Definition of Retail

In 2004, The High Court of Delhi[1] defined the term ‘retail’ as a sale for final consumption in contrast to a sale for further sale or processing (i.e. wholesale). 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 customersRetailing 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.

Division of  Retail Industry –  Organised and Unorganised Retailing

The retail industry is mainly divided into:- 1) Organised and 2) Unorganised Retailing 

Organised retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses.

Unorganised retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner manned general stores, paan/beedishops, convenience stores, hand cart and pavement vendors, etc.

The Indian retail sector is highly fragmented with 97 per cent of its business being run by the unorganized retailers. The organized retail however is at a very nascent stage. The sector is the largest source of employment after agriculture, and has deep penetration into rural India generating more than 10 per cent of India’s GDP.[2] 

E-retailing, most commonly known as e-tailing is nothing but shopping through the Internet and other media forms. There are many things that are common between direct retail stores and online retail stores. Both have the process of billing of the customers and have to maintain a relationship with the suppliers.

Bottlenecks Faced By E-Retailing in India

Problems with the Payment System

People in India are not used to the online shopping system and moreover the online payment system through the credit card is also totally alien to them. Most of them do not avail of the transaction facilities offered by the credit cards. They are also dubious regarding the online payment system through the credit cards. Hence different payment options should be made available to them like the credit card, cash on delivery and net banking to give them further assurance.

Problems with Shipping

The customers using the online shopping channel should be assured that the products that they have ordered would reach them in due time. For this the retail companies have resorted to private guaranteed courier services as compared to postal services.

The customers should be assured that the online retailers are not only available online but offline as well. This gives them the psychological comfort that these companies can be relied upon.

Products offered at discounted rates

The online retailers save on the cost of building and employee salaries. Some part of this benefit should also be enjoyed by the online customers by a reduction in the price of the product. The customers should be conveyed this message that they are getting the products at a discounted price.

Language Problem

Most internet retail shops use English as their mode of communication. English may not be comprehensible to the majority of the Indian population . To increase the customer base, content in the online retail shops should be provided in local language.

Another reason why the concept of e- retailing or online retailing has not gained prominence in India is that the Indians prefer to touch the products physically before buying them. This facility is provided through the multi-brand outlets, not available online. Studies have revealed the preferences of the customers towards the traditional shopping methods. Hence the retailer online should first make it a point to spot the potential customers and accordingly plan out the product. If the customers are more open to online shopping, then nothing can be more beneficial. They save the time and effort to visit, departmental stores, shopping malls, etc. products can be delivered by a click of the mouse.

Another problem is that the retail industry is standing on its point of inflexion and considering its infant stage, it would take time for the new concept of e-retailing to take off.

Some online retailing sites in India

E Bay is heading the race of online retailers. In this race it has become very difficult to determine the online retail store that makes the products available at convenient and cheap rates. From this very difficulty has cropped up comparison sites. Comparison is done on the basis of an index which is constructed from the data available from different shopping sites. The bechna.com and the ultop.com are such sites though many more sites are entering this zone.

The comparison sites not only help to choose the online sites that would be providing the best deal but also offline as well. Sites like Rediffproductsearch, Compare India.com have constructed the data that is taken from the conventional local retai;ers. These sites help the customer in finding out the local retail store that will best suit his purpose.

Future of E-retailing in India

There are divergent views on the future of e-retailing in India. Some experts are of the opinion that the giant, big brand retailers would dominate the small ones due to their wider investment capacities. It would be next to impossible for the small retailers and the kiranas to prove their existence in the battlefield of online retailing. Another viewpoint is that there would be an exponential growth in the online retailing business in India.

Structure of the Retail Industry In India

The retail industry continued in India in the form of Kiranas till 1980. Soon, following the modernisation of the retail sector in India, many companies started pouring in the retail industry in India like Bombay Dyeing, Grasim etc. As has been mentioned earlier the retail sector in India can be widely split into the organised and the unorganized sector. The unorganized sector is predominant. We may discuss in detail the different divisions of the retail sector in India.

Unorganized Retail Sector

The unorganized retail sector basically includes the local kiranas, hand cart, the vendors on the pavement etc. This sector constitutes about 98% of the total retail trade.

But Foreign Direct Investment in the retail sector is expected to shrink the employment in the unorganized sector and expand that in the organized one.

Organised Retail Sector

In the organised sector trading is undertaken by the licensed retailers who have registered themselves to sales as well as income tax. The organised retail sector have in their ambit, corporate backed hypermarkets and retail chains. The private large business enterprises are also included under the organised retail category.

