be conducted for each aspect of yow strategy. Lay down clearly the do's and don'ts for each aspect.Review the risks you face and how you plan to cope with them.

FDI IN RETAILINGIn the current investment regime, no foreign investment is allowed in domestic retailtrading. This is based on the perception that opening up retail trading for FDIinvestment could impact local Venders and lead to job losses. However,manufacturing companies are allowed to carry out wholesale trading of high valueitems purely to institutional customers or wholesale distributors on a cash and carrybasis.

Indian retail trade is of enormous size ($180 billion), nearly 10 per cent of GDP,employing 21 million persons, which is about 7 per cent of the labour force. It is sixtimes bigger than Thailand and five times larger than South Korea and Taiwan.China's retail trade is 8 per cent of GDP and 6 per cent of employment. But thetrade 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 per cent 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 resistingFDI, had the government declared it an industry, it would done the trade a world of goodModern retailing is designed not only to provide consumers with a wide variety of products under one roof, but also of assured home delivery and informationfeedback between consumers and producers. A modem retail outlet will also makeit easy to buy on credit and provide for servicing and repair of products sold. With ITapplication, the modem retail store can cut transaction costs such as due toinventory, delivery and handling. That is precisely how the US based Wal-Mart grewto be a giant because it reduced its distribution costs to 3 per cent of salescompared to 4.5 per cent of others.

Wal-Mart had entered the Chinese market a few years ago (in 1996). Now it wants

to enter India and bring FDI to set itself up to network. India is today the only major economy that still does not permit FDI in retail trade. In China, 35 of the world's top70 retailers have already entered and set up business. They have helped inboosting their exports. Wal-Mart alone exported in 2002 about $12 billion worth of goods. These retailers source their goods from inside China.

India is targeting for its GDP to grow by 8 to 10 per cent per year. This requiresraising the rate of investment as well as generating demand for the increasedgoods and services produced. Exports are one way of generating that demand.Encouraging private consumption expenditure is another way. Both these can befacilitated by allowing market-savvy, market-intelligent and best management

practices, through corporations such as Wal-Mart, Carrefour, Ahold, JC Penny toenter India.

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These retail giant houses can bring their better managerial practices and IT-friendlytechniques to cut wastage and set up integrated supply chains to gradually replacethe presented disorganized and fragmented retail market. As India's urbanization grows,these modem food delivery systems are required. Foreign companies want to comein, and we need their money and techniques to prepare our transition to theinevitable globalised market of the future.

The status of organized retailing in some South East Asian countries that allowedFDI in retailing has been given in below:-

CountryTraditional Retailing

Organized Retailing Traditional Retailing

Malaysia50%

50%50%50%

50% 50%

Thailand 50% 50%Philippines 35% 65%Indonesia 25% 75%

South Korea 15% 85%China 10% 90%India 2% 98%

In view of the demands made by industry and the need to boost the retail trade, theGovernment is actively considering removing the restrictions. A recent notecirculated by the Ministry of Commerce has proposed permission for FDI up to 100per cent in retail trade subject to Government approval on a case-to-case basis.

However, this permission, if it is given, will be with lots of strings attached. Besidesfollowing rules on minimum capitalization, the foreign entrants will be expected toneutralize the outflow of foreign exchange (repatriation of dividends) by way of export earnings on a year-to-year basis.

FDI in retail sector has been a key driver of productivity growth in Brazil, Polandand Thailand. This has resulted in lower prices to the consumer, more consumptionand higher profit for the producer. FDI in retail trade has forced the wholesalers andfood processors to improve, raised exports, and triggered growth by outsourcingsupplies domestically. The availability of standardized products has also boostedtourism in these countries.

The biggest opposition to allowing l00% FDI is the feared exit of the small retailers.Currently, moves are on to counter these apprehensions and the players are keenlyawaiting the final decision from the Government.

