CHAPTER-III

CONCEPT FRAME WORK-RETAIL BUSINESS

In the present chapter, an attempt has been made to the theoretical, concept and methodology to work out Indian retail sector

For this purpose, the chapter has been divided into six different sections.

1. Unorganized sector

2. Concept view business

3. Overview of retail business

4. Challenges of unorganized retail business

5. Growth of retail business

6. Impact of organized and FDI in retail business in India

3.1 UNORGANISED SECTOR:

Introduction

The unorganized sector covers most of the rural labour and an important part of urban labour it includes activities carried out by small and family enterprises, partly or wholly with family labour. In this sector wage-paid labour is largely non-unionized due to casual and seasonal nature of employment and spread location of enterprises. This sector is marked by low incomes, unstable and irregular employment, and lack of protection either from legislation or trade unions. The unorganized sector uses mainly labour intensive and indigenous technology. The workers in unorganized sector are so scattered that the implementation of the Legislation is very inadequate and ineffective. There are hardly any unions in this sector to act as watch-dogs. But the contributions made by the unorganized sector to the national income, is very substantial as compared to that of the organized sector. It adds more than 60% to the national income while the contribution of the organized sector is almost half of that depending on the industry.

Meanings:

The unorganized sector consists of all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services operated on a proprietary or partnership basis and with less than ten total workers.

Unorganized workers consist of those working in the unorganized enterprises or households, excluding regular workers with social security benefits, and the workers in the formal sector without any employment and social security benefits provided by the employers

The term Unorganized Sector is used to denote the collective of economic units engaged in the production of goods and services with the primary objective of generating employment and income for the persons engaged in the activity. Categories of workers:The unorganized Labour can be categorized broadly under the following categories: -

1. Occupation: Small and marginal farmers, landless agricultural laborers, share croppers, fishermen, those engaged in animal husbandry, in beedi rolling, labeling and packing, building and construction, collection of raw hides and skins, handlooms weaving in rural areas, brick kilns and stone quarries, saw mills, oil mills etc. are called occupational laborers.

2. Nature of Employment: The unorganized labourers are attached to agricultural labourers, bonded labourers migrant workers, contract and casual labourers etc.

3. Specially distressed categories: Some of the unorganized labourers are toddy tappers, scavengers, carriers of head loads, drivers of animal driven vehicles, loaders, unloaders, etc

4. Service categories: Some of the unorganized labourers are Midwives, domestic workers, barbers, vegetable and fruit vendors, newspaper vendors etc.

3.2 CONCEPT OF BUSINESS:

Introduction

As business and society have become more difficult over the years, at present, the business world is very competitive and the cost of businesses is going up. Because of high competition and rising cost of business transactions, the margin available to the owners of business becomes very thin. Therefore, the businessmen have to improve the financial performance of the business by monitoring and measuring the results of business regularly.

A business is an organization designed to provide goods, services, or both to consumers. Businesses are pre dominant in capitalist economies, in which most of them are privately owned and formed to earn profit to increase the wealth of their owners. Businesses may also form not-for-profit or be state-owned. A business owned by multiple individuals may be referred to as a company, although that term also has a more precise meaning.

Business organization refers to all necessary arrangements required to conduct a business. It refers to all those steps that need to be undertaken for establishing relationship between men, material, and machinery to carry on business efficiently for earning profits. This may be called the process of organizing. The arrangement which follows this process of organizing is called a business undertaking or organization. A business undertaking can be better understood by analyzing its characteristics.

Characteristics of Business:1. Distinct Ownership: The term ownership refers to the right of an individual or a group of individuals to acquire legal title to assets or properties for the purpose of running the business. A business firm may be owned by one individual or a group of individuals jointly.

2. Lawful Business: Every business enterprise must undertake such business which is lawful, that is, the business must not involve activities which are illegal.

3. Separate Status and Management: Every business undertaking is an independent entity. It has its own assets and liabilities. It has its own way of functioning. The profits earned or losses incurred by one firm cannot be accounted for by any other firm.

4. Dealing in goods and services: Every business undertaking is engaged in the production and or distribution of goods or services in exchange of money.

5. Continuity of business operations: All business enterprise engages in operation on a continuous basis. Any unit having just one single operation or transaction is not a business unit.

6. Risk involvement: Business undertakings are always exposed to risk and uncertainty. Business is influenced by future conditions which are unpredictable and uncertain. This makes business decisions risky, thereby increasing the chances of loss arising out of business.

Business Individual Trader:When the ownership and management of business are in control of one individual, it is known as sole proprietorship or sole trader ship. It is seen everywhere, in every country, every state, every locality. The shops or stores which you see in your locality - the grocery store, the vegetable store, the sweets shop, the chemist shop, the stationery store, the telephone booths etc. come under sole proprietorship. It is not that a sole tradership business must be a small one. The volume of activities of such a business unit may be quite large. However, since it is owned and managed by one single individual, often the size of business remains small.

Characteristics: 1. Ownership: The business enterprise is owned by one single individual that is the individual has got legal title to the assets and properties of the business. The entire profit arising out of business goes to the sole proprietor. Similarly, he also bears the entire risk or loss of the firm.

2. Management: The owner of the enterprise is generally the manager of the business. He has got absolute right to plan for the business and execute them without any interference from anywhere. He is the sole decision maker.

3. Source of Capital: The entire capital of the business is provided by the owner. In addition to his own capital he may raise more funds from outside through borrowings from close relatives or friends, and through loans from banks or other financial institutions.

4. Legal Status: The proprietor and the business enterprise are one and the same in the eyes of law. There is no difference between the business assets and the private assets of the sole proprietor. The business ceases to exist in the absence of the owner.

5. Liability: The liability of the sole proprietor is unlimited. This means that, in case the sole proprietor fails to pay for the business obligations and debts arising out of business activities, his personal property can be used to meet those liabilities.

6. Stability: The stability and continuity of the firm depend upon the capacity, competence and the life span of the proprietor.

7. Legal Formalities: In the setting up, functioning and dissolution of a sole proprietorship business no legal formalities are necessary. However, a few legal restrictions may be there in setting up a particular type of business. For example, to open a restaurant, the sole proprietor needs a license from the local municipality; to open a chemist shop, the individual must have a license from the government. Advantages of Sole Trader: 1. Better Control: The owner has full control over his business. He plans, organizes, co-ordinates the various activities. Since he has all authority, there is always effective control.

2. Prompt Decision Making : As the sole trader takes all the decisions himself the decision making becomes quick, which enables the owner to take care of available opportunities immediately and provide immediate solutions to problems.

3. Flexibility in Operations: One man ownership and control makes it possible for change in operations to be brought about as and when necessary.

4. Retention of Business Secrets: Another important advantage of a sole proprietorship business is that the owner is in a position to maintain absolute secrecy regarding his business activities.

5. Direct Motivation: The owner is directly motivated to put his best efforts as he alone is the beneficiary of the profits earned.

6. Personal Attention to Consumer Needs: In a sole tradership business, one generally finds the proprietor taking personal care of consumer needs as he normally functions within a small geographical area.

7. Creation of Employment: A sole tradership business facilitates self employment and also employment for many others. It promotes entrepreneurial skill among the individuals.

8. Social Benefits: A sole proprietor is the master of his own business. He has absolute freedom in taking decisions, using his skill and capability. This gives him high self-esteem and dignity in the society and gradually he acquires several social virtues like self- reliance, self-determination, independent thought and action, initiative, hard work etc,. Thus, he sets an example for others to follow.