The organised retail sector can be further subdivided into:

Instore Retailers

This type of retail format is also known as the brick and mortar format. These retail stores are in the form of fixed point sale outlets. They are specially designed to lure the customers. There are different types of stores through which the instore retailers operate.

Branded Stores appear in the form of exquisite showrooms. Here the total range of a particular brand is available and the quality of the product is certified by the government.

There are also multi brand specialty stores that sell a series of brands so that the consumer can choose from the wide array of brands.

Department stores have a large number of brands and products catering to all basic needs to luxurious items as well.

Supermarkets are basically self service retail stores.Discount Stores offer commodities at reduced prices.In Hyper Marts customers have wide variety of products to choose from and they are also available at discounted rates.

Convenient stores are located in prominent places within the reach of majority of the customers and do not operate in stringent work hours.

Shopping Malls are a storehouse of a large variety of retail shops situated close to each other.

Retail Formats in India

The retail formats in India can be categorised into the traditional and the modern forms. The traditional format includes Kiranas, street markets, kiosks and multiple brand stores.

The modern format, on the other hand includes supermarkets, hypermarkets, department stores and specialty chains.

In discussing about the structure of the retail sector in India we cannot forgo forecourt retailing and trade parks.

Trade parks

Trade parks are basically business complexes that promote international trade. The global players here have access to the top Indian exporters. To the buyers this would prove to be a boon since they do not have travel to far off towns to enter into business deals with the exporters, especially in places where infrastructure is very poor. By this the exporters not only enhance their visibility but they also enjoy a host of other advantages. They can design libraries, studio etc, in order to attract potential customers.

Forecourt Retailing

This type of retailing is done by the oil companies in order to increase their revenue. They not only deliver fuel but also offer other services to its customers.

Indian Retail Industry

Evolution of Indian retail Industry:

Indian Retail Industry is standing at its point of inflexion, waiting for the boom to take place. The inception of theretail industry dates back to times where retail stores were found in the village fairs , Melas or in the weekly markets. These stores were highly unorganized. The maturity of the retail sector took place with the establishment of retail stores in the locality for convenience. With the government intervention the retail   industry  in India took a new shape. Outlets for Public Distribution System, Cooperative stores and Khadi stores were set up. These retail Stores demanded low investments for its establishment.

The retail industry in India gathered a new dimension with the setting up of the different International Brand Outlets, Hyper or Super markets, shopping malls and departmental stores.

Key Players in the Indian Retail   Sector :

The untapped scope of retailing has attracted superstores like Wal-Mart into India, leaving behind the kiranas that served us for years. Such companies are basically IT based. The other important participants in the Indian Retail sector are Bata, Big Bazaar, Pantaloons, Archies, Cafe Coffee Day, landmark, Khadims, Crossword, to name a few.

Retailing in India: a forecast:Future of organized retail in India looks bright. According to recent researches it is projected to grow at a rate of about 37% in 2007 and at a rate of 42% in 2008. It will capture a share of 10% of the total retailing by the end of 2010.

According to the Union Minister of Commerce & Industry, Shri Kamal Nath, the organized retail sector is expected to grow to a value of Rs. 2,00,000 crore (US$45 billion) and may generate 10 to15 million jobs in next 5 years. This can happen in two forms- 2.5 million of these people may be associated directly with retailing and the rest 10 million people may be gainfully employed in related sectors that will be pulled up through the strong forward and backward linkage effects.

However to compete in this sector one needs to have up-to-date market information for planing and decision making. The second most important requirement is to manage costs widely in order to earn at least normal profits in face of stiff competition.

Growth of the Retail Sector In India

In this section we may deal with the growth of the organized as well as the unorganized retail sector of India.

Due to the untapped potential that exists in the Indian retailing market, it is a very fast growing sector. One reason that can be attributed to this rapid entry of the foreign retail giants ,is that the Western Countries have reached a point of saturation in their retail sector. Another reason as already mentioned earlier is the change in the tastes and preferences or the psychographic of the consumers that is bent in their favour.

Although the retail sector in India contributes to about 10% in the GDP, it is the most underdeveloped sector in terms of investments that are made in this sector. The unorganized retail sector has recorded a growth of 5% per annum while the organized sector is growing at 25-30 % per annum. One should not be impressed by the figures of the organised retail markets since developed market in US, Taiwan, Malaysia is still a dream to the Indian retail market. They have registered a growth of 50% per annum.

