Shubhangi

Retail is the sale of goods and services from individuals or businesses to the end-user. Retailers are a part of an integrated system called the supply chain. A retailer purchases goods or products

in large quantities from manufacturers directly or through a wholesale, and then sells smaller quantities to the consumer for a profit. Retailing can be done in either fixed locations like stores

or markets, door-to-door or by delivery. In the 2000s, an increasing amount of retailing is done online using electronic payment and delivery via a courier or postal mail. Retailing includes subordinated services, such as delivery. The term "retailer" is also applied where a service

provider services the needs of a large number of individuals, such as for the public. Shops may be on residential streets, streets with few or no houses, or in a shopping mall. Shopping streets

may be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect customers from precipitation. Online retailing, a type of electronic commerce used for business-to-consumer (B2C) transactions and mail order, are forms of non-shop retailing.

Shopping generally refers to the act of buying products. Sometimes this is done to obtain

necessities such as food and clothing; sometimes it is done as a recreational activity. Recreational shopping often involves window shopping (just looking, not buying) and browsing

and does not always result in a purchase.

Retail comes from the Old French word tailler, which means "to cut off, clip, pare, divide" in terms of tailoring (1365). It was first recorded as a noun with the meaning of a "sale in small

quantities" in 1433 (from the Middle French retail, "piece cut off, shred, scrap, paring").[1] Like in French, the word retail in both Dutch and German also refers to the sale of small quantities of items.

Types of retail outlets

Fruit shop in Naggar, Himachal Pradesh, India

San Juan de Dios Market in Guadalajara, Jalisco Inside a supermarket in Russia

Walnut Market in Katra, Jammu & Kashmir, India

A marketplace is a location where goods and services are exchanged. The traditional market square is a city square where traders set up stalls and buyers browse the stores. This kind of

market is very old, and countless such markets are still in operation around the whole world.

In some parts of the world, the retail business is still dominated by small family-run stores, but this market is increasingly being taken over by large retail chains. Most of these stores are called

high street stores. Gradually high street stores are being re-grouped at single locations called malls. These are more defined and planned spaces for retail stores and brands.

Types by products

Retail is usually classified by type of products as follows:

Food products — typically require cold storage facilities. Hard goods or durable goods ("hardline retailers")[2] — automobiles, appliances,

electronics, furniture, sporting goods, lumber, etc., and parts for them. Goods that do not

quickly wear out and provide utility over time. Soft goods or consumables[3][4] — clothing, other fabrics, footwear, cosmetics, medicines

and stationery. Goods that are consumed after one use or have a limited period (typically under three years) in which you may use them.

Arts — Contemporary art galleries, Bookstores, Handicrafts, Musical instruments, Gift

shops, and supplies for them.

Types by marketing strategy

There are the following types of retailers by marketing strategy:

Department store

Department stores are very large stores offering a huge assortment of "soft" and "hard goods; often bear a resemblance to a collection of specialty stores. A retailer of such store carries variety of categories and has broad assortment at average price. They offer considerable customer

service.

Discount store

Discount stores tend to offer a wide array of products and services, but they compete mainly on price offers extensive assortment of merchandise at affordable and cut-rate prices. Normally,

retailers sell less fashion-oriented brands.

Warehouse store

Warehouses that offer low-cost, often high-quantity goods piled on pallets or steel shelves; warehouse clubs charge a membership fee.

Variety store

Variety stores offer extremely low-cost goods, with limited selection.

Demographic

Retailers that aim at one particular segment (e.g., high-end retailers focusing on wealthy individuals).

Mom-And-Pop

A small retail outlet owned and operated by an individual or family. Focuses on a relatively

limited and selective set of products.

Specialty store

A specialty (BE: speciality) store has a narrow marketing focus - either specializing on specific merchandise, such as toys, shoes, or clothing, or on a target audience, such as children, tourists, or oversize women.[5] Size of store varies - some specialty stores might be retail giants such as

Toys "R" Us, Foot Locker, and The Body Shop, while others might be small, individual shops such as Nutters of Savile Row.[5] Such stores, regardless of size, tend to have a greater depth of

the specialist stock than general stores, and generally offer specialist product knowledge valued by the consumer. Pricing is usually not the priority when consumers are deciding upon a specialty store; factors such as branding image, selection choice, and purchasing assistance are

seen as important.[5] They differ from department stores and supermarkets which carry a wide range of merchandise.[6]

Boutique

Boutique or concept stores are similar to specialty stores. Concept stores are very small in size, and only ever stock one brand. They are run by the brand that controls them. An example of brand that distributes largely through their own widely distributed concept stores is

L'OCCITANE en Provence. The limited size and offering of L'OCCITANE's stores are too small to be considered a specialty store proper.

General store

A general store is a rural store that supplies the main needs for the local community;

Convenience store

A convenience store provides limited amount of merchandise at more than average prices with a

speedy checkout. This store is ideal for emergency and immediate purchases as it often works with extended hours, stocking everyday;

Hypermarkets

Provides variety and huge volumes of exclusive merchandise at low margins. The operating cost is comparatively less than other retail formats.

Supermarket

A supermarket is a self-service store consisting mainly of grocery and limited products on non food items. They may adopt a Hi-Lo or an EDLP strategy for pricing. The supermarkets can be anywhere between 20,000 and 40,000 square feet (3,700 m2). Example: SPAR supermarket.

Mall

A shopping mall has a range of retail shops at a single outlet. They can include products, food and entertainment under one roof. Malls provide 7% of retail revenue in India, 10% in Vietnam, 25% in China, 28% in Indonesia, 39% in the Philippines, and 45% in Thailand.[7]

"Category killer" or specialist

By supplying wide assortment in a single category for lower prices a category killer retailer can "kill" that category for other retailers. For few categories, such as electronics, the products are displayed at the centre of the store and sales person will be available to address customer queries

and give suggestions when required. Other retail format stores are forced to reduce the prices if a category specialist retail store is present in the vicinity.

E-tailer

The customer can shop and order through the internet and the merchandise is dropped at the

customer's doorstep or an e-tailer. Here the retailers use drop shipping technique. They accept the payment for the product but the customer receives the product directly from the manufacturer or a wholesaler. This format is ideal for customers who do not want to travel to retail stores and are

interested in home shopping. However, it is important for the customer to be wary about defective products and non secure credit card transaction. Examples include Amazon.com,

Pennyful, and eBay.

Vending machine

A vending machine is an automated piece of equipment wherein customers can drop the money in the machine and acquire the products. Some stores take a no frills approach, while others are

"mid-range" or "high end", depending on what income level they target.

Other types

Other types of retail store include:

Automated Retail stores — self-service, robotic kiosks located in airports, malls and

grocery stores. The stores accept credit cards and are usually open 24/7. Examples include ZoomShops and Redbox.

Big-box stores — encompass larger department, discount, general merchandise, and

warehouse stores.

Retailers can opt for a format as each provides different retail mix to its customers based on their customer demographics, lifestyle and purchase behaviour. A good format will lend a hand to

display products well and entice the target customers to spawn sales.

Global top ten retailers

Worldwide Top Ten Retailers [8][9]

Rank Company Country of

Origin

2013 revenue

($US billion)

1 Walmart

United

States $464,162

2 Tesco

United Kingdom

$120,052

3 Costco

United States

$105,156

4 Carrefour France $103,555

5 Kroger

United

States $96,751

6 Lidl Germany $87,236

7 Metro AG Germany $85,832

8 The Home Depot

United States

$74,754

9 Aldi Germany $73,035

10 Target Corporation

United States

$71,960

Operations

Retail pricing

The pricing technique used by most retailers is cost-plus pricing. This involves adding a markup

amount (or percentage) to the retailer's cost. Another common technique is suggested retail pricing. This simply involves charging the amount suggested by the manufacturer and usually

printed on the product by the manufacturer.

In Western countries, retail prices are often called psychological prices or odd prices. Often prices are fixed and displayed on signs or labels. Alternatively, when prices are not clearly displayed, there can be price discrimination, where the sale price is dependent upon who the

customer is. For example, a customer may have to pay more if the seller determines that he or she is willing and/or able to. Another example would be the practice of discounting for youths,

students, or senior citizens.

Competition

Retail stores may or may not have competitors close enough to affect their pricing, product availability, and other operations. A 2006 survey found that only 38% of retail stores in India

believed they faced more than slight competition.[10] Competition also affected less than half of retail stores in Kazakhstan, Bulgaria, and Azerbaijan. In all countries the main competition was

domestic, not foreign.[11]

Country % of Retail Stores Facing Competition [11]

India 38%

Kazakhstan 44%

Bulgaria 46%

Azerbaijan 48%

Uzbekistan 58%

Armenia 58%

Georgia 59%

Kyrgyzstan 59%

Russia 62%

Belarus 64%

Croatia 68%

Romania 68%

Ukraine 72%

Turkey 73%

Serbia 74%

Tajikistan 74%

Slovenia 77%

Country % of Retail Stores Facing Competition [11]

Latvia 78%

Bosnia and Herzegovina 79%

Moldova 79%

Czech Republic 80%

Slovakia 80%

Poland 83%

Hungary 87%

Estonia 88%

Lithuania 88%

Macedonia 88%

Albania 89%

Retail trade provides 9% of all jobs in India and 14% of GDP.[10]

Staffing

Because patronage at a retail outlet varies, flexibility in scheduling is desirable. Employee scheduling software is sold, which, using known patterns of customer patronage, more or less

reliably predicts the need for staffing for various functions at times of the year, day of the month or week, and time of day. Usually needs vary widely. Conforming staff utilization to staffing needs requires a flexible workforce which is available when needed but does not have to be paid

when they are not, part-time workers; as of 2012 70% of retail workers in the United States were part-time. This may result in financial problems for the workers, who while they are required to

be available at all times if their work hours are to be maximized, may not have sufficient income to meet their family and other obligations.[12]

Transfer mechanisms

There are several ways in which consumers can receive goods from a retailer:

Counter service, where goods are out of reach of buyers and must be obtained from the seller. This type of retail is common for small expensive items (e.g. jewelry) and controlled items like medicine and liquor. It was common before the 1900s in the United

States and is more common in certain countries like India.[which?] Delivery, where goods are shipped directly to consumer's homes or workplaces. Mail

order from a printed catalog was invented in 1744 and was common in the late 19th and early 20th centuries. Ordering by telephone was common in the 20th century, either from a catalog, newspaper, television advertisement or a local restaurant menu, for immediate

service (especially for pizza delivery), remaining in common use for food orders. Internet shopping - a form of delivery - has eclipsed phone-ordering, and, in several sectors - such

as books and music - all other forms of buying. Direct marketing, including telemarketing

and television shopping channels, are also used to generate telephone orders. started gaining significant market share in developed countries in the 2000s.

Door-to-door sales, where the salesperson sometimes travels with the goods for sale. Self-service, where goods may be handled and examined prior to purchase.

Digital delivery or Download, where intangible goods, such as music, film, and electronic books and subscriptions to magazines, are delivered directly to the consumer in the form of information transmitted either over wires or air-waves, and is reconstituted by a device

which the consumer controls (such as an MP3 player; see digital rights management). The digital sale of models for 3D printing also fits here, as do the media leasing types of

services, such as streaming.

