Chapter 3 Retail in India -Retail Management[1]

8/6/2019 Chapter 3 Retail in India -Retail Management[1]

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Chapter- 3

RETAIL IN INDIA


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OverviewOverview

The retailing industry in India is largelyunorganised and predominantly consists of smallindependent, owner-managed shops

Retailing is Indias largest industry in terms ofcontribution to GDP and accounts for 13 percent ofthe GDP

There are around 5 million retail outlets in India

There are also an unaccounted number of low-costkiosks

There are around 5 million retail outlets in India There are also an unaccounted number of low-cost

kiosks (tea stalls, snack centre, barbershops etc,.)and pushcarts/mobile vendors


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Growth in retail outletsGrowth in retail outlets

(millions)(millions)

Year Urban Rural Total

1978 0.58 1.76 2.35

1984 0.75 2.02 2.77

1990 0.94 2.42 3.36

1996 1.80 3.33 5.13


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Composition ofComposition of uurbanrban--ruralrural

ooutletsutletsUrban Rural

Grocers 34.7% Grocers 55.6%

Cosmetic stores 4.0%

Chemist 6.3%


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Organized retailing in India represents a small fractionof the total retail market

Organized retailing was first started in India in the

year 2001 and was valued at Rs. 11,228.7 billion Income in urban India is increasing

A rising working population faces a shortage of time

Demand for frozen, instant, ready-to-cook, ready-to-eat food, and readymade clothes is rising

Rural India continues to be serviced by small retailoutlets

The McKinsey report predicts FDI will help the retailbusinesses to grow to $ 460-470 billion by 2010


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Kirana andKirana and iindependentndependent sstorestores

Kirana, Mom and Pop, and family owned retail shopsrepresent bulk of the retail business in India These are usually shops with a very small area stocking a

limited range of products, varying from region to regionaccording to the needs of the clientele

About 78% of these retail stores are small family-owned

businesses utilising only household labour Even among retail enterprises that employ hired workers,the bulk of them use less than three workers

These are low cost structures, mostly owner-operated, withnegligible real estate and labour costs and little or no taxesto pay

Branding is not the key decision criteria for a majority ofcustomers at the traditional retail outlets particularly in thesmall townships and rural India

Conventionally, retailers source the merchandise fromwholesalers and sell it to end-users


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Cooperatives andCooperatives and ggovernmentovernmentbbodiesodies

India has large number of retail stores run bycooperative societies and government bodies acrossproduct categories

Such initiatives were taken for various socio-economic

factors primarily to promote industries andemployment in rural areas

Super Bazaars and the Kendriya Bhandars along withthe administered price Public Distribution System areorganized retailing formats

Examples: Mother Dairy, Delhi and Fruit & Vegetable Project

Public Distribution System in New Delhi

Central Cottage Industries Emporium


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Retailing in ruralindiaRetailing in ruralindia

An important phenomenon in Indias consumer culture is

the emergence of the rural market for several basicconsumer goods

Three-fourths of Indias population lives in rural areas, andbrings one-third of the national income

The rural market has been growing steadily over the years

and is now bigger than the urban market for FMCGs (53%share of the total market) with an annual size in value termscurrently estimated at around 50,000 crore

A boon for the companies who are seeking new ways toincrease sales

NCAER projects that the number of middle and high-income households in rural India are expected to grow from80 million to 111 million by 2007

Existing retail formats available in rural India are retailoutlets within the village, feeder centre or markets, melas,haats and shandies, hawkers (mobile retailers)


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RuralRural mmarketarket ppenetrationenetrationlevelslevels

Durable Rural share % Product Penetration %

Refrigerator 24.30 Coffee 7

Black and white

television

62.65 Biscuits 60.1

Washing machine 14.64 Toilet soap 91.6

Pressure cooker 51.51 Toothpaste 35.6

Instant Water heater 2.04 Talcum powder 16.4

Mixer/grinder 27.43 Hair oil 16.0

Colour television 28.77 Shampoo 39.8

Scooter 28.56 Razor blade 47.1

Motorcycle 47.87 Skin cream 15.5


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Retail Strategy

The sector represents a variation in level

of development and preference for

formats based on product categories

Product categories differ in terms ofpercentage share of markets, level of risk

and relevance for the consumer, and the

expectation and requirement of customerservice


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SpecificSpecific pproductroduct ccategoriesategories

1. Food Category: Supermarkets,discount stores, freshproduct outlets, speciality stores, convenience storesand off-price retailers.

2. Restaurants: Apna Ghar, old formats coexist(Ghanteewala Halwai, Natraj Caf, Giani ka falooda)

3. Health and Beauty Products: LIFESPRINGHEALTH & BEAUTY PLACE (Health Foods atBeauty Products, Eye Care at Life Spring )

4. Clothing and Footwear Retailers: Kala Niketan,THE LOFT, Shoppers Stop, Pantaloon, Trent, HomeFurniture and Household Goods Retailers

5. Durable Goods Retailers :Viveks6. Petro-Retailing in India: Bharat Petroleum

7. Retail Banking: Multi-Channel Distribution,CallCentres (support services), Technology, Rural exposure

8. Leisure industry


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Number ofNumber of rretailetail ooutlets in Indiautlets in India

000 outlets Food Retailers

1997 2943

1998 3123.4

1999 3300.2

2000 3480

2001 3682.9


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PPoint ofoint of aaccessccess of the Internetof the Internet

Net accessed

from

% on a Working

Day

% on a Holiday

Home 25 47

Cyber Caf 30 27

Work 29 07

Others 16 19


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ChallengesChallenges iinn rretailetail bbusiness In Indiausiness In India

Retail industry in India is in a phase of transitionand faces challenges

Recent examples of chains that tried ramping uptoo fast too soon (Barista, Domino's andShoppers' Stop) all fell into a cash trap

Deciding the right pace of expansion is critical

Retailers in India face other challenges in termsof

1. Real estate

2. Regulations3. Manpower

These challenges have an impact on thr costs andefficiency of operations of the retail business

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Chapter 3 Retail in India -Retail Management[1]