9. Equitable Distribution of Wealth: A sole proprietorship business is generally a small scale business. Hence there is opportunity for many individuals to own and manage small business units. This enables widespread dispersion of economic wealth and diffuses concentration of business in the hands of a few.

Disadvantages of Sole Trader: 1. Unlimited Liability: In sole proprietorship, the liability of business is recovered from the personal assets of the owner. It restricts the sole trader to take more risk and increases the volume of his business.

2. Limited Financial Resources: The ability to raise and borrow money by one individual is always limited. The inadequacy of finance is a major handicap for the growth of sole proprietorship.

3. Limited Capacity of Individual: An individual has limited knowledge and skill. Thus his capacities to undertake responsibilities, his capacity to manage, to take decisions and to bear the risks of business are also limited.

4. Uncertainty of duration: The existence of a sole tradership business is linked with the life of the proprietor. Illness, death or insolvency of the owner brings an end to the business. The continuity of business operation is, therefore, uncertain.

3.3 RETAIL BUSINESS OVERVIEW:

Introduction:

In India, the most of the retail sector is unorganized. In India, the retail business contributes around 11 percent of GDP. Of this, the organized retail sector accounts only for about 3 percent share, and the remaining share is contributed by the unorganized sector. The main challenge facing the organized sector is the competition from unorganized sector. Unorganized retailing has been there in India for centuries, theses are named as mom-pop stores. The main advantage in unorganized retailing is consumer familiarity that runs from generation to generation. It is a low cost structure; they are mostly operated by owners, have very low real estate and labor costs and have low taxes to pay.

Evolution of retail business:

The origins of retailing in India can be traced back to the emergence of Kirana stores and mom-and-pop stores. These stores used to cater to the local people. Eventually the government supported the rural retail and many indigenous franchise stores came up with the help of Khadi & Village Industries Commission. The economy began to open up in the 1980s resulting in the change of retailing. The first few companies to come up with retail chains were in textile sector, for example, Bombay Dyeing, S Kumar's, Raymonds, etc. Later Titan launched retail showrooms in the organized retail sector. With the passage of time new entrants moved on from manufacturing to pure retailing. Retail outlets such as Foodworld in FMCG, Planet M and Musicworld in Music, Crossword in books entered the market before 1995. Shopping malls emerged in the urban areas giving a world-class experience to the customers. Eventually hypermarkets and supermarkets emerged. The evolution of the sector includes the continuous improvement in the supply chain management, distribution channels, technology, back-end operations, etc. this would finally lead to more of consolidation, mergers and acquisitions and huge investments.

Retailing in India can be traced to the following:-The era of rural retail industry could be categorized into weekly markets and village fairs. Weekly markets catered to the daily necessities of villages. Village fairs provided goods from food, clothing to small consumer durables.

1. The traditional era saw the emergence of the neighborhoods kirana stores to cater to convenience of the Indian consumers. The era of government support saw indigenous franchise model of stores, chains run by khadi LH industries commission.

2. The Modern Era: Retailing is going through a transition phase in India. The corner grocery stores giving way to international formats of retailing. The traditional food and grocery segment has seen the emergence of supermarkets and grocery chains convenience stores and fast food chains.

1. The Traditionally Era:

The evaluation of traditional retail business is small retailing, including street vending, has been one of the easy-entry economic activities for the working poor, often as a means of their survival this has flourished for a long time in India. In particular, street vending, including for poor women, has been a major source of a large number of urban working poor who do not have a fixed premise to sell their products, most of whose products are also targeted to poorer consumers. There are a number of initiatives taken by both the government and non-governmental organizations (NGOs) to support street vendors in India, such as development of street vendors organizations, advocating supportive policies and concrete measures to facilitate their activities. India has a rich traditional history of retail trade. Many of the retail formats have been in existence since ancient times and at the same time they have a presence across the country.

Some of the traditional retail formats are:

Mandis: Mandis are agricultural markets set up by State Governments to procure agricultural produce directly from farmers. Located in high production centers of different crops, these markets can be categorized as grain markets, cotton mandis, soya mandis, vegetable mandis etc.

Haats: A haat is a periodic market which exists typically at the village level. A haat can be said to be public gathering of buyers and sellers of commodities, fruits, vegetables, household goods, clothes, and accessories. Unlike mandis, haats are accessible to small farmers. Local bodies usually control auctions of space and issue licenses and permits to vendors to use these haats

Melas: Another prominent feature of the Indian rural life is a mela. Melas can be classified primarily according to their nature, into commodity fairs and religious fairs.

2. The Modern Era:

The evaluation of modern trend of retail business economy has been undergoing a fast change, involving market liberalization, including in the retail sector. Large multinational retailers, such as Wal-Mart, are now coming into the Indian market through joint ventures with local wholesalers. While it is yet to be seen as to how successful such international retailing chain stores will be, far-reaching impacts on both small retailers and consumers in the Indian market will be beyond our imagination. It is also feared that small retailers will be crowded out in the wake of expansion of larger foreign and domestic retailers in the market. The latter can sell better quality products at cheaper price, and on a much wider scale.

Phases in the Evolution of Retail Sector

Weekly Markets, Village and Rural Melas

Source of entertainment and commercial exchange

Convenience stores, Mom-and-pop / Kirana shops

Neighborhood stores/convenience

Traditional and pervasive reach

PDS outlets, Khadi stores, Cooperatives

Government supported

Availability/low costs/distribution

Exclusive brand outlets, hypermarkets and supermarkets, department stores and shopping malls

Shopping experience/ efficiency Modern formats/ international

Meaning of Retail

The word Retail is derived from the French Word Retaillier meaning to cut a piece off or to break bulk. In simple terms this means a firsthand transaction with the customer. Retailing thus might be understood as the final step in the distribution of merchandise, for consumption by the end consumers. It thus consisted of all activities involved in the marketing of goods and services directly to the consumers for their personal, family or household use. Retailing involves a direct interface with the customer and the coordination of business activities from end to end- right from the concept or design stage of a product or offering, to its delivery and post-delivery service to the customer. Retail was the final stage of any economic activity. By virtue of this fact, retail occupied an important place in the world of economy.

A retailer may be defined as a dealer or trader who sells goods in small quantities or one who repeats or relates. Retailing can be considered as the last stage in the movement of goods and or services to the consumer. Put simply, any firm that sells products to the final consumer is performing the function of retailing. Thus, it consists of all activities involved in the marketing of goods and services directly to the consumers, for their personal, family or household use.

Definitions of retail:

The High Court of Delhi In 2004 defined the term retail as a sale for final consumption in contrast to a sale for further sale or processing a sale to the ultimate consumer. Thus, retailing can be said to be the interface between the producer and the individual consumer buying for personal consumption. This excludes direct interface between the manufacturer and institutional buyers such as the government and other bulk customers. Retailing is the last link that connects the individual consumer with the manufacturing and distribution chain. A retailer is involved in the act of selling goods to the individual consumer at a margin of profit.

Philip Kotler Retail includes all the activities involved in selling goods or services to the final consumers for personal, non-business use. A retailer or retail store was any business enterprise whose sales volume comes primarily from retailing.

The North American Industry Classification system (NAICS) specifies that the retail trade sector comprises establishments primarily engaged in retailing merchandise, generally without transformation, and rendering services incidental to the sale of merchandise.Retailing is a distribution channel function, where one organization buys products from supplying firms or manufactures products themselves, and then sells these directly to consumers.