The retail stores have mushroomed in the Tier II and Tier III cities. The participants in the retail market hold the presence of market in the cities as a signal to their growth.

It has been seen that the retail companies have invested in the IT sector for their growth and development. The IT sector has contributed greatly to the growth of the retail sector in India. The retail firms have made lumpy investments in Enterprise Resource Planning System as a strategy for their growth and development. SAP has also assumed a significant role in the growth and development of the organised retail industry.

The sudden growth of the organised retail sector can be attributed to the ushering of the domestic retail giants like Reliance, Pantaloons, ITC, RPG, Rahejas and the Bharti Group. The foreign companies continue to wait in the sidelines. These prominent retail chains have adversely affected the farmers in some states. Another viewpoint is that the farmers have rather benefited since they were eager on the market intervention of the buig retailers for the purpose of marketing and processing of their output. Since the big retailers reap the benefits of buying directly from the farmers , the consumers can purchase the products at minimal price rates. In places like Uttarakhand, the big retail chains are welcomed for the same purpose by the farmers. They have helped in putting finances in the right channels of processing and packaging.

Growth of the Retail Outlets In India

Outlets

1996

1997

1998

1999

2000

2001

Food Retailers

2769

2943.9

3123.4

3300.2

3480

3682.9

Non-Food Retailers

5773.6

6040

6332.2

6666.3

7055.5

7482.1

Total Retailers

8542.6

8983.6

9455.6

9966.5

10534.4

11165

Source: P.G.Chengappa, Lalith Achoth, Arpita Mukherjee, B.M.Ramachandra Reddy andP.C.Ravi, Evolution of Food Retail Chains: The Indian Context, 5-6th Nov. 2003, www.ficci.com

From the above table it is quite evident that there is a rising trend in the total retail outlets in India. The non-food retail outlets contribute more to this rise.

The trend in the retail sector as compared to other sectors may be represented in the following graph. We can see that as compared to the clothing and the food and beverages industry the retailk industry has witnessed a sharp rise especially from 2002. before that it was following a slow and steady pace.

The growth of the different retail sectors can be discussed as under.

Growth of FMCG

The report produced by HSBC shows that the FMCG retail sector is expected to grow by 60 % by 2010. leaving aside the packaging sectors, the other sectors that have registered rapid growth are hair care, household care, confectionery, chocolates etc.

Growth of Consumer Durables

The consumer growth industry is estimated to grow by 40% in the coming season. The television, refrigerator and washing machines sector has also witnessed a rapid growth. The market for Indian colour television is expected to reach the value of 10.5 million units by the next fiscal year. The refrigerator market is estimated to reach 4.5 million.Hence in a nut shell the retail industry in India has witnessed unprecedented growth in the past years. The organised sector is expected to make Quantum jumps in the coming years in terms of its contribution to GDP.

Top Companies in the Indian Retail Industry

The India retail industry: who's who

The Indian retail sector has been a euphoria over the last five years. India topped the A.T. Kearney's Global Retail Development Index for two consecutive years and this has infatuated Indian as well as foreign retail players to go gaga on the merchandising track. According to geographical expansion, Delhi/NCR and Mumbai are the felicitated regions as the top companies have rated the spending potential of consumers in the vicinity of the national capital and the financial capital as excellent. Other metros such as Kolkata, Chennai, Hyderabad and Bangalore have caught the sight of investors but their fortunes are yet to be illuminated. Companies like The Future Group, Reliance, Bharti-Walmart, DLF etc. have shown the way for other to enter. The country is expecting a surge in the growth sprint and let's hope for the best.

Top Companies: An analysis

Big Bazaar- Big Bazaar is a chain of department stores owned by the Pantaloon Group (Future Group)and headed by Kishore Biyani and headquartered at Mumbai. It offers all types of household items such as home furnishing, utensils, fashion products etc. It has a grocery department and vegetable section known as the Food Bazaar and its online shopping site is known as FutureBazaar.com. The real estate fund management company promoted by the Future Group expects to develop more than 50 projects across India covering a combined area of more than 16 million sq. ft. On April 1 2007, Big Bazaar had to shut its outlets in Mumbai as the 120 retrenched employees called a strike with the support of Bhartiya Kamgar Sena (the trade Union wing of Shiv Sena). Later the management agreed to reinstate the sacked workers.