Second-hand retail

See also: Charity shop

Some shops sell second-hand goods. In the case of a nonprofit shop, the public donates goods to the shop to be sold. In give-away shops goods can be taken for free.

Another form is the pawnshop, in which goods are sold that were used as collateral for loans.

There are also "consignment" shops, which are where a person can place an item in a store and if it sells, the person gives the shop owner a percentage of the sale price. The advantage of selling

an item this way is that the established shop gives the item exposure to more potential buyers.E-tailers like OLX,Quikr etc. also working on second hand goods sales.

Challenges

To achieve and maintain a foothold in an existing market, a prospective retail establishment must

overcome the following hurdles:

Regulatory barriers including o Restrictions on real estate purchases, especially as imposed by local governments

and against "big-box" chain retailers; o Restrictions on foreign investment in retailers, in terms of both absolute amount

of financing provided and percentage share of voting stock (e.g., common stock)

purchased; Unfavorable taxation structures, especially those designed to penalize or keep out "big

box" retailers (see "Regulatory" above); Absence of developed supply chain and integrated IT management; High competitiveness among existing market participants and resulting low profit

margins, caused in part by o Constant advances in product design resulting in constant threat of product

obsolescence and price declines for existing inventory; and Lack of properly educated and/or trained work force, often including management,

caused in part by

o Lack of educational infrastructure enabling prospective market entrants to respond to the above challenges.

Sales techniques

Behind the scenes at retail, there is another factor at work. Corporations and independent store owners alike are always trying to get the edge on their competitors. One way to do this is to hire

a merchandising solutions company to design custom store displays that will attract more customers in a certain demographic. The nation's largest retailers spend millions every year on in-store marketing programs that correspond to seasonal and promotional changes. As products

change, so will a retail landscape. Retailers can also use facing techniques to create the look of a perfectly stocked store, even when it is not.

A destination store is one that customers will initiate a trip specifically to visit, sometimes over a

large area. These stores are often used to "anchor" a shopping mall or plaza, generating foot traffic, which is capitalized upon by smaller retailers.

Customer service

Customer service is the "sum of acts and elements that allow consumers to receive what they

need or desire from your retail establishment." It is important for a sales associate to greet the customer and make himself available to help the customer find whatever he needs. When a

customer enters the store, it is important that the sales associate does everything in his power to make the customer feel welcomed, important, and make sure he leaves the store satisfied. Giving the customer full, undivided attention and helping him find what he is looking for will contribute

to the customer's satisfaction.[13] For retail store owners, it is extremely important to train yourself and your staff to provide excellent customer service skills. By providing excellent customer service, you build a good relationship with the customer and eventually will attract

more new customers and turn them into regular customers. Looking at long term perspectives, excellent customer skills give your retail business a good ongoing reputation and competitive

advantage.[1

THE INDIAN RETAIL SCENE

India is the country having the most unorganized retail market. Traditionally it is a family�s livelihood, with their shop in the front and house at the back, while they run the retail business. More than 99% retailer�s function in less than 500 square feet of shopping

space. Global retail consultants KSA Technopak have estimated that organized retailing in India is expected to touch Rs 35,000 crore in the year 2005-06. The Indian retail sector is

estimated at around Rs 900,000 crore, of which the organized sector accounts for a mere 2 per cent indicating a huge potential market opportunity that is lying in the waiting for the consumer-savvy organized retailer.

Purchasing power of Indian urban consumer is growing and branded merchandise in

categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and even Jewellery,

are slowly becoming lifestyle products that are widely accepted by the urban Indian consumer. Indian retailers need to advantage of this growth and aiming to grow, diversify and

introduce new formats have to pay more attention to the brand building process. The emphasis here is on retail as a brand rather than retailers selling brands. The focus should be

on branding the retail business itself. In their preparation to face fierce competitive pressure, Indian retailers must come to recognize the value of building their own stores as brands to reinforce their marketing positioning, to communicate quality as well as value for money.

Sustainable competitive advantage will be dependent on translating core values combining products, image and reputation into a coherent retail brand strategy.

There is no doubt that the Indian retail scene is booming. A number of large corporate houses � Tata�s, Raheja�s, Piramals�s, Goenka�s � have already made their foray into

this arena, with beauty and health stores, supermarkets, self-service music stores, newage book stores, every-day-low-price stores, computers and peripherals stores, office equipment

stores and home/building construction stores. Today the organized players have attacked every retail category. The Indian retail scene has witnessed too many players in too short a time, crowding several categories without looking at their core competencies, or having a well

thought out branding strategy.

STRATEGIES, TRENDS AND OPPORTUNITIES 2007 Retailing in India is gradually inching its way toward becoming the next boom industry. The

whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retail has entered India as seen in

sprawling shopping centres, multi-storied malls and huge complexes offer shopping, entertainment and food all under one roof. The Indian retailing sector is at an inflexion point where the growth of organized retailing and growth in the consumption by the Indian

population is going to take a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. A large young working population with median age of

24 years, nuclear families in urban areas, along with increasing workingwomen population and emerging opportunities in the services sector are going to be the key growth drivers of the organized retail sector in India.

GROWTH OF RETAIL SECTOR IN INDIA

Retail and real estate are the two booming sectors of India in the present times. And if industry experts are to be believed, the prospects of both the sectors are mutually dependent

on each other. Retail, one of India�s largest industries, has presently emerged as one of the most dynamic and fast paced industries of our times with several players entering the market.

Accounting for over 10 per cent of the country�s GDP and around eight per cent of the employment retailing in India is gradually inching its way toward becoming the next boom industry.

As the contemporary retail sector in India is reflected in sprawling shopping centers,

multiplex- malls and huge complexes offer shopping, entertainment and food all under one roof, the concept of shopping has altered in terms of format and consumer buying behavior,

ushering in a revolution in shopping in India. This has also contributed to large-scale investments in the real estate sector with major national and global players investing in

developing the infrastructure and construction of the retailing business. The trends that are driving the growth of the retail sector in India are

Low share of organized retailing Falling real estate prices Increase in disposable income and customer aspiration Increase in expenditure for luxury items (CHART)

Another credible factor in the prospects of the retail sector in India is the increase in the

young working population. In India, hefty pay packets, nuclear families in urban areas, along with increasing working-women population and emerging opportunities in the services sector. These key factors have been the growth drivers of the organized retail sector in India which

now boast of retailing almost all the preferences of life - Apparel & Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home & Office Products, Travel and Leisure and many

more. With this the retail sector in India is witnessing rejuvenation as traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores.

The retailing configuration in India is fast developing as shopping malls are increasingly

becoming familiar in large cities. When it comes to development of retail space specially the malls, the Tier II cities are no longer behind in the race. If development plans till 2007 is

studied it shows the projection of 220 shopping malls, with 139 malls in metros and the remaining 81 in the Tier II cities. The government of states like Delhi and National Capital Region (NCR) are very upbeat about permitting the use of land for commercial development

thus increasing the availability of land for retail space; thus making NCR render to 50% of the malls in India.

India is being seen as a potential goldmine for retail investors from over the world and latest research has rated India as the top destination for retailers for an attractive emerging retail market. India�s vast middle class and its almost untapped retail industry are key attractions

for global retail giants wanting to enter newer markets. Even though India has well over 5 million retail outlets, the country sorely lacks anything that can resemble a retailing industry

in the modern sense of the term. This presents international retailing specialists with a great opportunity. The organized retail sector is expected to grow stronger than GDP growth in the next five years driven by changing lifestyles, burgeoning income and favorable demographic

outline.

INDUSTRY EVOLUTION

Traditionally retailing in India can be traced to The emergence of the neighborhood �Kirana� stores catering to the convenience of

the consumers Era of government support for rural retail: Indigenous franchise model of store chains run

by Khadi & Village Industries Commission

1980s experienced slow change as India began to open up economy. Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim

first saw the emergence of retail chains Later Titan successfully created an organized retailing concept and established a series of

showrooms for its premium watches

The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers.

For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music

World in music; Crossword and Fountainhead in books. Post 1995 onwards saw an emergence of shopping centers

Mainly in urban areas, with facilities like car parking Targeted to provide a complete destination experience for all segments of society Emergence of hyper and super markets trying to provide customer with 3 V�s - Value,

Variety and Volume Expanding target consumer segment: The Sachet revolution - example of reaching to the

bottom of the pyramid. At year end of 2000 the size of the Indian organized retail industry is estimated at Rs.

13,000 crore

RETAILING FORMAT IN INDIA

Malls: The largest form of organized retailing today. Located mainly in metro cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sq ft and above. They

lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof. Examples include Shoppers Stop, Piramyd, and

Pantaloon. Specialty Stores:

Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on

specific market segments and have established themselves strongly in their sectors. Discount Stores:

As the name suggests, discount stores or factory outlets, offer discounts on the MRP

through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non-perishable goods.

Department Stores: Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. Further

classified into localized departments such as clothing, toys, home, groceries, etc.

Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, which started in

Mumbai and now has more than seven large stores (over 30,000 sq. ft) across India and even has its own in store brand for clothes called Stop.

Hyper marts/Supermarkets:

Large self-service outlets, catering to varied shopper needs are termed as Supermarkets. These are located in or near residential high streets. These stores today contribute to 30% of

all food & grocery organized retail sales. Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales.

Convenience Stores:

These are relatively small stores 400-2,000 sq. feet located near residential areas. They stock a limited range of high-turnover convenience products and are usually open for extended

periods during the day, seven days a week. Prices are slightly higher due to the convenience premium

MBO�s:

Multi Brand outlets, also known as Category Killers, offer several brands across a single product category. These usually do well in busy market places and Metros.

INDIA�S NUMBER OF DOMESTIC GROCERY CHAINS AND EARLY FOREIGN

ENTRANTS

RECENT TRENDS

Retailing in India is witnessing a huge revamping exercise as can be seen in the graph

India is rated the fifth most attractive emerging retail market: a potential goldmine. Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes

up 3 percent or US$ 6.4 billion As per a report by KPMG the annual growth of department stores is estimated at 24% Ranked second in a Global Retail Development Index of 30 developing countries drawn

up by AT Kearney. Multiple drivers leading to a consumption boom:

o Favorable demographics o Growth in income o Increasing population of women

o Raising aspirations: Value added goods sales Food and apparel retailing key drivers of growth

Organized retailing in India has been largely an urban Phenomenon with affluent classes and growing number of double-income households.

More successful in cities in the south and west of India. Reasons range from differences in consumer buying behavior to cost of real estate and taxation laws.

Rural markets emerging as a huge opportunity for retailers reflected in the share of the

rural market across most categories of consumption o ITC is experimenting with retailing through its e-Choupal and Choupal Sagar �

rural hypermarkets. o HLL is using its Project Shakti initiative � leveraging women self-help groups

� to explore the rural market.

o Mahamaza is leveraging technology and network marketing concepts to act as an aggregator and serve the rural markets.

IT is a tool that has been used by retailers ranging from Amazon.com to eBay to radically change buying behavior across the globe.