Retailing is defined as all the activities involved in selling goods or services directly to final consumers for personal, non business use. Retailing consists of the final activity and steps needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer.

Retailing consists of the sale of goods or merchandise, from a fixed location such as a department store or kiosk, in small or individual lots for direct consumption by the purchaser.

Retailing may include subordinated services, such as delivery. Purchasers may be individuals or businesses. In commerce, a retailer buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells smaller quantities to the end-user. Retail establishments are often called shops or stores.

Retail comes from the French word retailers, which refers to "cutting off, clip and divide" in terms of tailoring (1365). It first was recorded as a noun with the meaning of a "sale in small quantities" in 1433 (French). Its literal meaning for retail was to "cut off, shred, paring".

According to David Gilbert Any business that directs its marketing effort towards satisfying the final consumer based upon the organization of selling goods and services as a means of distribution

According to Chetan Bajaj Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use. It is responsible for matching individual demands of the consumers with supplies of all the manufacturers.

Concept view of Retailer:

Generally goods and services pass through several hands before they come to the hands of the consumer for use. But in some cases producers sell goods and services directly to the consumers without involving any middlemen in between them, which can be called as direct channel. So there are two types of channels, one direct channel and the other, indirect channel.

There are many indirect channels like:

Producer,

Wholesaler,

Retailer,

Consumer,

Wholesalers and retailers are important middlemen who generally facilitate flow of goods from the producers to the consumers.

Meaning of Retailer:

Retailers are the traders who buy goods from wholesalers or sometimes directly from producers and sell them to the consumers. They usually operate through a retail shop and sell goods in small quantities. They keep a variety of items of daily use.

Characteristics of Retailers:The following are the characteristics of retailers:

1. Retailers have a direct contact with consumers. They know the requirements of the consumers and keep goods accordingly in their shops.

2. Retailers sell goods not for resale, but for ultimate use by consumers. For example, you buy fruits, clothes, pen, pencil etc. for your use, not for sale.

3. Retailers buy and sell goods in small quantities. So customers can fulfill their requirement without storing much for the future.

4. Retailers require less capital to start and run the business as compared to wholesalers.

5. Retailers generally deal with different varieties of products and they give a wide choice to the consumers to buy the goods.

Functions of Retailers:Retailer performs various functions while selling their products and services to their customers and it is these functions that allow the products to ultimately be sold successfully. In this context, they perform various functions like sorting, breaking bulk, holding stock, as a channel of communication, storage, advertising and certain additional services.

Sorting: Manufacturers usually make one or a variety of products and would like to sell their entire inventory to a few buyers to reduce costs. Final consumers, in contrast, prefer a large variety of goods and services to choose from and usually buy them in small quantities. Retailers are able to balance the demands of both sides, by collection of an assortment of goods from different sources, buying them in sufficiently large quantities and selling them to consumers in small units.

Breaking Bulk: Breaking bulk is another function performed by retailer. The word retailing is derived from the French word retailer, meaning to cut a piece off. To reduce transportation costs, manufacturers and wholesalers typically ship large cartons of the product, which are then tailored by the retailers into smaller quantities to meet individual consumption needs.

Holding Stock: Retailers also offer the service of holding stock for the manufacturers. Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the manufacturer to regulate production. Consumers can keep a small stock of products at home as they know that this can be replenished by the retailer and can save on inventory carrying costs.

Additional Services: Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. Providing product guarantees, after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers end. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for it later. Retailers fill orders, promptly process, deliver and install products. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. The display itself allows the consumer to see and test products before actual purchase. Retail essentially completes transactions with customers

Channel of Communication: Retailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers. From advertisements, salespeople and display, shoppers learn about the characteristics and features of a product or services offered. Manufacturers, in their turn, learn of sales forecasts, delivery delays, and customer complaints. The manufacturer can then modify defective or unsatisfactory merchandise and services.

Transport and Advertising Functions: Small manufacturers can use retailers to provide assistance with transport, storage, advertising and pre-payment of merchandise. This also works the other way round in case the number of retailers is small. The numbers of functions performed by a particular retailer have a direct relation to the percentage and volume of sales needed to cover both their costs and profits.

Buying and assembling of goods: Retailers buy and assemble varieties of goods from different wholesalers and manufacturers. They keep goods of those brands and variety which are liked by the customers and the quantity in which these are in demand.

Storage of goods: To ensure ready supply of goods to the customer retailers keep their goods in stores. Goods can be taken out of these stores and sold to the customers as and when required. This saves consumers from botheration of buying goods in bulk and storing them.

Credit facility: Although retailers mostly sell goods for cash, they also supply goods on credit to their regular customers. Credit facility is also provided to those customers who buy goods in large quantity.

Personal services: Retailers provide personal services to the customers by providing expert advice regarding quality, features and usefulness of the items. They give suggestions considering the likes and dislikes of the customers. They also provide free home delivery service to customers. Thus, they create place utility by making the goods available when they are demanded.

Risk bearing: The retailer has to bear many risks, such as risk of:

Fire or theft of goods

Deterioration in the quality of goods as long as they are not sold out

Display of goods: Retailers display different types of goods in a very systematic and attractive manner. It helps to attract the attention of the customers and also facilitates quick delivery of goods.

Supply of information: Retailers provide all information about the behavior, tastes, fashions and demands of the customers to the producers through wholesalers. They become a very useful source of information for marketing research.

Behaviour of Retailer:

Retailing can be distinguished in various ways from other businesses such as manufacturing. Retailing differs from manufacturing in the following ways:

There is direct end user interaction in retailing.

It is the only point in the value chain to provide a platform for promotions.

Sales at retail level are generally in smaller unit sizes.

Location is a critical factor in retail business.

In most retail business, services are as important as core products.

There are a larger number of retail units compared to other members of the value chain. This occurs primarily to meet the requirements of geographical coverage and population density.

Retailers have a direct contact with consumers. They know the requirements of the consumers and keep goods accordingly in their shops.

Retailers sell goods not for resale, but for ultimate use by consumers. For example, you buy fruits, clothes, pen, pencil etc. for your use, not for sale.

Retailers buy and sell goods in small quantities. So customers can fulfill their requirement without storing much for the future.

Retailers require less capital to start and run the business as compared to wholesalers.

Retailers generally deal with different varieties of products and they give a wide choice to the consumers to buy the goods.

Classification of Retail Business:

The retail trade classification is further divided in the following two ways.

1. Organized Retail: Organized Retail refers to trading activities undertaken by licensed retailers i.e. those who are registered for sales tax, income tax etc. These included the corporate backed hypermarkets, retail chains & also privately owned large retail business. Organized retail units operate on bigger premises, some of which are air conditioned and have generators. They keep wide range of quality products with brand image.

2. Unorganized Retail: In the unorganized Sector, the retail shops are mostly owner-operated. They have a low cost, structure, with small premises, low labour cost. 96 percent Indian retail market is under unorganized sector.