Bharti Retail-, a wholly owned subsidiary of Bharti Enterprises. has announced two joint ventures (JV)with the international retailing behemoth, Wal-Mart. The first JV ensures cash and carry business, in which 100 percent FDI is permitted and it can sell only to retailers and distributors. The second JV concerns the franchise arrangement. Sunil Mittal, Chairman of the Bharti Group assured that the ventures will use “low prices every day” and “best practices for the satisfaction of the customer”. Processed foods and vegetables will be delivered by Bharti Field Fresh, Bharti's JV with Rothschild. Bharti Retail aims to foray every city with a population exceeding 1 million. It has plans to come up with an investment of more than $2 billion in convenience stores, supermarkets and hypermarkets spread over an aggregate 10 million sq. ft. The expansion drive looks ambitious but analysts are worried that Bharti may face stiff competition from Pantaloon and Reliance as they too have sanguine plans to flood the markets with thousands of retail outlets in the coming five years. Bharti Telecom also has plans to offer all its fixed and mobile telecom products and services from a single window to the SMB (Small and Medium Business) enterprises under the Bharti Infotel division..

Reliance Retail- Reliance claimed last year to start a retail chain that will be unique in size and spread, will lead to the welfare of one and all ranging from Indian farmers,

manufacturers and ultimately consumers. It is known as Reliance Retail Ltd.(RRL) and is a 100 percent subsidiary of Reliance industries Ltd.(RIL). Soon after the Bharti-Wal Mart tie up, there was the news that RIL (Reliance Industries Ltd.) Chairman Mukesh Ambani met Commerce Minister Kamal Nath to discuss the apprehension of cheap imports from China. Reliance Retail has plans to open 4,000 outlets across 1,500 towns for an investment of $5.6 billion. Reliance is not away from agro-business. According to Buddhadeb Bhattacharjee, Chief Minister of West Bengal, “Reliance will hold demonstration farming, produce good quality seeds and give inputs to farmers”. Its most significant participation has been in the food procurement business in Madhya Pradesh and Punjab. This has in fact compelled the government to import wheat this year. Reliance Retail has also been reported to have entered into an agreement with footwear manufacturer Bata India Ltd. so that they will involve in selling each other's products.

DLF Shopping Malls- DLF Retail Developers Ltd. is one of the troikas of the DLF Group. Besides being India's largest real estate developer, DLF is also of the leaders in innovating shopping malls in India. It caught public eye when it launched the 2,50,000 sq ft. shopping mall in Gurgaon. It has brought a dramatic change in the lifestyles and entertainment with its City Centres and DT Cinemas. DLF has plans to invest Rs. 2000-3000 crore in all the emerging areas from metros to A class cities in the next two years. Till last year the company was involved in building 18 malls out of which 10 were in the NCR region. Future plans of DLF involve opening up of 100 malls(speciality malls, big box retailing and integrated malls) across 60 cities in next 8-10 years. They are slowly transforming into 'lease' and 'revenue share' models.

Local players like ITC, the A.V. Birla Group and Tatas have given the hints to enter organised retail. France’s Carrefour SA and Britain’s Tesco too were recently in news for their future plans to explore the Indian retail market.  

Technology in indian retail inductry

FEBRUARY 11, 2007

in SALES/MARKETING MANAGEMENT

The Indian retail industry is beginning to use technology in subtle ways to enhance

customers’ shopping experience, by cutting down the time they spend in checkout

queues and by helping them find things. And in the process, sales are rising.

Globally technology has already made headway into the retail sector. Wal-Mart for

instance monitors weather forecasts to predict what their customers will want to buy

around that time of the year. Then there are information kiosks that display maps to

guide consumers on how to find any item, and tiny devices that record customers’

buying preferences and makes helpful suggestions. For instance, someone who is

buying an anti-dandruff shampoo might also want a similar type of conditioner

Shoppers walking into Hyper-city, a mall in Mumbai, are in for a slightly hi-tech

experience. They’ll see customers bustling about with tiny golf-ball-sized gadgets

hooked on to their shopping carts. And this curious little gadget doesn’t just sit

there. Every time a shopper picks up an item, say bread, this tiny gizmo beeps, as if in

agreement. What’s most intriguing about this experience is that even during peak

time, there are hardly any queues at the cash counter.

Surprised? Well don’t be, because this might just be your first taste of the kind of

shopping experience you can expect in the near future. This new shopping buddy at

hyper-city is in fact a handheld scanner (I-Scan) that lets you generate your own bill as

you go along picking items and adding them to your cart.

This cuts your shopping time by almost half, as all you have to do at the checkout

counter is make the payment and leave. This device is already helping the retail outfit

provide faster checkout as well as reduce staffing needs by a considerable amount.