�E-tailing� slowly making its presence felt.

RETAIL SALES IN INDIA

CHALLENGES & OPPORTUNITIES Retailing has seen such a transformation over the past decade that its very definition has undergone a sea change. No longer can a manufacturer rely on sales to take place by ensuring mere availability of his product. Today, retailing is about so much more than mere merchandising. It�s about casting customers in a story, reflecting their desires and aspirations, and forging long-lasting relationships. As the Indian consumer evolves they expects more and more at each and every time when they steps into a store. Retail today has changed from selling a product or a service to selling a hope, an aspiration and

above all an experience that a consumer would like to repeat. For manufacturers and service providers the emerging opportunities in urban markets seem to lie in capturing and delivering better value to the customers through retail. For instance, in Chennai CavinKare�s LimeLite, Marico�s Kaya Skin Clinic and Apollo Hospital�s Apollo Pharmacies are examples, to name a few, where manufacturers/service providers combine their own manufactured products and services with those of others to generate value hitherto unknown. The last mile connect seems to be increasingly lively and experiential. Also, manufacturers and service providers face an exploding rural market yet only marginally tapped due to difficulties in rural retailing. Only innovative concepts and models may survive the test of time and investments. However, manufacturers and service providers will also increasingly face a host of specialist retailers, who are characterized by use of modern management techniques, backed with seemingly unlimited financial resources. Organized retail appears inevitable. Retailing in India is currently estimated to be a US$ 200 billion industry, of which organized retailing makes up a paltry 3 percent or US$ 6.4 billion. By 2010, organized retail is projected to reach US$ 23 billion. For retail industry in India, things have never looked better and brighter. Challenges to the manufacturers and service providers would abound when market power shifts to organized retail. CONCLUSION The retail sector has played a phenomenal role throughout the world in increasing productivity of consumer goods and services. It is also the second largest industry in US in terms of numbers of employees and establishments. There is no denying the fact that most of the developed economies are very much relying on their retail sector as a locomotive of growth. The India Retail Industry is the largest among all the industries, accounting for over 10 per cent of the country�s GDP and around 8 per cent of the employment. The Retail Industry in India has come forth as one of the most dynamic and fast paced industries with several players entering the market. But all of them have not yet tasted success because of the heavy initial investments that are required to break even with other companies and compete with them. The India Retail Industry is gradually inching its way towards becoming the next boom industry.

The retail sector has been at the helm of India’s growth story. The sector has evolved dramatically from traditional village fairs, street hawkers to resplendent malls and plush outlets, growing from strength to strength. According to the Indian Council for Research on International

Economic Relations (ICRIER), India is the seventh-largest retail market in the world, and is expected to grow at a CAGR of over 13% till FY12. In FY07 retail sales reached Rs 13,300 bn

and amounting to around 33% of India’s GDP at current market prices1. According to the Central Statistical Organisation (CSO) estimates, the total domestic trade (both retail and wholesale) constituted 13.0% of country’s GDP in 1999-2000, which has gone up to 15.1% in

FY07.

What is retailing?

Retailing is a distribution channel function, where one organisation buys products from supplying firms or manufactures products themselves, and then sells these directly to consumers.

In majority of retail situations, the organisation, from whom a consumer buys, is a reseller of products obtained from others, and not the product manufacturer. However, some manufacturers

do operate their own retail outlets in a corporate channel arrangement.

Retailers offer many benefits to suppliers and customers as resellers. Consumers, for instance, are able to purchase small quantities of an assortment of products at a reasonably affordable

price. Similarly, suppliers get an opportunity to reach their target market, build product demand through retail promotions, and provide consumer feedback to the product marketer.

During the last few years, the Indian retail market has seen considerable growth in the organised

segment. Major domestic players have entered the retail arena and have ambitious plans to expand in the future years across verticals, formats, and cities. For example, companies like Reliance, Tata, Bharti, Adani Enterprise, have been investing considerably in the booming Indian

retail sector. Besides, a number of transnational corporations have also set up retail chains in collaboration with big Indian companies.

The Indian retail sector is highly fragmented and the unorganised sector has around 13 million

retail outlets that account for around 95-96% of the total Indian retail industry. However, going forward, the organised sector’s growth potential will increase due to globalisation, high economic growth, and changing lifestyle. Moreover, high consumer spending over the years by

the young population (more than 31% of the country is below 14 years) and sharp rise in disposable income are driving the Indian organised retail sector’s growth. Even small towns and

cities are witnessing a major shift in consumer lifestyle and preferences, and have thus emerged as attractive markets for retailers to expand their presence.

Although the growth potential in the sector is immense, it is not without challenges that could slow the pace of growth for new entrants. Rigid regulations, real estate costs, high personnel

costs, lack of basic infrastructure, shrinkage, and highly competitive domestic retailer groups are some such challenges. Additionally, resource constraints at shopping mall projects are also

delaying completion and disrupting many retailers’ entry strategies.

Global Retail Scenario

Retailing has played a major role in the global economy. In developed markets, retailing is one of the most prominent industries. In 2008, the US retail sector contributed 31% to the GDP at

current market prices. In developed economies, organised retail has a 75-80% share in total retail as compared with developing economies, where un-organised retail has a dominant share.

Global retail sales was estimated to be around US$ 12 trillion in 20072; however, in 2008, the slowdown in the global economy, especially in the US, and credit crunch, decreased consumer spending. On a global level, the economy performed robustly till 2007, but the US crisis spread

over to Europe in early 2008, and its impact was felt in the Asia-Pacific region by mid-2008.

India has the highest number of retail outlets in the world at over 13 million retail outlets, and the average size of one store is 50-100 square feet. It also has the highest number of outlets (11,903)

per million inhabitants. The per capita retail space in India is among the lowest in the world, though the per capita retail store is the highest. Majority of these stores are located in rural areas.

Evolution of organised retail

The share of organised retail in developed countries is much higher than developing countries like India. In 20063, the share of organised retail in the US was around 85%, in Japan it was

66%, in the UK it was 80%, while in developing countries like India, China and Russia it was 6%, 20% and 33%, respectively. The concept of organised retail had occurred much later in

developing economies than the developed economies. Modern day retail came into existence in

three successive waves. The first wave took place in the early to mid-1990s in South America, East Asia excluding China, North Central Europe and South Africa. The second wave of

organised retail occurred during mid-to-late 1990s in Mexico, Central America, South-east Asia and South Central Europe. The third wave of organised retail boom started in the late 1990s and

early 2000 in some parts of Africa, Central and South America, South-east Asia, China, India and Russia and continues to grow at a rapid pace.

Rising household expenditure in BRIC countries drives organised retail

The household expenditure in Brazil, Russia, India and China, or the BRIC countries, is growing

at a faster rate than the developed countries like the US, UK, Japan, Germany, and France, indicating the higher growth potential for the retail sector in these countries that have a large consumer base. Household expenditure (at constant prices) in developed countries like the US,

UK, Germany, and Japan has witnessed an average annual growth of 3.2%, 2.5%, 0.2%, and 1.0%, respectively, during 2004-2007, but the expenditure in the BRIC countries has been much

higher. The developed countries are witnessing a continuous fall in domestic demand and high dependence on export earnings, which are the reasons for lower household expenditure. In current times, the global demand is weakening, owing to economic slowdown, and this worry is

looming large over the retail sector.

The consumer market in the developed countries is saturating, and therefore, big retail

companies in those countries are increasingly expanding their footprint in emerging countries like India, China, and Russia. Even though 100% FDI is not permitted in the retail sector, India

continues to attract leading global retailers to start retail business through local alliances. For example, recently, Wal-Mart has opened its first store at Amritsar (Punjab) in a joint venture (JV) with Bharti Enterprises, and it is also planning to expand its footprint to other parts of India.

The fact that the penetration of organised retail in BRIC countries is much lower than the developed countries is acting as an added advantage for these retail giants.

Major global retail markets

This section provides a brief overview on the retail industry in major global markets on the basis of phases of retail lifecycle. Organised retailing in most economies typically passes through four

distinct phases:

In the first phase, new entrants create awareness of modern formats like hypermarket, supermarket, department stores etc and raise consumer expectations

In the second phase, consumers demand more modern formats as the markets develop, thereby leading to a strong growth

In the third phase, the high rate of growth leads to a stage of mature market

In the final phase, the domestic market reaches a saturation point leading to limited growth, so retailers explore and evaluate new markets across the globe

USA

The US retail market is the largest retail market in the world, and the organised sector constitutes

over 85% of the total retail sales. In 2008, the US retail industry recorded sales of US$ 4,404.7 billion, amounting to 31% of the national GDP at current prices. The US retailing is divided into

three categories: department stores, mass merchandisers, and specialty stores. Consumers in the US have now become more value-conscious, which has led to an increase in the sales of discount stores that make ‘mass merchandisers’ as the largest category. Online retailing also has been

gaining popularity in the US, but the recent slowdown in the economy and financial crisis have shrunk consumer spending, which is likely to reflect in the retail sales figures of 2008. As

domestic markets in the developed countries have saturated and opportunities in emerging markets are rising, organised retailers from those countries have been turning to new markets.

UK

The UK retail sales were valued at £278 billion in 2008 with 197,990 establishments. The industry contributed to 8% of the national GDP in 20084. The retail industry in the UK provides

employment to 2.8 million people, which constitutes 11% of the total workforce; however, the recent global economic slowdown has affected the UK market also. As the financial system in

the UK is facing problems, and has resulted in a sluggish economy, consumer spending has also reduced.

China

China opened up its economy to the world in 1980s which led the growth of the organised retail

market in the country, which constituted 20% of the total retail sales of US$ 785 billion in 20065. China’s retail industry is also growing at a phenomenal rate and plays a vital role in the global retail scenario due to its large and burgeoning population, large cities, and increasing

purchasing power of local population.

Retail in India: Industry Structure

The retail industry in India is highly fragmented and unorganised. Earlier on retailing in India was mostly done through family-owned small stores with limited merchandise, popularly known

as kirana or mom-and-pop stores. In those times, food and grocery were shopped from clusters of open kiosks and stalls called mandis. There were also occasional fairs and festivals where people

went to shop. In the twentieth century, infusion of western concepts brought about changes in the structure of retailing. There were some traditional retail chains like Nilgiri and Akbarallys that

were set up on the lines of western retail concepts of supermarkets. The government set up the public distribution system (PDS) outlets to sell subsidised food and started the Khadi Gram Udyog to sell clothes made of cotton fabric. During this time, high streets like Linking Road and

Fashion Street emerged in Mumbai. Some manufacturers like Bombay Dyeing started forward integrating to sell their own merchandise. Shopping centres or complex came into existence,

which was a primitive form of today’s malls.

Since liberalisation in early 1990s, many Indian players like Shoppers Stop, Pantaloon Retail India Ltd (PRIL), Spencer Retail ventured into the organised retail sector and have grown by many folds since then. These were the pioneers of the organised Indian retail formats. With the

opening up of foreign direct investment in single-brand retail and cash–and-carry formats, a new chapter unfolded in the retail space. Many single-brand retailers like Louis Vuitton and Tommy

Hilfiger took advantage of this opportunity. The cash-and-carry format has proved to be an entry route for global multichannel retailing giants like Metro, Wal-Mart and Tesco.