3.4 UNORGANISED RETAIL BUSINESS IN INDIA:

Introduction

India is the country having the most unorganized retail market. Traditionally the retail business is run by Mom & Pop having Shop in the front & house at the back. More than 99% retailers function in less than 500Sq.Ft of area. All the merchandise was purchased as per the test & vim and fancies of the proprietor also the pricing was done on ad hock basis or by seeing at the face of customer. Generally the accounts of trading & home are not maintained separately. Profits were accumulated in slow moving & non-moving stocks which were to become redundant or consumed in-house. Thus profits were vanished without their knowledge. The Manufactures were to distribute goods through C & F agents to Distributors & Wholesalers. Retailers happen to source the merchandise from Wholesalers & reach to end-users. The merchandise price used to get inflated to a great extent till it reaches from Manufacturer to End-user. Selling prices were largely not controlled by Manufacturers. Branding was not an issue for majority of customers.

significance of unorganized retail :

Indian retail sector is pre-dominantly controlled bytraditional and unorganized formats of retailing. These formats have emerged and developed with the growth of population in the country in rural and semi urban areas. The traditional "kirana "or "Baniya ki Dukan" still enjoy the leadership and commanding position in retail trade. In smaller towns and urban areas we may see the power of small family run independent 'mom and pop' store offering a wide range of merchandise mix. These store formats are traditional and do not enjoy professionalism. A large number of these stores are family business involving more than one generation. These retailers have developed a rapport and goodwill among customers and popularly known as" Dukan Wala bhaiya "

Unorganized retail business one of the easiest ways to generate self-employment, as it requires limited investment in land, capital and labour. It is generally family run business with lack of standardization and the retailers who are running this store are lacking education, experience and exposure. In smaller towns and urban areas, there are many families who are traditionally using these unorganized retail business shops and mom and pop stores offering a wide range of merchandise mix. Generally, these unorganized retail business shops are the family business of these small retailers which they are running for more than one generation.

The reasons might be-

In smaller towns and urban areas, there are many families who are traditionally using these kirana shops and 'mom and pop' stores offering a wide range of merchandise mix. Generally these kirana shops are the family business of these small retailers which they are running for more than one generation.

These kiran shops are having their own efficient management system and with this they are efficiently fulfilling the needs of the customer. This is one of the good reasons why the customer doesn't want to change their old loyal kirana shop.

A large number of working class in India is working as daily wage basis, at the end of the day when they get their wage, they come to this small retail shop to purchase wheat flour, rice etc for their supper. For them this the only place to have those food items because purchase quantity is so small that no big retail store would entertain this.

Similarly there is another consumer class who are the seasonal worker. During their unemployment period they use to purchase from this kirana store in credit and when they get their salary they clear their dues. Now this type of credit facility is not available in corporate retail store, so this kirana stores are the only place for them to fulfill their needs.

It is the convenience store for the customer. In every corner the street an unorganized retail shop can be found that is hardly a walking distance from the customer's house. Many times customers prefer to shop from the nearby kirana shop rather than to drive a long distance organized retail stores.

These unorganized stores are having n number of options to cut their costs. They incur little to no real-estate costs because they generally operate from their residences.

The Unorganized Retail Formats: Unorganized retail formats refer to those formats that have long been part of the retail landscape of India. They include formats like kirana and independent stores that are typical of the unorganized retail sector across product categories and also the most administratively organized form of Indian retailing cooperatives and government controlled retail institutions In terms of professional management and efficiency of combination with value chain, the traditional retail formats are better classified under the unorganized retail sector.

Grocery Stores: Grocery stores sell are variety of food and non-food products, such as meat, produce, cereal, dairy products, health and beauty aids and cleaning products. Depending on their location and the area's population, the size of a grocery store can vary from a small family market to a large supermarket. Food retailers: There are large number and variety of retailers in the food-retailing sector. Traditional types of retailers, who operate small single-outlet businesses mainly using family labour, dominate this sector .In comparison, super markets account for a small proportion of food sales in India. However the growth rate of super market sales has being significant in recent years because greater numbers of higher income Indians prefer to shop at super markets due to higher standards of hygiene and attractive ambience.

Health & beauty products: With growth in income levels, Indians have started spending more on health and beauty products .Here also small, single-outlet retailers dominate the market .However in recent years, a few retail chains specializing in these products have come into the market. Although these retail chains account for only a small share of the total market , their business is expected to grow significantly in the future due to the growing quality consciousness of buyers for these products . Pharmacy retailing in India is largely dominated by traditional/local chemists. Over the years, this category has attracted a number of pharmaceutical companies venturing into retailing. These new entrants are offering attractive discounts along with value added services (e.g. diagnostics and lab facilities, home delivery)

Clothing & footwear: Numerous clothing and footwear shops in shopping centers and markets operate all over India. Traditional outlets stock a limited range of cheap and popular items; in contrast, modern clothing and footwear stores have modern products and attractive displays to lure customers. However, with rapid urbanization, and changing patterns of consumer tastes and preferences, it is unlikely that the traditional outlets will survive the test of time.

Home furniture & household goods: Small retailers again dominate this sector. Despite the large size of this market, very few large and modern retailers have established specialized stores for these products. However there is considerable potential for the entry or expansion of specialized retail chains in the country.

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

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

Electronics: Historically, this market was largely dominated by branded stores which primarily sold high ticket value items (television, refrigerators etc.) which over the years has broadened to include lower ticket value products (hand blenders, water purifiers etc.) There also exists a parallel second hand market for these goods (exchange offer items), thus creating a need for retailer to reverse logistics. Easy availability of consumer finance, high technology acceptance, newer product categories and technologies, and desire to emulate the developed world has led to an increase in the overall spending within this category (Deloitte, 2010)

Challenges of unorganized retail business

Unorganized retail businesses to describe the different challenges in India the retail outlets concerned are small but their Challenges seem to be many. In general, it is observed that every outlet is hit by some problem or the other depending on its size and structure. The following major Challenges are identified are as follows:

1. Challenges of Marketing

2. Challenges with Government

3. Challenges with Labour

4. Challenges with Competitor

5. Challenges of social and Economical policy

6. Challenges of finance

1. Challenges of Marketing:

The challenges of marketing one of the main factors consumer because consumers today see an exciting explosion of choices, new categories, and new shopping options and have increasing disposable income to fulfill their aspirations they are seeking more information to make these choices. Consumers are increasingly seeking convenience in shopping. Today consumer changes so many factors there

Factors of changes:

Sales Promotion Schemes: Retailing is an activity which is highly affected by the value for money aspect. If the customer feels is going to get best deal out of every single rupee is spending on purchase. Modern retailers use various sales promotion schemes that not only help them boost their sales but also give their customers a feel that they will get best value for their money. This variable is an important one as it helps creating a positive perception about organized retailing and may motivate them to prefer the modern retail formats over traditional ones.

Family Entertainment Shopping: Entertainment is sought by everyone in life and in present retail scenario it has become an important factor to attract shoppers to the retail outlets or shopping malls. Retailing has been changed altogether these days, shoppers look for entertainment along with their shopping. They want their kids to play and enjoy while parents shop. Customers today look whole family entertainment while shopping. Shopping malls today have become a place of enjoyment, fun and frolic for the entire family. This can attract customers and affect their perception and thus, preference positively towards the modern formats of retail.

Status Symbol: India has almost 96% of unorganized retail that means only 4% of retail is organized. People still are very selective when it comes to shopping. Shopping from organized retailing was considered to be status symbol in India in the initial phase of modern retail and in this era also this factor may be affecting the perception of the customer. Keeping this in mind the scholar has considered this factor in the study. This factor may also be affecting the preference level of the shoppers for organized retailing.