This might seem extraordinary experiment now, but analysts say gadgets like these are

set to become common place within the next couple of years, replacing today’s

stationary cashier counters, dumb price tags and static paper signboards.

Some of the technological aspects already introduced in retail industry is listed below,

I-Scan:

Shoppers at Hyper-city in Mumbai can use a handled scanner that lets them generate

their own bill they add items to their cart. This cuts down on shopping time by almost

half, as all you have to do at the checkout counter is make the payment and leave.

RFID chips:

NXP semiconductors used tiny RFID (radio frequency identification) chips instead of

tickets for over 1,000 dignitaries at the recent ICC Champions Trophy semi-finals at

Jaipur. This tiny chip stored all the information that was required about the viewers,

including their photos for identification. This helped in cut down on fraud, and in tracking

viewers and monitoring the stadium.

Near field communications:

With this technology, your mobile devices will automatically communicate with smart

devices in the vicinity and make transactions. For instance, you could pay with your

mobile device.

Intactix space planning:

This system uses complex number-crunching algorithms to see how the shop-floor will

look stacked up with merchandise.

more at http://www.citeman.com/1484-technology-in-indian-retail-inductry/#ixzz1BJxhqRWY

IT in Retail: What's Hot

The Indian retailing, which has topped the charts for being the most favored and attractive destination is yet in its nascent stage. Neither the FMCG retailers are in a position to maintain world class standard, nor one wishes to be an iconoclast. The digitization of the Indian retail sector has captured the minds of retail magnets for quite some time now but has remained the grey area of the Indian story of retail sector. The Indian IT sector is growing at a rate of 31 percent and posted a record revenue of $40 billion in 2006-07. This is indeed a good news but the staggering domestic segment demanded services worth only $8.2 billion. In this study we focus on how e-retail can boost the plans of existing and forthcoming national retail players. We further try to put forth the challenges in computerisation of the organized retail and make an attempt to suggest some prospective solutions.

Why IT is the need of the hour

The organised retail sector of India will form about 10 percent of the total retailing business in India and is expected to worth US $70 billion by the end of 2010. in the mean time it will grow at a CAGR of around 49.53 percent. But certain speed breakers associated with the primitive form of retailing must be overcome to maintain its tempo.1. Unorganised retailing in India is ubiquitous and so the communication between the manufacturer and retailer is heavily dependent on the wholesalers, dealers and traders. This is more so because the retailers can't afford costly investments. So they ultimately have to suffer due to low participation market flow of commodities. Nowadays even the organised business houses are facing the problems related to SCM(Supply Chain Management). The SCM's huge emphasize on middlemen rather than on the retailers has aggravated the problem. The introduction of EDI (Electronic Data Interface) can deliver QR (Quick Response) and ECR (Efficient Consumer Response) systems to ameliorate thepartnership channel and thus shorten the time between the placement of orders and delivery to occur. For eg. the 17 outlets of FoodWorld are linked online with its central manufacturing house at Chennai.2. The scale and process complexity are also of paramount importance as millions of customers deal with thousands of retail outlets. At the end of the day the total number of transactions is in the order of hundreds of millions. This makes keeping track of the money movement an onerous job. The spread of the planning cycles and huge geographical dispersion makes the task more arduous.

Retail operations:

How does Information Technology help

India has seen a retail boom in the last five years. This has helped the sector grow to a size of Rs. 8,10,000 crores. IT can and has to play a substantial role in this flourishing industry to keep up the vigour as well as to make it globally competitive. It can happen in many ways:

1. Retailing in a large country like India is basically a multi-plant and multi-market activity. It is almost if not actually impossible to handle the diversified operations. Introduction of IT can make things easier and the node can be immensely useful in managing the complexities.

2. Advanced planning and scheduling and inventory   management  are inevitable to any growing retail sector. Besides, merchandising and seasonality management systems can drastically change the fortune of retail sector in India.3. To improve penetration and enhance quality of services, data mining and top-class forecasting has no substitutes. Understanding consumer needs and collaborating with suppliers are essential parts of merchandising activities. A logical interpretation of data is fundamentally important to make decision, specially when one is looking forward to establish a new retail chain. These help in modifying revenues and cutting down costs, the two dimensions of an upward-moving profit curve. Data-cleansing and re-architecture also help in making effective decisions.It is fully justified that all the retail institutions as well as the manufacturer and all distribution centers be linked Online to ensure EDI of the server installed in the market with the EPOS (Electronic Point   Of   Sale ). However the retailers should carefully choose the IT service provider as global researches have shown that global IT expenditure in the retail sector is growing at 13 percent whereas the revenues has grown at a mere rate of 2 percent. The maintenance costs are also quite high owing to the different technology platforms for fragmented point solutions.