Booming Indian economy spurs consumption

The Indian economy posted a remarkable CAGR growth of 8.9% during FY04-FY08, which

increased the per capita income and in turn, the disposable income of a large section of the population. Growth in the retail trade depends on the fundamentals of an economy. The Indian economy grew at a robust rate over the last five years, riding high on the high growth in the

service sector (10.5%) and the manufacturing sector (9.4%) as compared with 7.4% and 4.1% during FY99-FY03. The rise in per capita income and the resultant rise in disposable income

stimulated consumption during this five-year period, thereby resulting in a spurt in retail trade. Furthermore, according to the Mckinsey Global Institute (MGI), the average real household disposable income is likely to grow by 5.3% during 2005-2025 and reach Rs 318,896 per annum

as compared with 3.6% in the previous 20 years, which indicates the huge potential for the retail sector in India.

Private Final Consumption Expenditure, per capita income and retail sales are positively

related

The private final consumption expenditure (PFCE) and GDP growth are indicative of the growth

in the retail sector. In the past consumers, especially young consumers in the age group of 15-34, increased their consumption expenditure with an increase in their earnings; these young consumers totalled around 400 million and constituted 35% of the total population. Due to the

consequent boom in the Indian retail sector many foreign and Indian players entered the Indian retail sector.

The chart above shows that during FY95-FY00, the PFCE (constant prices) increased by 5.4% per annum. Later on, from FY01 to FY03, PCFE declined to 4.0%. Again during FY03-FY07, it

went up to 6.2% per annum. During these time periods, the retail sales, the per capita income, and the real GDP growth followed a similar trend as the PFCE, which made it evident that there is a positive correlation between real GDP and PFCE on the retail sector. During FY08, the

PFCE as a percentage of GDP at factor cost at constant prices remained very high at 62.2%; hence, the overall retail sector growth received a major impetus during this period.

There have been striking changes in India’s consumption pattern over the past 50 years owing to

the ever-increasing media exposure, changes in lifestyle, growing urbanisation, coupled with an increase in the education levels among others. The Indian retail industry has matured

tremendously over the years, and has become more process-driven, standardised, qualityassured, and brand-driven.

Size of the Indian retail industry

In 2007, the total Indian retail industry was valued at Rs 13,300 billion (estimate), and the

organised segment constituted 5.9% of the value at Rs 783 billion. In the segment, the clothing and accessories sales had a majority share of 38.1% followed by the food and grocery segment at 11.5% and electronics segment at 9.1%. The organised retail industry grew at a CAGR of 33%

during 2004-2007. Even though the organised retail segment has a minuscule share in the total industry, it has enormous potential considering the rising urbanisation, the efficient supply-chain,

the readily-available retail space, and modern technology, which help in reducing consumer prices to a great extent.

Furthermore, with the entry of big foreign players, the Indian organised retail market has become more competitive in terms of implementing newer business models on the operational format,

and pricing, and in terms of efficiency. The organised retail sector will largely benefit in terms of productivity and growth if sectors like agriculture, food processing, and textile are encouraged further. The above-mentioned sectors would receive a remarkable boost if they would supply to

big Indian and foreign retail players, which will ensure their growth in tandem with the retail

sector. Moreover, the organised retail sector will directly and indirectly improve the country’s employment scenario.

Many Indian retail players have already started purchasing supplies directly from farmers and

other suppliers, which has invariably eliminated the supply-chain complexities and large number of intermediaries, and has resultantly lowered prices for consumers. Furthermore, the amendment

of the Agriculture Product Marketing Act (APMC) has revamped the farm produce supply chain.

Industry segmentation

Organised retail can be segmented in two ways - segmentation by verticals and by channels. Verticals are segmented on the basis of the type of merchandise offered; similar merchandise can

be clubbed together to form a vertical, for instance food and grocery. Channels are the means through which retailers sell their merchandise; for example, store channels of retailing that comprise different formats like hypermarkets, supermarkets and department stores and non-store

formats like online retailing, vending and kiosks.

Major retail segments

Food and grocery:

In 2007, the food and grocery segment was valued at Rs 7,920 billion, and it enjoyed a dominant market share of 62% in the total Indian retail sector; however, there was a completely opposite

scenario in the organised retail segment. The food and grocery segment is the second-largest in the organised retail and has an 11.5% share that is valued at Rs 90 billion.

Initially this segment grew at a slow pace due to the presence of an established retailing system

led by kirana stores, a highly-fragmented food supply chain, and the lack of a developed food processing industry. Nilgiri was one of the earliest retailers that started a chain or stores in different parts of the country. However, the growth of Nilgiri’s stores was limited as it was

challenged by a weak supply chain and an under-developed food processing industry. Post-liberalisation, organised retailers saw a renewed opportunity in the food and grocery segment.

Few food and grocery retailers

Food Bazaar: PRIL ventured into food retailing with Food Bazaar in Apr 2002. Initially it was a

part of Big Bazaar but later on it started operating as a standalone outlet in addition to being a part of Big Bazaar. The store offers a wide range of fruits, vegetables, FMCG products and

ready-to-cook products. It uses a concessionaire model for wet groceries, and it sources staples from APMC or farmers (where the state permits). Food Bazaar attracts high footfalls due to innovative initiatives like live-grinding, live bakery, fresh juice corner etc.

In Aug 2007, the store ventured into another retail format that served the food and grocery

segment called the KB Fair Price shop. This store is modelled on the concept of low-frills neighbourhood store of 1,000-1,600 square feet. The Fair Price store follows a pricing model that

is 20% lower than the prevailing market price.

More: Aditya Birla Retail Ltd forayed into the retail business in 2006 by acquiring Trinethra Super Market Ltd, the south-India based retail chain. In May 2007, the company launched its

own brand of stores called More in Pune. The supermarket store has a minimum size of 2,500 square feet and offers fruits, vegetables, staples, personal care, general merchandise, pharmacy,

poultry and dairy products.

Reliance Retail: Reliance Retail Ltd, a subsidiary of Reliance Industries Ltd, has an aggressive plan to expand its retail network across India. It entered the food and grocery segment in November 2006 through its convenience store format Reliance Fresh. The store offers a range of

fruits, vegetables, personal care, home care and kitchen utensils. It focuses on building a strong relationship with the agri-business value chain and sources directly from wholesalers.

Fashion and accessories

Fashion and accessories is the largest category in organised retail and had a 38.1% share valued

at Rs 298 bn in 2007. In terms of total retail, this category held the second position with a 9.5% share valued at Rs 1,313 bn. The segment has driven the retail boom in India and has opened

many opportunities for large as well as global retailers to enter the segment. Despite the high rental, many global retailers like Gas, Gucci, Levi’s, Benetton, Marks and Spencer have opened their stores in India, and also have plans to increase their presence.

The men’s wear segment had the highest share of 40.2% in the Rs 1,313-billion fashion and

accessories market in 2007 while the women’s category accounted for 34.8%, followed by the kids wear and uniform category at 24.9%. Demand in the branded apparel segment is increasing

as consumers are upgrading to premium brands due to changing preferences. The premium segment has seen the fastest growth in value owing to the rising preference for formals at Indian workplaces, the new offerings from international brands, and the increasing willingness on the

part of consumers to pay a premium for quality. The apparel retailers are also pushing themselves to the accessories segment to attract more customers.

Few fashion and accessories retailers

Pantaloons: The first Pantaloon store was opened at Gariahat in 1997 in 8,000-square-feet area.

Over the years, the store has undergone several transitions. When it was launched, the store mostly sold external brands. Gradually, it started retailing an eclectic mix of external brands as

well as private labels. Initially, it positioned itself as a family store targeted across age and gender groups but later it shifted its focus towards being a fashion store and gave more emphasis on the youth. As on Dec 2008, Pantaloons had around 44 stores spread across major cities in

India.

Shoppers Stop: Shoppers Stop is one of the largest retailers in India. It primarily caters to the lifestyle segment and offers customers both domestic and international brands. The store recently

revamped its branding by introducing a new symbol. Shoppers Stop has lifestyle retailing as its core housing brand across categories like apparels and accessories. The store operated at 26 locations in 12 cities as on Dec 2008.

Koutons: Koutons Retail is a leading manufacturer of readymade and fashion wear brand. It was established as Charlie Creation Pvt Ltd in 1991 for manufacturing and exporting garments. Later

in 1998 Koutons was established to provide affordable men’s wear to the masses. Koutons also entered the women’s segment in Apr 2008 by launching its brand Les Femme, which caters to

young women in the 16-34 years age group and includes apparels like t-shirts, partywear, lycra, semi-formal shirts, denims, capri pants etc. Koutons has also launched its brand Les femme for women & Koutons Junior for kids. Few renowned brand of Koutons are: Koutons men’s wear,

Les Femme, Koutons Junior and Charlie Outlaw.

Footwear

In 2007, the footwear segment had a 1.1% share in the total retail market and was valued at Rs 160 billion while it had a 9.9% share in the organised market and was valued at Rs 77.5 billion.

In the same year the organised footwear market recorded a fantastic growth of 49% over 2006 while the overall retail market grew by just 16.4%. The changes in consumer behaviour and

attitudes reflected in the increasing demand for newer styles and different types of footwear. The market currently offers many brands that cater to every target segment. The Indian footwear market is moving at a brisk pace presently to cater to the domestic demand. Moreover, the influx

of international brands is inducing the otherwise price-conscious customers to shell out more bucks for their favourite brands.

The footwear market is experiencing a changing consumer preference for casual and younger

style due to media penetration and due to the increasing awareness about international trends and lifestyle. There already are a large number of players, both domestic and international, in the semi-formal, formal and casual segment but the casual segment dominates the Indian footwear

market with a 75% share. Branded sports wear is also growing at a faster rate than the other segments and the key players in this segment are Adidas, Reebok, Nike, Puma et al.

Few footwear retailers

Reebok: In 1995, Reebok forayed into the Indian retail market. Today Reebok is one of the

frontrunners in the Indian sports wear industry. Reebok’s offerings include apparels, footwear and fitness equipment and products. Its footwear offerings are mostly in the trainers and sneakers segment. Reebok recently has introduced its new lifestyle vertical Reebok Classic.

Bata: Bata India is one of the most well-known and largest footwear retailers in India. The retailer manufactures and markets different types of footwear that includes rubber, canvas, leather, and plastic footwear. It markets footwear under the brand names of North Star, Power,

Ambassador, Marie Claire besides dealing in international brands like Dr Scholl and Hush Puppies. Bata has a strong distribution network structure of wholesalers and distributo rs.

Khadim’s: Khadim’s forayed into footwear retailing in 1993 and is one of the most renowned

retailers in east India. Khadim’s markets its own products besides few others and specialises in women’s and children’s footwear. The retailer has a presence in multi-brand outlets (MBOs) across the country in addition to its own exclusive outlets.