Attractive visual display: Display plays an important role in creating perception of the shoppers as visual impact is more powerful than the verbal. Eye-catching Visual merchandising or display of goods acts as a silent sales person. People these days are attracted by the visual aspects of retail. Best or the latest items on display helps shoppers to make a perception about the retail outlet which may turn into his preference for the retailer.

Good parking facilities: With the increasing number of four wheelers, parking has become a big problem for the shoppers as they go out for shopping. Parking may also act as an important factor in deciding for a purchase or a retailer. Retailers who offer ample parking space for the shoppers may be at an advantage as compared to the retailers where parking is a problem. Thus, shoppers who perceive that organized retailing offers good parking facility may prefer the newer form of retailing for their shopping needs. Wide variety Product: this is another important factor as customer always prefers variety for the shopping. The modern retailers have this advantage over the traditional ones that they have better assortment and variety of the products at their outlet. This factor helps them create a perception in shoppers mind that they will get the best of all if they visit a modern retail outlet. Thus, this can be a factor which may influence the shoppers very much and force them to shop from an organized retail outlet rather than a traditional one.

2. Challenges with Government:

The Indian government has not focused 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 , 1948

Standards of Weights and Measures Act, 1976

Provisions of the Contract Labour (Regulations and Abolition) Act, 1970

The Income Tax Act, 1961

Customs Act, 1962

The Companies Act, 1956

The challenges of retail trade government influences very essential because the rules and regulations to favourable for organized and multilevel organization of the government. A retailer has to obtain a number of permissions from the government to start his business. Retailers expect some incentives from the government to run their business successfully. Policies of government sometimes cause unexpected struggles in the retail business. In spite of the cooperation extended by the government to retailers; they face many Challenges from various departments like weights & measurements, Local tax, Municipal tax, quality control. Officers of these departments harass retailers for pretty irregularities. This leads to wastage of business hours. Small retailers, if they run their business in accordance to the policies of the government, can avail themselves various facilities provided under different schemes. Government provides information about the latest trends in international retail business. In view of its global prominence, interference of government is inevitable in retail sector.3. Challenges with labour:

The challenges of many retail outlets are facing administrative challenges. In the present day competitive world, to satisfy the consumers, retail shop has to be organized with certain standards. The utmost important thing in field of organizing is the work culture of the employees. Most of the employees are not working with dedication the main reason for this is lack of good working conditions in the shops. Employees are frequently changing from shop to shop. Lack of good working conditions make employees change from retail shops to other fields. Employees demand hike in their wages, more holidays, reduced working hours etc.

Challenges with Competitor:

International organization and organized retail store service available in India and they differ, price, quality, size, variety, freshness, smell, status, symbol, brand value etc., In the present situation it can be clearly said that all middle class people as well as lower income people are using organized retail store. By considering this situation management and other organized retail store have come up with different marketing strategy i.e., freshness, door delivery, membership card etc., but customers prefer to purchase their variety of goods due to various reasons. It is obvious that the quality, price, advertisement, brand value, freshness, convenience etc. Before choosing shops around for that is best suitable. In the modern world advertisements is a must to all types of product to get popularity, among the people while giving advertisement one should keep it in mind not to give wrong information about the products.

Organized Retail Format:

Departmental Stores: It the very old format of large type of stores. This format emerged in the early nineteenth century as a way of offering a collection of personal and home furnishings goods under one roof to the increasingly discriminating and affluent Victorian middle-class customers. They are still a powerful presence in todays retailing landscape, providing the focus for shopping centers around the world. It is also a multi level store.

Variety Stores: In this type of store large varieties of goods in one roof. In terms of describing large stores, the boundaries of definition are becoming increasingly blurred. Some variety stores like the larger Marks and Spencer stores are becoming very much like department stores, as increased space allows the width and depth of the product range to be expanded. In contrast, some department stores traded down as a survival strategy in the late 1980s and early 1990s, leading to the evolution of the discount department store.

Supermarkets and hypermarkets: Supermarkets, a store concept have been a highly successful retail format. The real advantage that the supermarket offered the customer was self-service, and therefore a much faster method of shopping. Instead of requesting products over a counter, the supermarket allowed the customer to get involved with the product prior to purchase. The ability to peruse the product offering, try new products and impulse purchase, appealed to the increasingly affluent postwar customer. In addition, the space and labour-saving factors allowed retailers to offer a wider choice of product at lower prices. The supermarket was therefore quickly adopted as the principal methods for acquiring every day goods. Supermarkets now dominate the retail industry. They have grown into superstores, offering more and more products, adapting changes to provide the most convenient method of shopping for the majority of household goods for the majority of households.

Discount Stores: Discount stores can be extremely minimal in terms of store environment and service, but a synthesis of the discounter and the specialist chain store has emerged in the form of the value retailer, who combines carefully planned product ranges, good service and store layout with an everyday low pricing policy.

Convenience Stores: The convenience store concept has been the savior of many small retail businesses who have seen their trade taken away by large grocery orientated multi-outlet retailers. By adapting to provide an emergency, impulse purchase and top-up service, many small retailers have found a living with a product range that is reoriented towards convenience.

4. Challenges of Finance:

Retail sector, shortage of finance or capital is considered to be the most important factor responsible for a host of Challenges faced by them.

Sources of Finance: unorganized retail traders generally depend on two kinds of capital, (1) Equity or own capital and (2) borrowed capital consisting of (i) long term capital for its investment in equipment and other capital assets and (ii) short term capital to meet current needs of the Business. Own capital is usually provided by the Retailers themselves. It is sometimes supplemented by the resources raised from friends and relatives either as partners. Small retailers generally do not encourage capital from outside agencies as it involves sharing of management and control. Much of this initial capital is required for the purchase of fixed assets like land, building, Furniture, other Technical equipments and the balance for working capital. Owned capital may not be sufficient to meet the long term needs. In such a case, besides the own capital, long term capital is needed for expansion and renovation of enterprises and modernization of shops. Short term credit is needed for working capital, to buy trade goods, to pay wages, to maintenance expenditure etc.

Various Schemes of Banks: Indian government has introduced various schemes to extend financial assistance rural retailers availed themselves loans under the schemes. Loans availed under various schemes is discussed here under in comparison with number of outlets. It is clear that commercial banks are one of the sources of funds to urban and rural outlets. Banks also granted loans to retail outlets under various governmental schemes. Challenges in Obtaining Finance: Many of retailers are unwilling to approach financial agencies in spite of their financial needs and majority of retailers mentioned the following reasons for their uncertainty Various Challenges are encountered by rural and urban traders in dealing with the financial agencies in raising funds and repaying the loans to them. The important among them are security, delay in sanction, insufficient financing, high rates of interest and cumbersome procedures. Loan taken by Commercial Banks: Generally banks do not sanction and release loan amount to retailers as soon as they apply for a loan. Banks have to verify the application and forward it to their higher authorities for approval. It retailers apply for a loan under some government scheme, Government officials concerned have to inspect their application obviously it takes some time for sanctioning the loan from the date of application. Besides this delay, banks take some more time for releasing the sanctioned loan amount to maintain their liquidity position. Timely financial assistance is essential to any Retail outlet. When commercial banks take long periods of time in sanctioning the financial assistance from the date of application to the date of sanction and disbursement, the Traders suffer a lot. It is observed that banks delayed their assistance in many cases.3.5 IMPACT OF ORGANISED AND FOREIGN DIRECT INVESTMENT

Introduction

FDI Foreign direct investment (FDI) or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor. Foreign direct investment is the sum of equity capital, reinvestment of earnings and other long or short term capital as shown in the balance of payments. It usually involves participation in management, joint venture, transfer of technology and expertise. There are two types of FDI: (a) Inward foreign direct investment and (b) Outward foreign direct investment. Foreign direct investment excludes investment through purchase of shares. Foreign direct investment can be used as one measure of growing economic globalization.