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Pantaloon Retail (India) Ltd. The Company's principal activity is to operate chainretails stores in names of Big Bazaar, Food Bazaar, Central and Pantaloons. TheBig Bazaar is the discount store which offers a wide range of products under oneroof. The products include apparels and non-apparels such as utensils, sportsgoods and footwear. The Company also has its presence into gold retailing bylaunching Gold Bazaar. The Company's Food Bazaar provides a range of food andgrocery products ranging from fresh fruits and vegetables, staples, FMCG products

and ready-to-cook products. The Central offers a chain of stores including booksand music stores, global brands in fashion, sports and lifestyle accessories grocerystore and restaurants. The Pantaloon retail stores focus largely apparels andaccessories.

Pantaloon: Fashion by Pantaloon

Pantaloon is the company's departmental store and part of life style retail format. Infact, PRIL took its very initial steps in the retail journey by setting up the firstPantaloon store in Kolkata in 1997. ln a short time Pantaloon has been able tocarve a special place for it self in the hearts and minds of the aspirational Indiancustomers. The company has depth of offering for both men and women ataffordable prices. A striking characteristic of Pantaloon has been the strength of itsprivate label programme. John Miller, Ajile. Scottsvile, Lombard Annabelle is someof the successful brands created by the company. With13 stores across the countryand an ever-increasing stable of private brands, Pantaloon - in the coming years ispoised to become a leading fashion trendsetter .

Food Bazaar- Wholesale prices

Food Bazaar's core concept is to create a blend of a typical Indian Bazaar andInternational supermarket atmosphere with the objective of giving the customer allthe advantages of Quality, Range and Price associated with large format stores andalso the comfort to See Touch and Feel the products. The company has recentlylaunched an aggressive private label programme with its own brands of tea, salt,spices, pulses, jams, ketchups etc. With unbeatable prices and vast variety (thereare 42 varieties of rice on sale), Food Bazaar has proved to be a hit with customersall over the country.

Big Bazaar: Is se sasta aur acha kahin nahin

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Big bazaar is the company's foray into the world of hypermarket discount stores, thefirst of its kind in India. Price and the wide array of products are the USP's in BigBazaar. Close to two lakh products are available under one roof at prices lower by 2to 60 per cent over the corresponding market prices. The high quality of service,good ambience, implicit guarantees and continuous discount programmes havehelped in changing the face of the Indian retailing industry. A leading foreignbroking house compared the rush at Big Bazaar to that of a local suburban train.

1, 70,000 products at 5- 5O % discount.

At Big Bazaar, you will get: A wide range of products at 6 - 60 % lower than thecorresponding market price, coupled with an international shopping experience.

Apparel and Accessories for Men, Women and Children.Baby Accessories.

CosmeticsCrockeryDress Materials Suiting & ShirtingElectrical AccessoriesElectronicsFootwear Home TextilesHome NeedsHousehold AppliancesHousehold Plastics

HardwareHome Dcor LuggageLinensSareesStationeryToysUtensils & Utilities

Big Bazaar is both big and a bazaar. It is unlike, say, a Wal-Mart or even a Food

world. Big Bazaar is almost an aircon8itioned version of any Indian bazaar. It is aslightly orderly and organized version of, say Chickpet for Bangalore guys or Dadar for Mumbaiites. There is a huge crowd which can move in almost any direction. Youcan buy anything (pretty much everything is available at Big Bazaar). It is not aplace where you can browse through at leisure and pick up a few things here andthere. This is a place if you are serious about your shopping.

Life at Big Bazaar is pretty self-sufficient. If you were trapped in there for a week,you could live a good life. But to appreciate the nuances of home economics, oneshould try comparing prices. The clothes especially deserve an independent featureof their own.

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Particularly designed for the regular middle-class family that requires clothing thatlasts and doesnt burn holes into the pockets of existing clothing, this store offersgood bargains. What you won't get here is designs your friends will drool over.Checks and stripes are like the far end of the creative exercise here, and the bestbet for the fashion conscious would be the plain colors on display.