Home and office improvement

In 2007, the home and office-related retail segment was valued at Rs 455 billion in the total retail market while it was valued at Rs 50 billion in the organised retail market. In the same year the

segment had a 6.4% share in the organised retail. Home and office improvement is another important segment of the organised retail as people have started spending more on discretionary

items. Presently the segment is growing at an impressive rate. Due to the salary hikes and rise in the double-income households, the lifestyle needs of the young and flourishing India are surging and consequently, consumers are going for renovation of their homes. The concomitant rise in

investments in furniture, home accessories and furnishings, has added to the segment’s boom.

Few home and office improvement retailers

Godrej Lifespace: On Apr 1, 2003, Godrej & Boyce Manufacturing Company Ltd launched a new retail division. The division was established to present a new concept in retailing by

displaying and selling under one roof the Godrej range of home and office furniture, appliances, security equipment and locks. Later in 2005, the showrooms were branded as Godrej Lifespace

Stores.

Home Stop: Home Stop is one of the premium home improvement stores that offers a wide range of merchandise. It stocks various national and international brands that cover all the home needs like home décor, furniture, bath accessories, draperies and health equipment. Home Stop

currently operates three Home Stop stores, one each in Mumbai, Bangalore and New Delhi.

Home Town: Home Solution Retail (India) Ltd (HSRIL), a subsidiary company of Pantaloon Retail, is designed to cater to the home furnishing and improvement market. The format is

designed as a one-stop destination that offers a complete range in consumer electronics, furniture and other home products. HSRIL operates five retail formats: Collection- i, Furniture Bazaar, Electronics Bazaar, Home Town and e-zone.

Electronics In 2007, the electronics segment had a 4% share in the total retail segment and was valued at Rs 575 billion while it had a 9.1% share in the organised electronic retail segment valued at Rs 71 billion. The electronics market has seen a proliferation of brands and product

categories in recent years. All international brands from Japan, Korea, the US, Europe and China have been launched in India and have been trying to build a pan-India dealer network. The

lifestyle category has seen higher growth in India on the back of changing consumer preferences and a consumption boom.

Few electronic retailers

eZone: eZone is an electronics specialty retail format from HSRIL by Kishore Biyani- led Future Group. The first eZone store was launched in 2006 in Indore and was followed with a second one

in Bangalore. eZone offers a range of personal products like computers, laptops, handy cams, MP3 players and mobile phones, entertainment products like plasma/LCD, flat TVs, home

theatre systems, DVD players, and stereosystems, home products like refrigerators, air conditioners, washing machines and microwave ovens, among other kitchen appliances.

Viveks: In 1965, B A Lakshmi Narayana Setty founded Vivek’s in a 200-square-feet-shop in Chennai. Today Viveks is one of the largest consumer electronics and home appliances retail

chains in India. Viveks Ltd is a public limited company that runs two retail brands – Viveks and Jainsons. The store was transformed into a public company from a family-run company when 14

stores of Jainsons were bought over in 1999. Later on in 2001 two stores of Premier and in 2002 Spencers Super Store were purchased. Viveks has recently absorbed Spencer’s into the Premier brand. Viveks grew from three stores in 1995 to more than 35 stores as on Dec 2008.

Catering services In 2007, the catering service in organised retail showed a tremendous growth

of 44.7% over the previous year. It was valued at Rs 713 billion in the total retail market and at Rs 57 billion in the organised retail market. The catering services market is divided into fast

food, cafes and restaurants and others. India is a buoyant market for this segment with over a billion people with different food habits, religious festivals, and various regions. Each region has its own traditional food, dietary habits and its own food specialities. In recent times many

international food chains have entered India, which has made this segment more dynamic and its growth, fast-paced. The key growth drivers of the segment in India are: the changes in Indian

demographics, young working population, nuclear families, rise in double-income household etc.

Few catering service retailers

Yum! Restaurants: Yum! Restaurants is present in India through its brands Pizza Hut and KFC. In 1995, KFC, which mainly serves chicken products, set foot in India. After taking into account

the vegetarian population of India, KFC recently modified its menu and launched a vegetarian fare, which now constitutes 40% of the product categories. Pizza Hut entered India in 1996 and as on Dec 2008, there were 147 Pizza Hut and 45 KFC stores across 35 and 14 cities,

respectively.

McDonald’s: McDonald’s is a 50:50 joint venture partnership in India between McDonald’s Corporation (USA) and two Indian businessmen. Hardcastle Restaurants Pvt Ltd owns and

operates McDonald’s restaurants in West India while Connaught Plaza Restaurants Pvt Ltd owns and operates these food outlets in the North.

Café Coffee Day: Café Coffee Day is a division of India’s largest coffee conglomerate Amalgamated Bean Coffee Trading Company. Café Coffee Day sources coffee from 5,000 acres

of estates and is the second-largest coffee shop in Asia. It has ventured into formats such as music cafes, book cafes, highway cafes, lounge cafes, garden cafes and cyber cafes.

Telecom

In 2008 the telecom market in India was worth Rs 272 billion and had a 1.8% share in the total

retail market while it had a 3.4% share in the organised retail segment and was valued at Rs 27 billion. The mobile and accessories segment exhibited tremendous growth in 2007. The Indian

telecom sector emerged as the second-largest wireless network in the world after China with the recent spate in number of wireless subscribers.

Few telecom retailers

The Mobile Store: The Mobile Store, promoted by the Essar Group, is one of the country’s largest mobile retailers. It’s a one-stop mobile solution shop that offers telecom products like

mobiles, accessories, mobile connections and recharges, mobile bill payments, handset repairs, handset exchange, music and gaming devices and DTH, all under one roof, in a world-class

shopping ambience. The shop had more than 1,300 stores spread across 200 cities as on Dec 2008.

MobileNXT: Bangalore-based MobileNXT Teleservices Pvt Ltd has a pan-India presence and operates in the following three major retail formats: standalone stores, store-within-a-store, and

enterprise stores. This store is eyeing a pan-India network and hence has initiated a tie-up with Shoppers Stop, Star Bazaar, Mega Mart, and Landmark stores, for setting up store-withina- store

in their outlets across the country. As on Dec 2008, the company was operating more than 36 stores that were spread across major cities in India.

Pharmaceuticals

In 2007, the pharmaceuticals market had a 3.5% share and was valued at Rs 488 billion in the

total retail market; however, its share in the organised retail market accounted for merely 2.0% share at Rs 15.4 billion during the same period. The organised pharmaceutical retailer is known to implement innovative concepts and global standards to provide customers with an experience

that is completely different from what an unorganised retailer offers.

Few pharmaceutical retailers

Apollo Pharmacy: In 1983, Apollo Pharmacy, a division of Apollo Hospital Enterprise Ltd, entered retailing by opening up its first store in Chennai. The retailer also took initiatives to

provide medicines to the rural regions by tying up with ITC’s e-choupal and Godrej Aadhaar. Apollo has also started expanding through the franchise route. It has recently launched a new concept, NurseStation, at its pharmacy outlets, where the nurses are available to attend the

patients at their houses, or refer them to an Apollo Clinic nearby. As on Dec 2008, Apollo was operating at over 890 outlets across the country.

MedPlus: In 2006, MedPlus Health Services Private Ltd was incorporated in Hyderabad to cater

into the health care segment. The company has established a large number of pharmacy outlets chain across major cities in various states of the country, and are majority of those are spread

across four southern states. It has over 600 pharmacy outlets spread across 63 cities/ towns in the country.

Beauty and wellness In 2007, the beauty and wellness segment grew at a tremendous rate of 65% over the previous year in the organised retail market. Its share in the total retail market,

however, was just 0.3% and was valued at Rs 46 billion. In the organised market, the segment showed tremendous growth due to the rise in service sector employment.

Few beauty and wellness retailers

Reliance Wellness: In Oct 2007, Reliance Retail Ltd, owned by Mukesh Ambani, entered the beauty and wellness segment by opening its first store at Hyderabad. This store offers a wide

range of products under the health foods, personal care, healthcare, and pharmaceuticals categories.

Himalaya Drugs: The Himalaya Drug Company operates both exclusive retail outlet formats

and shop-within-a-shop outlets. The stores offer an entire range of Himalaya drugs from pharmaceuticals, personal care, to baby care and animal healthcare products at competitive prices. The company emphasises on service, trained personnel and a quality shopping experience

in their stores. Himalaya has also launched its online shopping website to make all its products conveniently available to its customers 24/7 and to reach a wider market, where its stores are not

present.

Jewellery

In 2007, jewellery retail was worth Rs 694 billion and accounted for 5% of the total retail market. In the organised retail market, jewellery retail merely had a 2.9% share at Rs 23 billion.

In the same year jewellery retail in the organised retail market recorded high growth of 36.9% over 2006 as compared with 15.3% recorded in the total retail market.

Few jewellery retailers

Gitanjali: Gitanjali Gems Ltd (GGL) is one of the largest, integrated diamond and jewellery

manufacturer and retailer in India. It sources rough diamonds from primary and secondary source suppliers in the international market, cuts and polishes the rough diamonds and exports the diamonds to its international markets. GGL sells diamonds and other jewellery through retail

operations in India as well as in international markets. Its brand extensions include Gili, Asmi, Sangini, D’Damas, Giantti, Nakshatra, Collection G, Gold Expressions, Vivah Gold & Kiah.

Tanishq: In mid-1990s Titan Industries Ltd - promoted by the TATA Group - entered jewellery

retailing through Tanishq. Tanishq has set up production and sourcing bases by researching the jewellery crafts of India. Its factory, located at Hosur, Tamil Nadu, is spread across 135,000 square feet and is equipped with all modern machinery and latest equipment. As on Dec 2008,

there were 115 Tanishq stores spread across major cities in India.

Reliance Jewels: Reliance Retail Ltd entered jewellery retailing by opening its first store in Bangalore. The company aims to make Reliance Jewels a one-stop destination that offers

consumers a wide range of gold and diamond jewellery.

Timewear

In 2007, the Indian watches market enjoyed a 2.9% share in the overall organised retail market as compared with merely 0.3% in the total retail market. The market size of the watch market was

valued at Rs 44 billion in the same year. The size of this market has expanded due to the changes in consumer preference and the growing market for international watches in India. International

players like Tag Huer, Rado, Omega, Rolex have even signed up Indian celebrities as brand ambassadors to tap the market.

Few timewear retailers

Citizen: Citizen has 38 exclusive outlets in 27 cities across India. The Exclusive Branded Outlets (EBOs) called First Citizen house the latest international range of Citizen Watches and display over 800 different watches. Besides, Citizen Watches are also availab le at Lifestyle,

Shoppers Stop and more than 250 Citizen Corners (MBOs) across the country.

Titan: Titan is one of the largest manufacturers of watches in India. It offers product ranges that include the flagship brand Titan, Edge, Fastrack, Nebula, Raga, Steel, Regalia, Flip, Sonata,

which is available in Titan and exclusive Sonata stores. As on Dec 2008, there were 245 exclusive Titan showrooms (World of Titan) across 122 Indian cities in India.