Single brand: Single brand implies that foreign companies would be allowed to sell goods sold internationally under a single brand, viz., Reebok, Nokia and Adidas. FDI in Single brand retail implies that a retail store with foreign investment can only sell one brand. For example, if Adidas were to obtain permission to retail its flagship brand in India, those retail outlets could only sell products under the Adidas brand and not the Reebok brand, for which separate permission is required. If granted permission, Adidas could sell products under the Reebok brand in separate outlets.

Multi brand: FDI in Multi Brand retail implies that a retail store with a foreign investment can sell multiple brands under one roof. Opening up FDI in multi-brand retail will mean that global retailers including Wal-Mart, Carrefour and Tesco can open stores offering a range of household items and grocery directly to consumers in the same way as the ubiquitous kirana store.

Politician view about FDI in retail business in India:

Dr.Manmohan Singh, Prime Minister in India: We should not permit FDI in retail trade. India does not require this kind of reforms which would, rather than creating employment, destroy employment. Sushama Swaraj, BJP, opposite leader in lokshaba: The decision of the Government to permit FDI in multi - brand retail trade is a deliberate duplicity of the assurance given by the Government on the floor of the Parliament on 7th Dec 2011. Nitish Kumar, CM, in Bihar: The retail business is doing well, the shopkeepers are earning money and people are buying their daily needs from them If FDI comes in, the farmers will not be benefitted at all.The foreign investors promise in the beginning that profits will reach farmers. But ultimately, the farmers get nothing. Prakash Singh Badal, CM, in Punjab: If FDI comes, biggies would eat into the share of small fries, which would be against the idea of social welfare. Oommen Chandy, CM, Kerala: The Centre's decision to allow 51 per cent foreign investment in multi-brand retail business will not be implemented in the state. Navin Patnaik, CM, in Odisha: FDI in retail is neither going to bring down the prices nor improve the investment climate. J.Jayalalithaa, CM,in Tamilnadu: The UPA government has been making blunder after blunder by adopting many anti-people policies and this latest decision will only add up to one more such serious blunder committed by the Central government which seems to be totally unmindful of the interests of the common people. Overview of FDI in Indian retail sector:

Retail sector one of the pillars of its economy and accounts for 14 to 15% of its GDP. The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail markets in the world, with 1.2 billion people. Indias retailing industry is essentially owner manned small shops. In 2012, larger format convenience stores and supermarkets accounted for about 4% of the industry, and these were present only in large urban centers. India's retail and logistics industry employs about 40 million Indians (3.3% of Indian population). Until 2011, Indian central government denied foreign direct investment (FDI) in multiband retail, threatening foreign groups from any ownership in supermarkets, convenience stores or any retail outlets. Even single-brand retail was limited to 51% ownership and a practical process. In November 2011, India's central government announced retail reforms for both multi-brand stores and single-brand stores. These market reforms paved the way for retail innovation and competition with multi-brand retailers such as Wal-Mart, Carrefour and Tesco, as well single brand majors such as IKEA, Nike, and Apple. History has witnessed that the concern of allowing unrestrained FDI flows in the retail sector has never been free from controversies and simultaneously has been an issue for unsuccessful deliberation ever since the advent of FDI in India. Where on one hand there has been a strong outcry for the unrestricted flow of FDI in the retail trading by an overwhelming number of both domestic as well as foreign corporate retail giants; to the contrary, the critics of unrestrained FDI have always fiercely retorted by highlighting the adverse impact, the FDI in the retail trading will have on the unorganized retail trade, which is the source of employment to an enormous amount of the population of India. The antagonists of FDI in retail sector oppose the same on various grounds, like, that the entry of large global retailers such as Wal-Mart would kill local shops and millions of jobs, since the unorganized retail sector employs an enormous percentage of Indian population after the agriculture sector; secondly that the global retailers would conspire and exercise monopolistic power to raise prices and monopolistic power to reduce the prices received by the supply. Advantages of FDI

FDI plays an extraordinary and growing role in global business. It can provide a firm in the home country with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing. For a host country FDI is said to be an important factor for spurring the development of a nation in the following ways.

Economic development: Foreign Direct Investment helps in the economic development of the particular country where the investment is being made. It has also been observed that FDIs helped several countries when they have faced economic hardships.

Transfer of technologies: FDI also permits the transfer of technologies. This is done basically in the way of provision of capital inputs. It also assists in the promotion of the competition within the local input market of a country.

Human capital resources: The countries that get FDIs from another country can also develop the human capital resources by getting their employees to receive training on the operations of a particular business. The profits that are generated by the FDIs that are made in that country can be used for the purpose of making contributions to the revenues of corporate taxes of the recipient country.

Job opportunity: Foreign direct investment helps in the creation of new jobs in a particular country. It also helps in increasing the salaries of the workers. This enables them to get access to a better lifestyle and more facilities in life. It has normally been observed that foreign direct investment allows for the development of the manufacturing sector of the recipient country.

Income generation: FDI assists in increasing the income that is generated through revenues realized through taxation. It also plays a crucial role in the context of rise in the productivity of the host countries. In case of these countries, their companies get an opportunity to explore newer markets and thereby generate more income and profits.

Export: It also opens up the export window that allows these countries the opportunity to cash in on their superior technological resources. It has also been observed that as a result of receiving FDIs from other countries, the recipient countries can keep their rates of interest at a lower level. It becomes easier for the business entities to borrow finance at lesser rates of interest.

Linkages and spillover to domestic firms: Various foreign firms are now occupying a position in the Indian market through Joint Ventures and collaboration concerns. The maximum amount of the profits gained by the foreign firms through these joint ventures is spent on the Indian market, which in turn benefits the domestic firms.

Proper tax system: Tax revenue will increase like VAT and service tax. The organized sales with computerized billing system will also yield more revenue through commodity taxes like VAT and service tax to the government. Thus tax buoyancy of the economy would increase.

Distribution system: The report shows that 30-35% of Indias total production of fruits and vegetables is wasted every year due to inadequate cold storage and transport facilities. Almost half of this wastage can be prevented if fruit and vegetable retailers have access to specialized cold storage facilities and refrigerated trucks. The organized retail will bring in efficient practices that will help farmers in the procurement process, reduce wastage with finally efficient storage and will finally cut the losses. The giant retailers will help India to have strong storage system with highly developed transportation. Giant retailers with decades of experience on how to manage mountains of inventories supply them to key distribution centers and do it all faster, better, cheaper. The arrival of foreign retailers will definitely bring in synergies in distribution management practices.