Choice is one factor that suffers here, as there is immense quantity but hardly anyvariety. If you want to clothe an entire troupe of extras in executive stuff for a dancenumber, this is the place! You get hordes of stuff, but it's all the same. If you arelooking for anything in particular, then this is really not such a hot place.The accessories are good, though predictable. Brands make an appearance hereas watches of Casio and Titan are displayed, and the prices range from 300 tosome really heart-in-mouth figures

The rest of the stuff is not really very interesting as the prices are just a shadebelow the MRP. Groceries, home appliances, plastic goods, luggage, stationery,cosmetics... you name it, this place has it. Again, choice may suffer and you maynot get that particular deo of yours which has the opposite sex going randy.

There are small sub-departments for footwear, music cassettes and evenconsumables. There is an in-house cafeteria that offers pretty good chow atreasonable rates. And now that the bazaar is spread over only two floors asopposed to the earlier four floors, I guess the intimidation factor stands reduced too.Big Bazaar has an exchange offer where you can get rid any old item and getyourself a new one. The offer is applicable to products like utensils, plastics,footwear, luggage accessories, garments, toys, Watches, glass, electronics items,

and so on. Customers can get their old household items valued. Big Bazaar says itoffers better value because old, broken utensils and plastics can be exchanged for as much as Rs. 40 a kilo.What is more, consumers need not exchange their old items for similar items. Theycan bring in an old piece of luggage and walk off with a salwar kameez instead.Similarly, old shoes and can exchanged for an electric rice cooker.

Food Bazaar had announced a special shopping offer which attracted around20,000 shoppers. On a normal day, Center One's. Food Bazaar has 10 securityguards. However, on July 26 the management had to call in around 30 guards onspecial duty.

In the last week of February 2006, Big Bazaar, through a television commercial,announced an exchange offer in which customer can bring junk and get discount oncertain items.

January, the bazaar had offered massive discount on a particular day called SabseSasta Din. "About 2 million people showed up that day, which is almost four times than those visited the shop on Sunday before Diwali.

Meanwhile, sales at Big Bazaar have been growing steadily. In January 2005 thesales were of Rs 56.21 crore but in January 2006, it rose to Rs 129.61 crore.

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SWOT Analysis Of Big Baazar

Strengths

Prime location, presence in malls etc.Large floor space allowing for better visual merchandisingLarge area also allows to stock a large variety of products under one roof Financial backing from Pantaloon Group.Experienced and competent managementGood goodwill in the market.Bulk purchases leads to "economies of scale"Pan India Presence.Various schemes launched from time to time.Goods available at the cheapest rates.

Weaknesses

Large scale of operations sometimes acts as a barrier to personalizedcustomer relations

Large scale operations lead to reduced flexibility by increasing theamount of overheads and a huge commitment in terms of fixed costs

Sometimes its discount & exchange schemes lead to hamper its brandimage.

Employees are unable to cater to the large customers especially onexchange schemes days like on 26th of January etc.

Opportunity

In India Retailing is still a new concept. Hence there is still much of untappedmarket left out.

According to the Consumer Outlook study, consumers are generally satisfiedwith the service that organized retailers extend to them. More importantly,they are increasingly regarding these organized retailers as providing 'value-for-money', These findings indicate that large retailers will capture most of

the higher consumer spending.

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Threat

Many new retailers are coming up. Retailers like Subhiksha areadopting the same pattern of Big Baazar. Therefore Big Baazar will have a stiff competition from its competitors like Subhiksha,Vishal Mega Mart etc.

What started as a humble one store enterprise in 1986 in Kolkata(erstwhile,Calcutta) is today a conglomerate encompassing 46 showrooms in 34 cities.Indias first hyper-market has also been opened for the Indian consumer byVishal. Situated in the national capital Delhi this store boasts of the singelargest collection of goods and commodities sold under one roof in India.

The Group has a turnover of Rs 150 crore for 2004-05. Under the dynamicleadership of Mr. Ram Chandra Agarwal the group is expecting to touch theturnover of Rs 300 crore by the end of March 2006 and Rs 650 crore for theperiod2006-07.

The groups prime focus is on retailing. The Vishal stores offer affordable familyfashion at prices to suit every pocket.

The groups philosophy is integration and towards this end has initiatedbackward integration in the field of high fashion by setting up a state of the artmanufacturing facility to support its retail endeavors.