Books, music and gifts

Books, music and gift retailing were the earliest segments that witnessed a consolidation of

business into organised formats. The combined share of this segment was 1.1% of the total retail market at Rs 164 billion in 2007. Organised retailers like Planet M, Music World, and Landmark dominated the music segment. Archies, a prominent gift retailer, has a presence on both high

streets as well as in malls.

The books and publishing business continues to thrive due to greater literacy levels and rapidly growing middle class and higher middle class population, English-speaking middle-class

population. Moreover, new format chains like Crossword, Landmark, Oxford, and now, Odyssey, that fit into the leisure aspirations of people, are located conveniently, and offer an ambience conducive to browsing and book buying. As a result, the segment has been growing

further.

Crossword: Crossword was established in Oct 1992, is India’s leading bookstore chain and a wholly-owned subsidiary of Shoppers Stop Ltd. The company sells books and other products

under the Crossword brand. Crossword sells a wide variety of products like magazines, CD ROMs, music, stationery and toys apart from books. Crossword provides customers with cafes, reading tables and cloak facilities at each of its outlets. Crossword customers can also shop for

books using dial-a-book, fax-a-book and email-a-book facilities offered by the company. Its other services include gift vouchers, apart from the return, exchange & refunds policy being

followed by the company. Crossword bookstores are presently located in Mumbai, Bengaluru, Ahmedabad, New Delhi, Pune, Nagpur, Vadodara, Kolkata, Chennai, Jaipur and Hyderabad.

Entertainment In 2007, the entertainment segment was worth Rs 456 billion and had a 3.2% share in the total retail industry. This segment has been driven by the increasing base of young

population in India, whose entertainment needs has been surging with the influx of malls and multiplexes that provide leisure retail, gaming, and cinema. Players in the segment are likely to

gain greater market share as the consumer spend on entertainment is increasing. PVR cinemas, Fun Cinemas, Inox are the major players in the entertainment retailing space.

Overview of formats/channels The Indian retail industry is categorised into different retail formats on the basis of the retail operation. The formats are basically defined on the basis of the

size of the outlet, the pricing strategy followed, the type of merchandise sold, and also the location. Given below is a list of formats on the basis of the above-mentioned characteristics:

Hypermarkets: Hypermarkets are big-box formats with an average size that ranges between

60,000-120,000 square feet, and they stock multiple lines of products such as food and grocery, general merchandise, sports goods, and apparels. Hypermarkets are mammoth outlets that are fewer in number but cater to a larger area (3-5 kilometre). HyperCITY, Big Bazaar, RPG

Spencer’s and Shoprite Hyper are some major players in this format.

Supermarkets: The average size of supermarkets range from 10,000-30,000 square feet. They are a smaller version of hypermarkets that holds multiple lines of merchandise but is limited in

number when compared with supermarkets. Supermarkets are spread across the city, are greater in number, but cater to a smaller area (1-2 kilometer). Foodworld, Food Bazaar and Spinach are

some major players in this format.

Convenience stores: Convenience stores offer easy purchase experience through easily accessible store locations. The stores are basically small in size (500-3,000 square feet), which allows quick shopping and fast checkouts. Subhiksha and Reliance Fresh are some major players

in this format.

Cash-and-carry outlets: Cash-and-carry outlet is strictly not a retail format, but considering the business dynamics it follows it can qualify for a retail format. In a retail business usually a

consumer has to purchase one or more products but under this format, the consumers have to buy a minimum volume of products or value specified by the cash-and-carry retailer. In this format the buyers are basically small retailers or catering service providers who purchase in bulk

quantities. This stores’ size ranges from 100,000 square feet to 300,000 square feet. At present, Metro is a major player that falls under this format. Wal-mart’s alliance with Bharti and Tesco’s

with Trent will also come under the cash-and-carry format.

Discount stores: The focus of these stores is to offer merchandise at a price that is lower than the market price, and to gain profit from volumes. These stores keep merchandise mainly on the

basis of its saleability. Usually these are no-frill stores with simple surroundings and less service. Big Bazaar and Subhiksha are some famous examples.

Specialty stores: These stores usually ‘specialise’ in one line/category of merchandise. As these

stores are concerned with only one type of merchandise, they are able to offer a wider range of products at a lower price. Examples: Next and Vijay Sales.

Department stores: These stores are typically lifestyle stores where most of the merchandise

constitutes apparels and products other than food and grocery. These stores offer high quality service to consumers. These stores stock lesser merchandise than other formats since the

merchandise is stored in a presentable manner. Notable examples are Shoppers Stop, Westside, Trent, and Globus.

Category killers: Many major retail chains have adapted small specialty store concepts and have expanded themselves to create large specialty stores. These expanded, large speciality stores are

known as ‘category killers’. Ezone, which specialises in electronics, and Staples, which specialises in office stationery, are examples of category killers.

Regulatory Framework

The Indian government has not focussed on retail as an industry. Until now, there are no specific rules and regulations that are to be followed by retail companies. However, there are certain laws

that the retailers need to follow, which are general in nature and which pertain to the establishment of stores and the conduct of activities. These laws are as follows:

Shop and Establishment Act

Standards of Weights and Measures Act Provisions of the Contract Labour (Regulations and Abolition) Act The Income Tax Act

Customs Act The Companies Act

Apart from the above Acts, the companies also follow certain regional rules and regulations on

the basis of the stores’ location. In some regions regulations are imposed on the organised retailers to restrict their expansion and to promote regional retailers; for instance, the Tamil Nadu government imposed a 10% surcharge on organised retailers; the West Bengal government has

been asking mall developers to reserve 10% space for unorganised retailers.

Retailers are also required to take necessary approvals from local bodies to carry on with their business. There is no single window for clearances, and companies have to go to different

agencies to get approvals, which is one of the biggest hurdles that the segment faces.

FDI scenario in India

In 1991, the Indian government introduced the economic policy to attract foreign investments and since then, it has amended the policy from time to time in various sectors to allow higher

levels of foreign participation. The government policy in retail sector allows 100% foreign investment in wholesale cash-and-carry and single-brand retailing but prohibits investments in

retail trading. In 1997, the government imposed restrictions on FDI in retail sector but in 2006, these were lifted and opened in single-brand retailing and in cash-and-carry formats.

The cash-and-carry business is the easiest mode of entry for foreign retailers into India. Many global players like Metro and Shoprite have already entered the market. Wal-mart has forged an

alliance with Bharti for a cash-and-carry business, and Bharti is concentrating on front-end retail. Similarly, Tesco has entered India through an alliance with Trent (Tata Group). Apart from

investing in the cash-and-carry business, Trent will also support the back-end activities of Trent Ltd.

Many foreign brands have also entered India either through JVs with leading Indian retailers or through exclusive franchisees to set up shop in India. Louis Vuitton, Marks & Spencer Plc, GAS,

Armani are some such operators who have entered India through JVs. McDonald’s, KFC, Domino’s are the retailers who have taken the franchise route.

Slowly the government is opening up to the idea of permitting FDI in the Indian retail sector;

consequently there is greater momentum in the sector. Last year, owing to the global meltdown, investments dropped in all sectors. The government has therefore changed the guidelines for foreign investments to boost investments in the current year. This move is certainly likely to

improve the investment climate in the Indian retail space.

Growth Drivers

Currently, organised retail is in a nascent stage of growth in India as it just has a 5.9% share in the total India retail trade. However, in recent years, organised retailing has been growing at a

robust rate due to rise in the number of shopping malls as well as in the number of organised retail formats. The key factors of growth of organised retail in modern India are discussed in the

following pages.

Rising disposable income of Indian middle-class

The Indian middle-class can be categorised into seekers and strivers, which is the consuming class and the prime target segment for retailers in India. In 2005, these two categories together

constituted around 6.4% of total households in India but accounted for 20% of the disposable income. By 2015, the middle class is expected to constitute around 25% of total households and account for 44% of the total disposable income, and by 2025, the respective figures are likely to

go up to 46% and 58%. The Indian middle-class population and their growing disposable income levels will drive the future growth of organised retail in India6.

Changing consumer preferences and shopping habits

The prime reason for a paradigm shift in the shopping attitude of the Indian consumer is the change in their preferences and tastes. Due to the increasing use of IT and telecom, Indian consumers have become aware of brands and shops for lifestyle and value brands according to

the need and occasion. Consumers will continue to drive the growth in the organised retail by expanding the market and compelling retailers to widen their offerings in terms of brands and in

terms of variety.

The spending on essential commodities has been steadily falling over the years, whereas the

consumption of discretionary products has been growing at a healthy pace. If the composition of PFCE is studied, one can notice that the share of food, beverages and tobacco in the total PFCE has declined from 53.0% in FY90 to 42.2% in FY08. On the other hand, the share of

communication, entertainment, personal care consumption has been rising over the years. Changes in lifestyle have brought about a paradigm shift in consumption, which will

undoubtedly continue to drive retail growth in segments like beauty, healthcare, telecom, and entertainment. Moreover, the rising reach of media coverage is increasing consumer awareness about products, their prices and services, which is likely to further encourage growth in the

organised retail segment.

Changing demographics India is one of the youngest and largest consumer markets in the world with a median age of around 25 years, which is the lowest as compared with other countries.

According to estimates, India’s median age would be 28 by 2020. It is expected that over 53% of the population will be under the age of 30 by 2020, which means that the potential for the Indian retail segment will be enormous. Another plus about this population is that they will be more

dynamic than the previous generations because their consumption is driven by wants rather than needs. Thus, the organised retailing, which thrives on lifestyle products, is expected to receive a

boost because of the young population by 2020.

Increase in working population

India is the second-largest country in the world in terms of population, and is the largestconsumer markets in the world owing to its favourable demographics. In 2008 India’s

working population (in the 15-49 years age group) constituted around 53% of the population as compared with 48.6% in the UK, 49% in the US, and 53% in Russia. Further, the increase in the number of working women has fuelled the growth in sales of discretionary items. There has been

a 20% increase in the number of working women in the last decade.

Spurt in urbanisation

Historically cities and towns have been the driving force of overall economic and social development. Currently over 335 million people of India reside in cities and towns, which translates to around 30% of the total population7. The rapid growth in urbanisation has

facilitated organised retailing in India, and has caused the speedy migration of population into major tier I and tier II cities, which have a significant share in the retail sales of the country.

The urban population’s contribution in India’s GDP shot up from 29% in 1951 to 60% in 2001

and is expected to increase to 70% by 20118, as migration to cities and towns grows rapidly in anticipation of higher income opportunities provided by these epicentres. Moreover, the continuous development in urban areas has invariably attracted substantial inflows of capital

both from domestic and foreign investments have led to the transition of urban areas. As the Indian organised retail is mainly concentrated in the urban areas, its growth (urban areas) is

imperative for the organised retail in the country.