After going through a downturn, the Indian retail sector is likely to show positive results this year with several firms

witnessing buoyant sales, improved capital management and stable margins, according to ratings agency Fitch. “Retailers in

the country are likely to benefit from buoyant sales, improved working capital management and stable margins,” Fitch India

said in its report ‘2011 Outlook: Indian Retail’. The retail sector had suffered massively during the 2008-09 downturn with

many firms closing stores and holding back on expansion.

The report said the total debt is expected to increase in most cases to fund growing capex requirements as companies focus

on cementing their market share and retail footprint. “However, debt levels are likely to be supported by higher operating

profits and consequently leverage levels should remain stable and are likely to improve,” it said.

The agency also said it expects liquidity to remain comfortable, led by efficient working capital management.

“Improvements are expected from better inventory management and lower lease deposit levels,” it added. Besides, retail

firms are likely to witness stable operating margins this year, depending on each company’s choice on product category.

“This, in addition to economies of scale, private label sales mix and discounts from suppliers will help strengthen margins,”

the agency said. The report also said small retailers and new entrants are likely to go more aggressive this year, while large

players are also likely to face lesser risk in executing their expansion plans.

“Given the size and scale achieved by larger retailers such as PRIL and Shopper’s, their capex execution risk has reduced

considerably in line with their reduced pace of expansion,” the report said.

Retailing

Retailing is the transaction between the seller and consumer for personal consumption .It does not include transaction between the manufacturer, corporate purchase, government purchase and other wholesale purchase. A retailer stocks the goods from the manufacturer

and then sells the same to the end user for a marginal profit. In the supply chain that also consists of manufacturing and distribution, retailing is the last link before the product reaches the consumer.

Retail Sector in IndiaPost liberalization the Retail sector in India is heralded as one of the sunrise industries. It has never been better for the retail sector in India. Today within the booming service sector, retailing is the single biggest contributor in terms of GDP to the National Income. Retailing itself can be further divided into organized and unorganized sector.

Organized SectorOrganized retailing came into its own in tandem with the retail boom. Indian corporate like Reliance, ITC and Pantaloon have made foray into this segment along with several foreign brands changing the landscape of retailing in India. It coincided with the high growth in the Indian economy, resulting in greater purchasing power amongst the middle class, which in turn went on a purchasing spree. Other factors like consumer awareness, investments by venture capitalists and private equity firms have also contributed to the growth of organized retail. The growth in the organized retailing has resulted in the establishment of departmental stores, supermarkets, rural retailing, e-retailing and luxury retailing. Each one of these formats has a unique advantage and the scale of operation depends upon factors like average footfalls, sales per sq ft etc. However the process of acquiring license is still a bottleneck for the development of Indian retailing.

Unorganized sectorThe unorganized sector is still dominant in India, since it has the advantage of low investment need. Since retailing is the process of connecting the supplier and consumer, pricing of products is very important in a price conscious market like India. Unorganized retailers play an important role in this regard and are a vital part of the supply chain. If unorganized retail segment positions itself correctly, it can carve a niche for itself in India's booming retail sector.

Rural RetailingIndia's huge rural market has also attracted retail investments and is seen as a viable opportunity for growth by corporate India.ITC launched the countries first rural mall "Chaupal Sagar" with diverse products being offered ranging from FMCG to electronics appliance to automobiles, with a view to provide farmers a one stop center for all their consumption requirements. Many more new trends could possibly be tried in rural markets to unearth the huge potential.

Challenges Faced By The Industry

Even though India has well over 5 million retail outlets of different sizes and styles, it still has a long way to

go before it can truly have a retail industry at par with International standards. This is where Indian

companies and International brands have a huge role to play.

Indian retailing is still dominated by the unorganized sector and there is still a lack of efficient supply chain

management. India must concentrate on improving the supply chain management, which in turn would bring

down inventory cost, which can then be passed on to the consumer in the form of low pricing.

Most of the retail outlets in India have outlets that are less than 500 square feet in area. This is very small

by International Standards.

India's huge size and socio economic and cultural diversity means there is no established model or

consumption pattern throughout the country. Manufacturers and retailers will have to devise strategies for

different sectors and segments which by itself would be challenging.

The drawbacks provide a huge opportunity for the retail industry. The entry of foreign majors like Benetton,

Dairy Farm and Levis underline the opportunity for the industry in India.