Vishal is one of fastest growing retailing groups in India. Its outlets cater toalmost all price ranges. The showrooms have over 70,00 products range whichfulfills all your household needs, and can be catered to under one roof. It iscovering more than 11 Lacs of sq. ft. in retail space and more than 5 Lacs sq.ft.

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under construction. Each store gives you international quality goods and priceshard to match. The cost benefits that is derived from the large central purchaseof goods and services is passed on to the consumer.

The Founders

Mr. Ramchandra Aggarwal Mrs. Uma Aggarwal Mr. Surendra Aggarwal

Vishal Retail Ltd. has a factory in Gurgaon, Haryana. This factoryhas more

than 700 imported machines that have a capacity to manufacturer 150000pieces a month. The factory occupies 80000 sq ft of covered space. TheVishal group indirectly gives employment to more than a 1000 people. Thesepeople work in ancillaries that supply finished goods to the company.

Our 10 warehouses cater to 46 showrooms in 34 cities. These have acovered space of 11,00,000 sq ft. By the end of March 2007 we will expandour outlets to 61 companies owned outlets and many franchise operations.

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Products Available At Vishal Mega Mart

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http://www.vishalmegamart.net/men.htmhttp://www.vishalmegamart.net/ladiesaccessindex.htmhttp://www.vishalmegamart.net/infants.htmhttp://www.vishalmegamart.net/women.htmhttp://www.vishalmegamart.net/kidsboys.htmhttp://www.vishalmegamart.net/lifestyle.htmhttp://www.vishalmegamart.net/household.htmhttp://www.vishalmegamart.net/stationary.htmhttp://www.vishalmegamart.net/toysgames.htm


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Vishal Mega Mart inks pact with SBI for co-branded card

SBI Card announced the launch of its co-branded card in association with retailchain Vishal Mega Mart to tap the booming organized retail market.

``SBI Vishal Mega Mart Card is one of the best co-branded credit card that offersreward points and other benefits to frequent shoppers and would be free for thosewho spend above Rs 7,500 per annum,'' SBI Card CEO, Mr Roopam Asthana, said.

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``By partnering with the SBI Card, we are not just offering customers a convenientpayment mechanism but a unique consumer loyalty programme that rewards themevery time they shop,'' Vishal Retail Managing Director, Mr Ram Chandra Agarwal,said.

Some of the features of the co-branded card include Rs 250 discount voucher on signing up for the card and a process by which the cardholder earns fivereward points on every Rs 100 spent .

The retail chain has been planning to expand its number of stores. "We intend toopen around 40 stores by the next year," Mr Agarwal said. The company is alsoplanning an initial public offer to raise Rs 125 to Rs 150 crore. Mr Agarwal said,"The company has appointed merchant banker Enam Financial Services to advise iton the proposed issue that is due in four to six months."

The retail store has posted a turnover of Rs 150 crore in 2004-05 andexpects the figure to cross Rs 300 crore in 2005-06.

SWOT Analysis of Vishal Mega Mart

Strengths

Prime locationLarge floor space allowing for better visual merchandisingLarge area also allows to stock a large variety of products under one roof Financial backing

Highly trained and motivated sales force.Brand equity

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Large scale operations in various cities throughout the country allows themto reap the benefits of "economies of scale"

Weaknesses

Large scale of operations sometimes acts as a barrier to personalizedcustomer relations

Large scale operations lead to reduced flexibility by increasing theamount of overheads and a huge commitment in terms of fixed costs

A large organization structure leads to delayed decisions. This can provefatal for a business in the dynamic fashion industry. Vishal Mega Marthas a centralized purchasing department in Delhi, this fact sometimesresults in delayed decisions in adapting to changing market tends

Opportunity

Apart from the metro cities, cities like Ahmedabad, Pune, Lucknow, Indoreand Coimbatore have shown substantial retail presence. These markets areexpected to show exponential growth in the next few years. Thus ShoppersStop has the opportunity to explore new markets

According to the Consumer Outlook study, consumers are generally satisfiedwith the service that organized retailers extend to them. More importantly,they are increasingly regarding these organized retailers as providing 'value-for-mo

Project Report on Vishal and Bigbazar

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