Notably, the urban areas are India’s growth centres and they are growing rapidly over the last couple of years as compared to the world average as well countries like Brazil, the US and UK among others. For instance, during 1995-2000, annual urban growth in India was 2.35% as

compared to the world average of 2.07%. Furtherance, the annual urban growth in India would touch 2.6% during 2020-25, while globally it would fall consistently to reach 1.6%, China 1.36%

from 3.1% during 1995-2000, followed by Brazil to 0.82%9. Though, percentage of urban population to total population in India (29%) is comparatively quite low against the world average (48.6%), as well as countries such as Brazil (84%), China (40%), the US (81%) and

Russia (73%), it is however noticeable that total urban population in India was far more than the total population of the entire US in 2005 and by 2025, it is expected that India’s total urban

population would constitute around 6.7% of the total world population. This would undeniably emerge as the India’s largest market for organised retail, and therefore the challenge for the retail players to leverage the full potential of flourishing urban areas.

Furthermore, due to the rapid infrastructure development in major tier I, II and III cities, many rural inhabitants are attracted to cities, which increase the urban per capita income and in turn offers unbound opportunities for the organised retail segment. Increased globalisation has also

played a big role in the development of urban areas.

Rise in MPCE level in urban areas

The aggregate urban consumption in India has been growing steadily over the past few years as the economy has been continuously flourishing during this period, owing to a rise in urban

population as well as a rapid per capita income growth. In FY05, 56.0% of the urban population was below the MPCE level of Rs 930, while in FY07 the percentage of population under the

MPCE level of Rs 930 decreased to 46.1%.

The average MPCE for the urban population in FY07 was Rs 1,312 up from Rs 1,105 in FY05, on the other hand, the average MPCE for rural population in FY07 was Rs 695 up from Rs 579

in FY0710.

The NSS report clearly suggested that the consumption pattern in urban areas differed from the rural areas. While the food items constituted 52.2% of the rural area’s consumption in FY07 and

the non-food items accounted for the remaining share, in the urban areas, the share of food items in consumption was 39.4% and the non-food items accounted for the rest.

Organised retail concentration in tier II and III cities

Initially the retail revolution began in the big tier I cities in India; however, as tier I cities are

relatively saturated now, retailers, especially value retailers, are finding their way to smaller tier II and tier III cities as well. The changing landscape of the Indian retail segment and the increasing competition has also forced retailers to tap growth opportunities in tier II and III cities

in India.

Internet drives awareness and online purchases

There has been a substantial increase in the number of Indians who use the Internet and a concomitant increase in the number of online purchases. Indians have started using the Internet

not only for increasing awareness but also to shop online, which has opened a whole new channel of retailing in the Indian retail scenario. Online retailing offers consumers the

convenience of ordering merchandise to their doorstep. Recently, Future Group, which owns Pantaloon, has initiated a measure to capitalise on the online opportunity through futurebazaar.com. A similar venture flipkart.com is also proving the new channel to be highly

viable, especially since it eliminates the biggest cost of the physical store.

Easy credit availability – a boon for organised retail

The higher penetration of credit cards in India has also boosted the growth of the organised retail sector; in fact, the young population’s increasing fancy for plastic money has further fuelled their

purchasing power. Even though the organised retail sector is at a nascent stage (constituted 5.9% of the total retail industry in 2007), it is growing at a rapid pace. Moreover, the spurt in issuance of credit cards and loans by both Indian as well as foreign banks has further boosted the

segment’s growth. According to the RBI, as on FY09, the total number of outstanding credit and debit cards in India was 24.7 million and 137.4 million respectively.

Retail investment

Investments in the retail sector have improved since FDI has been allowed in single-brand and cash-and-carry formats. According to the Technopak estimates, investments in the organised

retail will touch US$ 35 billion in the next five years or so. Investments allow organised players in retail to expand at a very high rate. All key retailers in India have expansion plans over the next 3-4 years; for instance, Pantaloon has an ambitious expansion plan to take its retail space up

to 30 million square feet by 2011. Likewise, Vishal Retail is expected to take its total store count to 500 with an estimated retail space of around 10 million square feet by 2011.

Availability of quality real estate

According to industry sources, mall space in India has grown from a meagre 1.0 million square feet in 2002 to about 57.3 million square feet by the end of 2008; tier I cities are expected to account for around 73% of the mall space and the rest is likely to be equally divided between tier

II and tier III cities.

Sector Profile

The Indian retail industry has experienced high growth over the last decade with a noticeable shift towards organised retailing formats. The industry is moving towards a modern concept of retailing. The size of India's retail market was estimated at US$ 435 billion in 2010. Of this, US$ 414 billion (95% of the market) was traditional retail and US$ 21 billion (5% of the market) was organized retail. India's retail market is expected to grow at 7% over the next 10 years, reaching a size of US$ 850 billion by 2020. Traditional retail is expected to grow at 5% and reach a size of US$ 650 billion (76%), while organized retail is expected to grow at 25% and reach a size of US$ 200 billion by 2020. The US-based global management consulting firm, A T Kearney, in its Global Retail Development Index (GRDI) 2011, has ranked India as the fourth most attractive nation for retail investment, among 30 emerging markets. As India’s retail industry is aggressively expanding itself, great demand for real estate is being created. The cumulative retail demand for real estate across India is expected to reach 43 million square feet by 2013. Around 46 per cent of the total estimated demand between 2009 and 2013 will be come from Tier -1 cities. For instance, Pantaloon Retail added 2.26 million square feet (sq. ft.) of retail space during the fiscal 2011 and booked over 9 mill ion sq. ft of retail space to fructify its expansion plans in future. Some of the key players in the Indian retail market, with a dominant share are: 1) Pantaloon Retail Ltd, a Future group venture: Over 12 mn sq. ft. of retail space spread over 1,000

stores, across 71 cities in India. 2) Shoppers Stop Ltd: Over 1.82 mn sq. ft. of retail space spread over 35 stores, in 15 cities. 3) Spencer’s Retail, RPG Enterprises: Retail footage of over 1.1 mn sq. ft. with approx 250 stores, across 66 cities. 4) Lifestyle Retail, Landmark group venture: Has approximately 15 lifestyle stores and 8 Home centres. Other major domestic players in India are Bharti Retail, Tata Trent, Globus, Aditya Birla ‘More’, and Reliance retail. Some of the major foreign players who have entered the segment in India are– - Carrefour which opened its first cash-and-carry store in India in New Delhi. - Germany-based Metro Cash & Carry which opened six wholesale centres in the country. - Walmart in a JV with Bharti Retail, owner of Easy Day store—plans to invest about US$ 2.5 billion over the next five years to add about 10 million sq ft of retail space in the country. - British retailer Tesco Plc (TSCO) in 2008, signed an agreement with Trent Ltd. (TRENT), the retail arm of India’s Tata Group, to set up cash-and-carry stores. - Marks & Spencers have a JV with Reliance retail. FINANCE AND ASSISTANCE

The Indian retail sector accounts for 22 per cent of the country's gross domestic product (GDP) and contributes to 8 per cent of the total employment. India continues to be among the most attractive investment propositions for global retailers. Cumulative foreign direct investment (FDI) inflows in single-brand retail trading, during April 2000 to June 2011, stood at US$ 69.26 million. Til l now FDI up to 100 per cent was allowed for cash and carry wholesale trading and export trading under the automatic route, and FDI up to 51 per cent was allowed in single-brand products, with prior government approvals. However, the Government recently passed a cabinet note and permitted FDI upto 51% in multibrand retail ing with prior Government approval and 100% in single brand retailing thus further l iberalizing the sector. This policy initiative is expected to provide further fi llip to the growth of the sector. REGULATORY NORMS

Multiple laws and regulations are in force at the central, state and local levels for governing the retail sector. Absence of specific legislations controlling distribution trade and the existence of a plethora of laws such as the Essential commodities Act, the Cold Storage Order, the Weights & Measures Act, labor laws, the Shops Establishments Act and so on, leads to market distortion. Timely and effective implementation of GST will help bring about market integration. Streamlining the barriers for interstate movements and removal of all octroi and sales tax check points is possible if the implementation of GST is done with a national, on-line tax payment system. There should be quick implementation of all the provisions of the APMC Act , in letter and spirit, namely the institutionalization of market intermediaries, contract farming and so on. CHALLENGES Some of the key challenges faced by the sector are: 1) Shortage of skilled manpower - Front-end/retail assistant profiles in stores form a major proportion of the employment in the retail sector while store operations account for 75-80% of the total manpower employed in the organized retail sector. Unfortunately, there are very few courses specific to the retail sector and graduates/post graduates from other streams are recruited. Further, retail training opportunities such as niche courses for areas l ike merchandising, supply chain and so on are l imited. The condition is more alarming in the unorganized sector where the manpower is not equipped with even the basic level of retail specific and customer service skills, which adds to their incompetence vis-à-vis the organized sector. A cohesive effort to develop skills within the sector can have a significant potential impact on productivity and competitiveness, both within the sector and on the wider economy. 2) Lack of industry status - Due to the absence of ‘industry status’, organized retail in India faces difficulties in procurement of organized financing and fiscal incentives. The Government should grant the much needed ’industry status’ to the sector so that the sops that come with it help promote both big & small retailers. 3) Policy induced barriers – Organized retail in India is managed by both the Ministries of Commerce & Consumer Affairs. While the Ministry of Commerce takes care of the retail policy, the Ministry of Consumer Affairs regulates retailing in terms of l icenses and legislations. There is a need to govern retail operations through a single apex body. A single agency can take care of retail operations more effectively, especially with regard to addressing the grievances of retailers. The development of the retail sector can take place at a faster pace if a comprehensive legislation is enacted. 4) Real estate - Lack of sophisticated retail planning is another major challenge the sector faces. Available

space is easily interchangeable between commercial and retail use. In most cities, it is difficult to find suitable properties in central locations for retail, primarily due to fragmented private holdings, infrequent auctioning of large government owned vacant lands and litigation disputes between owners. THE FUTURE

Organized retail is a new phenomenon in India and despite the downturns, the ma rket is growing exponentially, as economic growth brings more of India’s people into the consuming classes and organized retail lures more and more existing shoppers into its open doors. By 2015, more than 300 million shoppers are l ikely to patronize organized retail chains. The growing middle class is an important factor contributing to the growth of retail in India. By 2030, it is estimated that 91 million households will be ‘middle class’, up from 21 million today. Also by 2030, 570 million people are expected to l ive in cities, nearly twice the population of the United States today. Consumer markets in emerging market economies l ike India are growing rapidly owing to robust economic growth. India's modern consumption level is set to double within five years to US$ 1.5 tril lion from the present level of US$ 750 billion. Thus, with tremendous potential and huge population, India is set for high growth in consumer expenditure. With India's large ‘young’ population and high domestic consumption, the macro trends for the sector look favorable. Online retail business is another format which has high potential for growth in the near future. The online retail segment in India is growing at an annual rate of 35 per cent, which would take its value from Rs 2,000 crore (US$ 429.5 million) in 2011 to Rs 7,000 crore (US$ 1.5 billion) by 2015. For instance the Tata Group firm Infiniti Retail, that operates its consumer durables and electronics chain of stores under the 'Croma' brand, is in the process of tapping net savvy consumers. Similarly, the Future Group, that operates a dedicated portal ‘Futurebazaar.com’ for online sales, has revealed that it is targeting at least 10 per cent of the company's total retail sales through the digital medium.