Partnership opportunity: Indian retailers have reason to be happy with foreign direct investment in the retail sector because it is a partnership opportunity that involves a lot of learning that could take them to higher profitability. The central government is planning to have 51% foreign investment; this means the foreign retailers need partners for the rest investment to gain market. Problems of allowing FDI

Adverse impact on the employment:In the absence of any substantial improvement in the employment generating capacity of the manufacturing industries in our country, entry of foreign capital in the retail sector is likely to play havoc with the livelihood of millions. Let alone the average Indian retailer in the unorganized sector, no Indian retailer in the organized sector will be able to meet the onslaught from a firm such as Wal-Mart when it comes in full swing. With its incredibly deep pockets Wal-Mart will be able to sustain losses for many years till its immediate competition is wiped out. This is a normal predatory strategy used by large players to drive out small and dispersed competition. This entails job losses by the millions. A back-of-the-envelope calculation can substantiate the point. If we take the case of India, it has 35 towns each with a population over 1 million. If Wal-Mart were to open an average Wal-Mart store in each of these cities and they reached the average Wal-Mart performance per store-we are looking at a turnover of over Rs 80330mn with only 10195 employees. Extrapolating this with average trend in India, it would mean displacing about 432000 persons and if we suppose that the large FDI driven retailers take up 20% of the retail trade in India, it would mean a turnover of Rs 800 billion and displacement of eight million persons employed in the unorganized retail sector.

Threat on Indian retail players

Entry of global players would increase internal rivalry among the players than promoting business of overall industry. Their economies of scale will allow them to reduce their margin to provide value for money products in the beginning to grab the market share which is not possible for domestic players to reduce in comparison to global players because of huge investment. Majority of the Indian players have not attained even breakeven point as organized retail is still at the nascent stage in India. Predatory practices of the multinational retail chains

FDI in retail is often supported on the basis of the need to develop modern supply chains in India, in terms of the development of storage and warehousing, transportation, logistic and support services, especially in order to meet the requirements of agriculture and food processing industries. While the infrastructure and technology needs are undeniable, the belief that the entry of multinational food retailers is the only way to build such infrastructure is unfounded. Moreover, the pitfalls of relying upon an agrarian development strategy driven by food retail chains and giant agribusinesses have already become clear through the experience of several developing countries like Malaysia, Thailand and Vietnam. Farmers experience many problems in supplying their produce to the food retailers and many get eliminated under the preferred supplier system. Farmers also face problems related to depressed prices due to cutthroat competition among the food retailers, delayed payments and lack of credit and insurance The emergence of such problems in India, especially in the context of the deep crisis that has engulfed the agrarian economy is totally avoidable. It is often argued that the Indian farmers and manufacturers are going to enjoy access to international markets by supplying commodities to these multinational retailers. However, the experience of the producers, especially those producing primary commodities in the developing world, is not encouraging in this regard. According to a source, while a cocoa farmer in Ghana gets only about 3.9% of the price of a typical milk chocolate bar, the retail margin would be around 34.1%. Similarly, 54% of the final price of a pair of jeans goes to the retailers while the manufacturing worker gets around 12%. The International market access available to the global retailers do not benefit the producers from the developing countries since they are unable to secure a fair price for their produce in the face of enormous monophony power wielded by these multinational giants.

Monopoly in the customer market and creation of cartels by the global players

Foreign players may create monopoly by providing products at discounted rates in the beginning to grab the market share by displacing domestic giants and after getting good market or monopoly in the market may create a cartel of global giants to exploit the customers by inducing price hike and customers would not get any option than to purchase at the available prices.

Distortion of urban development and culture

The promotion of large retail stores with huge retail space also fosters a different kind of urban development than what we have followed in India till date. Large shopping malls with all known retail chains with their showrooms as a part of urban development is familiar in the US where the consumers live in suburbs, drives long distances for his/her shopping and lives in a community that hardly knows each other. The problem with this model is that it neglects the simple Indian reality where most households do not have cars and need local markets. The myth of a huge and fast growing affluent middle class is counter to the reality that this section is still too small to support the remodeling of the urban landscape as is being planned with malls, large retail chains and branded products.

Determinants of FDI Inflows:

The volume and the quality of FDI in a country depend on the following factors:

Natural Resources: Availability of natural resources in the host country is a major determinant of FDI. Most foreign investors seek an adequate, reliable and economical source of minerals and other materials. FDI tends to flow in countries which are rich in resources but lack capital, technical skills and infrastructure required for the exploitation of natural resources.

National Markets: The market size of a host country in absolute terms as well as in relation to the size and income of its population and market growth is another major determinant. Large markets can accommodate more firms and can help firms to achieve economies of large scale operations.

Availability of Cheap Labour: The availability of low cost and skilled labour has been a major cause of FDI in countries like China and India. Low cost labour together with availability of cheap raw materials enables foreign investors to minimize costs of production and thereby increase profits.

Socio-Economic Conditions: The size of the population of the host country, its infrastructural facilities and income level of the country also influence direct foreign investment.

Political Situation: Political stability, legal framework, judicial system, relations with other countries and other political factors prevailing in the country also influence movements of FDI from one country to another.

Rate of interest: Differences in the rate of interest prevailing in different countries stimulate foreign investment. Capital tends to move from a country with a low rate of interest to a country where it is higher. FDI is also inspired by foreign exchange rates. Foreign capital is attracted to countries where the return on investment is higher.

Government Policies: Policy towards foreign investment, foreign collaborations, foreign exchange control, remittances, and incentives both monetary and fiscal offered to foreign investors exercise a significant influence on FDI in a country. For example, Export Processing Zones (EPZs) have been developed in India to attract more FDI inflows and to boost exports.

3.6 GROWTH OF INDIAN RETAIL BUSINESS:

Introduction

Retailing in Indias other main cities, such as Bangalore, Kolkata, Hyderabad, Pune and Chennai is growing rapidly, but such is the pace of change, that many smaller third tier cities are now firmly on the radar screen of the retail sector and mall developers. With around 50 cities of over one million populations, many of which are still largely untapped, there are clearly substantial opportunities for the retail sector in these cities. Domestic retailers and shopping mall developers are moving aggressively into Indias smaller cities in order to gain first mover advantage, to capture growing consumer markets and to respond to the strong demand for branded goods. There is clearly a significant requirement from the retail sector to know where Indias next growth opportunities are likely to be concentrated.