Future trends

Organized retailing is dominated by large conglomerates like TATA's, ITC, RPG group, Piramals and

Rahejas apart from the various MNC's. This trend is expected to continue in future.

Textile and Garment companies like Raymond, Madura Garments and Arvind Denims have achieved

forward integration by opening their own retail outlets for their branded garments. This gives them a huge

advantage by reducing the role of intermediaries, increase profit margin and enables them to be close to the

end user.

Inflation and the global meltdown have had an effect on the growth of retailing in India. Experts believe the

retail industry should focus on distinction, branding, after sales service, exploring commoditization, share of

purchasing power and innovation to tide over the crisis.

The year 2009 is seen as a year of consolidation for Indian retail sector. By ushering in best practices and

restructuring business models, the retail industry in India is expected to adjust to the changing market

conditions and ensure new opportunities for growth.

The retail sector is expected to grow at 8 to 12 per cent in 2009-2010.

Retail

Last Updated: December 2010

The BMI India Retail Report for the first-quarter of 2011 forecasts that total retail sales will grow from US$ 392.63 billion in 2011 to US$ 674.37 billion by 2014. Strong underlying economic growth, population expansion, the increasing wealth of individuals and the rapid construction of organised retail infrastructure are key factors behind the forecast growth. With the expanding middle and upper class consumer base, there will also be opportunities in India's tier II and III cities.

Mass grocery retail (MGR) sales in India are expected to undergo enormous growth over the forecast period. BMI predicts that sales through MGR outlets will increase by 145 per cent to reach US$ 21.35 billion by 2014.

BMI forecasts consumer electronic sales at US$ 29.09 billion in 2011, with over-the-counter (OTC) pharmaceutical sales at US$ 2.69 billion. The former sub-sector is expected to show growth of 55.6 per cent between 2011 and 2014, reaching US$ 45.27 billion, with projected double-digit growth of key products such as notebooks, mobile handsets and TVs. OTC pharmaceuticals, meanwhile, should increase slightly more, by 56.5 per cent throughout the forecast period, to reach US$ 4.21 billion.

China and India are predicted to account for more than 91 per cent of regional retail sales in 2011, and by 2014 their share of the regional market is expected to be more than 92 per cent. Growth in regional retail sales for 2011-2014 is forecast by BMI at 48.1 per cent, an annual average 15 per cent.

According to a McKinsey & Company report titled 'The Great Indian Bazaar: Organised Retail Comes of Age in India', organised retail in India is expected to increase from 5 per cent of the total market in 2008 to 14 - 18 per cent of the total retail market and

reach US$ 450 billion by 2015.

Furthermore, according to a report titled 'India Organised Retail Market 2010', published by Knight Frank India in May 2010 during 2010-12, around 55 million square feet (sq ft) of retail space will be ready in Mumbai, national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad and Pune. Besides, between 2010 and 2012, the organised retail real estate stock will grow from the existing 41 million sq ft to 95 million sq ft.

Driven by the growth of organised retail coupled with changing consumer habits, food retail sector in India is set to be more than double to US$ 150 billion by 2025, according to a report by KPMG.

India's retail market is expected to be worth about US$ 410 billion, with 5 per cent of sales through organised retail, meaning that the opportunity in India remains immense. Retail should continue to grow rapidly—up to US$ 535 billion in 2013, with 10 per cent coming from organised retail, reflecting a fast-growing middle class, demanding higher quality shopping environments and stronger brands, according to the report ‘Expanding Opportunities for Global Retailers’, released by A T Kearney.

India has been ranked as the third most attractive nation for retail investment among 30 emerging markets by the US-based global management consulting firm, A T Kearney in its 9th annual Global Retail Development Index (GRDI) 2010.

Foreign direct investment (FDI) inflows between April 2000 and October 2010, in single-brand retail trading, stood at US$ 197.04 million, according to the Department of Industrial Policy and Promotion (DIPP).

Carrefour, the world’s second-largest retailer, has opened its first cash-and-carry store in India in New Delhi. Germany-based wholesale company Metro Cash & Carry (MCC) opened its second wholesale centre at Uppal in Hyderabad, taking to its number to six in the country.

Electronic retail chain major, Next Retail India, plans to open 400 showrooms across the country during January-March 2011 increasing the total number of retail stores to 1,000 by the end of the fiscal year 2010-11.

Jewellery retail store chain Tanishq plans to open 15 new retail stores in various parts of the country in the 2011-12 fiscal.

V Mart Retail Ltd, a medium-sized hypermarket format retail chain, is set to open 40 outlets over the next three years, starting with 13 stores in 2011, in Tier-II and Tier-III cities.