The Indian Retail sector has come off age and has gone through major transformation over the last decade with a noticeable shift towards organised retailing. A T Kearney, a US Based global

management consulting firm has ranked India as the fourth most attractive nation for retail investment among 30 flourishing markets.

The retail market is expected to reach a whooping Rs. 47 lakh crore by 2016-17, as it expands at

a compounded annual growth rate of 15 per cent, accordingy to the ‘Yes Bank - Assocham’ study.

The retail market, (including organised and unorganised retail), was at Rs. 23 lakh crore in 2011-

12. According to the study, organised retail, that comprised just seven per cent of the overall retail market in 2011-12, is expected to grow at a CAGR of 24 per cent and attain 10.2 per cent share of the total retail sector by 2016-17.

In terms of sheer space, the organised retail supply in 2013 was about 4.7 million square feet (sq

ft). This showed a 78 per cent increase over the total mall supply of just 2.5 million sq ft in 2012.

“Favourable demographics, increasing urbanisation, nuclearisation of families, rising affluence amid consumers, growing preference for branded products and higher aspirations are other

factors which will drive retail consumption in India,” said DS Rawat, Assocham Secretary General.

Retail classification

Retail industry can be broadly classified into two categories namely- organised and unorganised

retail.

Organized retail - Organised traders/retailers, who are licensed for trading activities and registered to pay taxes to the government.

Unorganized retail – It consists of unauthorized small shops - conventional Kirana shops, general stores, corner shops among various other small retail outlets - but remain as the radiating force of Indian retail industry.

Market Dynamics

In the past few years, Indian Retail sector has seen tremendous growth in the organised segment. Major domestic players have stepped into the retail arena with long term, ambitious plans to expand their business across verticals, cities and formats.

Companies like Tata, Reliance, Adani Enterprise and Bharti have been investing considerably in the booming Indian Retail market. Along with these giant retailers, a number of transnational brands have also entered into the market to set up retail chains in close association with bigger

Indian companies.

High consumer spending over the years by the young population (more than 31% of the country is below 14 years) and sharp rise in disposable income are driving the Indian organised retail

sector’s growth. Even Tier I & Tier II cities and towns are witnessing a major shift in consumer preferences and lifestyles, the result of which, they have emerged as attractive markets for retailers to expand their presence.

The Indian retail sector is highly fragmented and the unorganised sector has around 13 million retail outlets that account for around 95-96% of the total Indian retail industry. However, going

forward, the organised sector’s growth potential is expected to increase due to globalisation, high economic growth, and improved lifestyle.

Although the growth potential in the sector is immense, there are obstacles too, that could slow the pace of growth for new entrants. Rigid regulations, high personnel costs, real estate costs, lack of basic infrastructure, and highly competitive domestic retailer groups are some such

challenges.

Key drivers of the Indian Retail Industry

Emergence of nuclear families An increase in the double-income households trend

Large working population Reasonable Real estate prices

Increase in disposable income and customer aspiration Demand as well as increase in expenditure for luxury items Growing preference for branded products and higher aspirations

Growing liberalization of the FDI policy in the past decade Increasing urbanisation,

Rising affluence amid consumers

Bottlenecks

A long way to meet international standards Lack of efficient supply-chain management Lack of required retail space

No fixed consumption pattern Shortage of trained manpower

Lack of proper infrastructure and distribution channel

Emerging sectors/trends in Indian retailing

Within retail, the emerging sectors would be food and grocery, apparel, electronics, e-commerce,

fashion and lifestyle.

Incorporation of technology in the organised retail segment has been something to reckon with in the past few years. Use of computers for merchandise planning and management, control of inventory costs and supplies and replenishment of goods done electronically, internal store

billing, etc has changed the face of product retailing.

Online retail business is the next gen format which has high potential for growth in the near future. After conquering physical stores, retailers are now foraying into the domain of e-retailing.

The retail industry is all set to test waters over the online medium, by selling products through websites. Food and grocery stores comprises the largest chunk of the Indian retail market.

An emerging trend in this segment is the virtual formats where customer orders are taken online

through web portals which are delivered at the door step the very same day or the following day. This trend has been catching up with most of the large sized retail chains that have their

websites.

The Road Ahead…

According to panel members at the seventh Food and Grocery Forum India, the opportunities in food and grocery retail in India are immense, given that it constitutes about 69 per cent of India’s

total retail market. The Indian retail market, currently estimated at $490 billion, is project to grow at a compounded annual growth rate of 6 per cent to reach $865 billion by 2023. Modern retail with a penetration of only 5% is expected to grow about six times from the current 27

billion USD to 220 billion USD, across all categories and segments.

Organised Retail is emerging as the new phenomenon in India and despite the slump, the market is growing exponentially. As economic growth brings more of India’s people into the consuming

classes and organized retail lures more and more existing shoppers, by 2015, more than 300 million shoppers are likely to patronize organized retail chains.

Consumer markets in emerging market economies like India are growing rapidly owing to robust

economic growth. India's modern consumption level is set to double within five years to US$ 1.5 trillion from the present level of US$ 750 billion.

The growing middle class is an important factor contributing to the growth of retail in India. By

2030, it is estimated that 91 million households will be ‘middle class’, up from 21 million today. Also by 2030, 570 million people are expected to live in cities, nearly twice the population of the United States today.

Thus, with tremendous potential and huge population, India is set for high growth in consumer expenditure. With India's large ‘young’ population and high domestic consumption, the macro

trends for the sector look favorable.

Retailing Sector Analysis Report ndia is the 5th largest retail market in the world. The

country ranks fourth among the surveyed 30 countries in terms of global retail development. The current market size of Indian retail industry is about

US$ 520 bn (Source: IBEF). Retail growth of 14% to 15% per year is expected through 2015. By 2018, the Indian retail sector is likely to grow at a CAGR of

13% to reach a size of US$ 950 bn. Retailing has played a major role the world over in increasing productivity across a wide range of consumer goods

and services. In the developed countries, the organised retail industry accounts for almost 80% of the total retail trade. In contrast, in India organised

retail trade accounts for merely 8-10% of the total retail trade. This highlights a lot of scope for further penetration of organized retail in India.

The sector can be broadly divided into two segments: Value retailing, which is typically a low margin-high volume business (primarily food and

groceries) and Lifestyle retailing, a high margin-low volume business (apparel, footwear, etc). The sector is further divided into various categories,

depending on the types of products offered. Food dominates market consumption with 60% share followed by fashion. The relatively low contribution

of other categories indicates opportunity for organised retail growth in these segments, especially with India being one of the world's

youngest markets.

Transition from traditional retail to organised retail is taking place due to changing consumer

expectations, growing middle class, higher disposable income, preference for luxury goods, and change in the demographic mix, etc. The

convenience of shopping with multiplicity of choice under one roof (Shop-in-Shop), and the increase of mall culture etc. are factors appreciated by the new

generation. These factors are expected to drive organized retail growth in India over the long run.

Key Points

Supply Players are now moving to Tier II and Tier III cities to increase penetration and explore

untapped markets as Tier I cities have been explored enough and have reached a

saturation level.

Demand Healthy economic growth, changing demographic profile, increasing disposable

incomes, changing consumer tastes and preferences are some of the key factors that are driving and will continue to drive growth in the organised retail market in India.

Barriers to entry

Reforms by India in opening up its economy have greatly improved trade prospects, but major barriers still exist such as regulatory issues, supply chain complexities,

inefficient infrastructure, and automatic approval not being allowed for foreign investment in retail. However, some of these issues may be tackled with allowance of FDI in single and multi-brand retail.

Bargaining power of suppliers

The bargaining power of suppliers varies depending upon the target segment, the format followed, and products on offer. The unorganised sector has a dominant position, still contributing about 90% to the total retail market. There are few players

who enjoy an edge over others on account of being established players and enjoying brand distinction. Since it is a capital intensive industry, access to capital also plays an important part for expansion in the space.

Bargaining power of customers

High due to wide availability of choice. With FDI coming in, this is expected to become stronger.

Competition High. Competition is characterised by many factors, including assortment, products,

price, quality, service, location, reputation, credit and availability of retail space etc. New entrants (business houses and international players) including foreign players are expected to further intensify the competition.

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Financial

Year '14

During FY14, the economic backdrop was a key factor impacting the performance of retail companies

across various sub sectors, including that of organized retail. Consumer sentiment and business confidence continued to be subdued during the year with economic growth decelerating further. This is attributable mainly to weakening industrial growth in the context of tight monetary policy followed by the

RBI through most of the year, political & policy stability related concerns and uncertainty in the global economy.

Inflation also was an important concern area. Persistent high inflation and inflation expectations meant

that the RBI was compelled to maintain the benchmark interest rates at a much higher level than what would be needed to encourage business and economic sentiment. In the recent quarters consumer sentiment has been varied-with apparel retailers reporting an improving trend but most other retail

formats still witnessing muted off take.

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Prospects

Retail industry has been on a growth trajectory over the past few years. The industry is expected to be

worth US$ 1.3 trillion by 2020. Of this, organized retail is expected to grow at a rate of 25% p.a. A significant new trend emerging in retail sector is the increase in sales during discount seasons. It has been observed of late that sales numbers in discount seasons are significantly higher than at other

times. This is prompting retailers to start discounts earlier and have longer than usual sale season. Also, concepts such as online retailing and direct selling are becoming increasingly popular in India

thereby boosting growth of retail sector.

Another crucial structural change is expected to come in the form of implementation of FDI in multi -brand retail. The industry players are strongly in favour of entry of foreign retailers into the country. This

will help them in funding their operations and expansion plans. The expertise and experience brought in by the foreign retailers will also improve the way the Indian retailers operate. It is expected to bring in more efficiency in the supply chain functions of retailers.

However, fear of loss of business for kiranawalas is still a cause of concern and is posing hurdles in FDI implementation across country. Ironically, even though it has been some time since the government opened the door for FDI in multi-brand retail, international retailers have not yet shown wholehearted

interest in coming to India yet. Hurdles such as requirement of clearance from individual states, mandate of 30% local outsourcing of materials from micro and small enterprises are keeping the investors away from India.

Retail is mainly a volume game, (especially value retailing). Going forward, with the competition intensifying and the costs scaling up, the players who are able to cater to the needs of the consumers and grow volumes by ensuring footfalls will have a competitive advantage. At the same time

competition, high real estate cost, scarcity of skilled manpower and lack of infrastructure are some of the hurdles yet to be tackled fully by retailers.

Luxury retailing is gaining importance in India. This includes fragrances, gourmet retailing, accessories,

and jewellery among many others. The Indian consumer is ready to splurge on luxury items and is increasingly doing so. The Indian luxury market is expected to grow at a rate of 25% per annum. This will make India the 12th largest luxury retail market in the world.

Rural retailing is another area of prime focus for many retailers. Rural India accounts for 2/5th of the total consumption in India. Thus, the industry players do not want to be left out and are devising strategies especially for the rural consumer. However, players should be ready to face some imminent

challenges in rural area. For instance, competition from local mom and pop stores as they sell on credit, logistics hurdles due to bad infrastructure in rural areas, higher inventory expenses and different buying preferences amongst rural population.