Retailing is emerging as one of Indias most dynamic and fast paced sectors. The drivers of its upward growth trajectory such as favourable demographics, rapid urbanization, Indias booming economy and growing middle classes, explain why the Indian retail market is seen by both domestic and international retailers, as well as the property industry, as one of the globes greatest untapped market (IBEF , 2009)1. India's nominal GDP was US$1.17Trillion in 2008. Average annual GDP growth of 6.5% is predicted by BMI to 2013 (India Retail Report Q4 2010)2. With the population forecast to increase from an estimated 1.19 Billion in 2008 to 1.27 Billion by 2013, GDP per capita is expected to expand by nearly 59% by the end of the forecast period, to reach a projected US$1,563. The Indian retail market is witnessing a migration from traditional retailing to modern/ organized retailing formats, with an explosive proliferation of malls and branded outlets. Modern retailing outlets in India are increasingly becoming global in standards and are witnessing intense competition. The growth in the overall retail market will be driven, in large part, by the explosion in the organized retail market. By this, we mean the familiar Western concept of chain outlets, department stores, supermarkets, etc., and this segment accounted for US$12.1bn of sales in 2006, or 4.6% of the total retail segment (Investment Commission of India (ICI) data, 2008). Indian retail industry is poised to grow at a rate of 19 per cent over the next five years (Crisil, 2009). The Organised retail market in India is projected to grow to US$ 23 billion in 200910. The Organised retail segment is expected to grow from 5 per cent to about 7 to 8 per cent by 201213. With a share of over 95 per cent of total retail revenues, traditional retailing continues to be the backbone of the Indian retail industry. Over 12 million small and medium retail outlets exist in India, the highest in any country. Traditional retail is highly pronounced in small towns and cities, with a primary presence of neighbourhood 'kirana' stores, push-cart vendors, 'melas' and 'mandis'. Organised retailing is growing at an aggressive pace in urban India, fuelled by burgeoning economic activity. An increasing number of domestic and international players are setting up base in the country and expanding their business to tap this growing segment. The food and beverages segment accounts for the largest share, at more than 70 per cent of the total retail pie. Traditional retail dominates food, grocery and the allied products sector, with grocery and staples largely sourced from kirana' stores and push cart vendors. Food and grocery segment comprises 62 per cent of the $ 270 billion Indian retail market (India Retail Report, 2007). Only 0.8 per cent of this segment is in the organized sector and witnessed a year-on-year growth of 30.8 per cent in 2005-06 as against 2.2 per cent growth of the total food and grocery retail market (Dr. Paromita Goswami, Dr. Mridula S. Mishra, 2008)3. The apparel and consumer durable verticals are the fastest-growing verticals. Mobile phones, supported by the growing telecom penetration in small towns and villages, are a major retail item with the addition of 10 million to 12 million mobile phone users every month. The home dcor sector is witnessing rapid growth with the reducing average age of Indians buying homes. Beauty care, home dcor, books, music and gift segments are gaining attraction, predominantly in the urban areas and emerging cities.Organized retail in India is largely restricted to urban regions with consumer exposure to modern retailing formats such as malls and standalone stores, etc., for specific product categories. The clothing and textiles/apparel segment dominated the organised retail sector with revenues worth US$ 6 billion in 200708, contributing more than 27 per cent to the organised retail pie. Figure 2.3 shows the comparative penetration of the organized retail in various countries. While the penetration is maximum (85%) in USA, it is hardly about 4% in India. Penetration of organised retail in India is projected to increase to 7 per cent by 201213.

Retail Trade in various countries

Country Percentage

India 8

China 17

Poland20

Indonesia30

Russia33

Brazil35

Thailand40

Malaysia55

USA85

Indias leading important retail chains The big players in Indian retail landscape now are the Future Group, Shoppers Stop, Westside, Subiksha and RPG Spencer. The newcomers who are knocking at the gates are Reliance Retail, Bharti Walmart and Aditya Birla Trinethra. Here, we intend to do a brief profiling of the major retail chains in order to understand the retail business in a better manner.

Bharti Wal-Mart Bharti Retail (Pvt.) Ltd. Unveiled the roadmap for its retail venture on 19th February, 2007 envisaging an investment of $2.5 billion with expectation of revenue of $4.5 billion from this business by 2015. The first retail outlet is expected to open somewhere in the month of August .Bhartis plan is to invest $2.5 billion by 2015 and open stores across all major cities. This investment would be only for setting up front-end stores. The modalities for its back-end linkage, including its joint venture with the world's largest retailer Wal-Mart, are in the process Retailing consists of all activities involved in selling goods and services to consumers for their personal, family or household use. It covers sales of goods ranging from automobiles to apparel and food products and services ranging from hair cutting to air travel and computer education. Sales of goods to intermediaries who resell to retailers or sales to manufacturers are not considered a retail activity.

Aditya Birla The Aditya Birla Group is India's first truly multinational corporation. Global in vision, rooted in values, the Group is driven by a performance ethic pegged on value creation for its multiple stakeholders. A US$ 24 billion conglomerate, with a market capitalization of US$ 23 billion and in the League of Fortune 500, it is anchored by an extraordinary force of 100,000 employees belonging to over 25 different nationalities. Over 50 per cent of its revenues flow from its operations across the world. Our mission is to change the way people shop. We will give them more. says Mr. Kumar Mangalam Birla, Chairman, Aditya Birla Group. The MORE promises a world-class pleasurable shopping experience to Indian consumers in their very own neighborhood.

Reliance Retail: On June 26, 2006, Mukesh Ambani, Chairman and Managing Director, Reliance Industries Limited, announced an Rs 25,000-crore investment in the retail sector. Reliance Retail started its retail operation with Reliance Fresh, a grocery store that sells vegetables, fruits, personal care items and other food products. Soon, these retail outlets will also be selling apparel and footwear, lifestyle and home improvement products, electronic goods and farm implements and inputs. They will also offer products and services in energy, travel, health and entertainment. In addition to this, partnerships would be developed to bring the best of global luxury brands to India as well. Reliance Retail plans to extend its footprint to cover 1,500 Indian cities and towns with outlets of a varied format, a mix of neighborhood convenience stores, supermarkets, specialty stores and hypermarkets. Reliance also plans to open restaurant outlets, financial services marts and tourism counters within its stores. Mukesh Ambanis ultimate ambition seems to be to create the Indian equivalent of Wal-Mart by scaling up the business to unprecedented heights to reach every nook and corner of the country. With its retailing venture, Reliance expected a revenue target of US $20 billion through its retail operations by 2010. Over a span of five years, RRL expects a 20% return-on-investment. The first store christened Reliance Fresh opened in November 2006 at Hyderabad. Within a few months they have now opened stores in Mumbai, Pune and Ahmedabad and plansof being worked out

RPG Spencer :RPGs Spencer presently has 125 stores across 25 cities covering a retail trading area of half a million square feet and with a clientele of 3 million customers a month. Spencer's has a national footprint with seven hypermarkets, three supermarkets and 70 daily use outlets, called Dailies. All the newly opened Spencer's stores stock every conceivable product that is required by a household on a daily basis. At Spencer's Daily shoppers can get fresh fruits, vegetables, fast-moving consumer goods, household items, groceries, with regular offers and discounts. Spencer's outlets are divided in to three retail formats. These are, Spencer's Hyper, the over 25,000-sq ft hypermarkets stocking over 25,000 items. The 8,000sq ft to 15,000-sq ft mini hyper stores, branded as Spencer's Super and the daily purchase 4,000-sq ft to 7,000-sq ft Spencer's Daily for groceries, fresh food, chilled and frozen products, bakery and weekly top up shopping.

Subiksha: The Chennai based Subiksha grocery chain runs around 200 outlets all over the country and its current turnover stands at Rs 224 crores. Their target customer is the middle income value conscious buyers. The main aim of Subiksha is to offer a functional and transactional shopping experience. This retail chain has no qualms and spends almost no money on creating a pleasant shopping experience, and all stores are non-air conditioned. There is no false roofing or sparkling vitrified tiles on the floor. A few years ago, Subiksha did not even offer shoppers self service. The customer had to place an order at a computerized teller and the goods were billed and delivered after cash is collected. Customers had to bring their own carry bags or pay to buy them from the store. Subiksha even attempted to charge the customers for home delivery.

Piramyd: Piramyd Retail is part of the Piramal Group, which has presence in diverse sectors spanning Pharmaceuticals, Textiles, Real Estate, Engineering, Family Entertainment and Retail with manufacturing operations in 19 locations across five states and employing over 18,000 people. The promoters launched the apparel business in 1999 under Piramyd Retail and Merchandising Pvt. Ltd. (PRMPL) while its food; home & personal care businesses (FHPC) were housed under Crossroads Shoppertainment Pvt. Ltd. (CSPL). As the apparel and food businesses individually reached a critical mass the management merged the two companies into Piramyd Retail Ltd. due to distant synergies in two businesses in March 2005. Pyramid also has a smaller format of stores called TruMart that caters to Food and Personal Care products.

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