Reliance Retail, the wholly owned subsidiary of Mukesh Ambani's Reliance Industries, is set to open 150 stores by the end of March 2011 and double the number of stores across the country in all formats within five years.

Future Value Retail, a Future Group venture, will take its hypermarket chain Big Bazaar to smaller cities of Andhra Pradesh, with an investment of around US$ 1.54 million to US$ 4.41 million depending on the size and format.

RPG-owned Spencer's Retail plans to set up 15-20 new stores in the country in 2011-12. Spar Hypermarkets, the global food retailing chain of the Dubai-based Landmark Group, expects to start

funding its India expansion beyond 2013 out of its local cash flow in the country. So far, the Landmark Group has invested US$ 51.31 million in setting up five hypermarkets and plans to pump in another US$ 51.31 million into the next phase of expansion.

Leading watchmaker Titan Industries Limited plans to invest about US$ 21.83 million for opening 50 premium watch outlets Helios in next five years to attain a sales target of US$ 87.31 million.

British high street retailer, Marks and Spencer (M&S) plans to significantly increase its retail presence in India, targetting 50 stores in the next three years.

Spain's Inditex, Europe's largest clothing retailer opened the first store of its flagship Zara brand in India in June 2010. It further plans to open a total of five Zara outlets in India.

Bharti Retail, owner of Easy Day store—supermarkets and hypermarts—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 by then, according to a company spokesperson.

Retail Industry, Retail Sector, Retail Trade

The retail industry is responsible for the distribution of finished products to the public. The retail sector comprises of general retailers (managed by individuals/families), departmental stores, specialty stores and discount stores.

The activities of the retail industry can be broadly classified into:

Personal goods store retailing

Hard goods: This covers deals in goods such as electronics, electrical appliances, furniture and sporting goods. 

Soft goods: This includes apparel retailing.

Non-store retailing

This includes infomercials, catalogue sales, vending machines and ecommerce.

Food retailing (restaurants)

Automotive services and retailing

Retail Industry: History

The retail industry emerged in the US in the eighteenth century, restricted to general stores. Specialty stores were developed only in those areas that had a population of above 5,000. Supermarkets flourished in the US and Canada with the growth of suburbs after World War II. The modern retail industry is booming across the world. Revenues from retail sales in the US alone stood at $4.48 trillion in 2007, according to a report by the US Census Bureau.

Retail Industry: Demand and Supply Drivers

The major demand drivers of the retail industry are:

Interest rates 

Population 

Employment 

Personal disposable income  

Individual debt

The supply drivers include:

Competitors in the industry 

Size of the market 

Cost of the factors of production

Retail Industry: Major Players

Of the world’s top ten retail companies in terms of total sales, six are American. Combined sales of the top ten companies, computed by Delloite, were $978.5 billion in 2007. Major retail giants include Wal-Mart, Target, Home Depot and Tesco.

Retail Industry: Statistics

The total sales from store retailers stood at €108,449.8 million in 2007 and the sales value of non-store retailers was €469.9 million. The percent composition of store and non-store retailers in 2007 was:

Store Retailers Non-Store Retailers Supermarkets 32.83 Vending 26.60 Small grocery retailers 24.46 Internet retailing 25.93 Hypermarkets 19.09 Home shopping 24.04 Food/beverage/tobacco specialists 15.68 Direct selling 23.43 Discounters 7.57     Others 0.36     Total 100 Total 100

Source: World Retail Data and Statistics 2008/2009

The retail sector is vital to the world economy, as it provides large scale employment to skilled and unskilled labor, minors and casual and part-time workers. Employment in the retail sector in the US and Europe surpassed 32 million in 2007.

Conclusion on retail industry in India

Contribution of Retail:

What, How and In this report we have analyzed in detail the retail industry in India. We had initially started with the evolution of the retail sector in India, then moved onto its size, distribution and the growth of the retail sector. We have also covered issues like the Foreign Direct Investment in the retail sector, the untapped opportunities that exist in the retail industry in India. We have also discussed about the bottlenecks that the retail industry is facing in India, online retailing in India and the role of Information Technology in the retail sector in India.

In this section we have coined down the major findings of our research.

Major Findings

1. The Retail Sector in India can be split up into two, the organised and the unorganized. The organized sector whose size is expected to triple by 2010 can be further split up into departmental stores, supermarkets, shopping malls etc.

2. In terms of value the size of the retail sector in India is $300 billion. The organised sector contributes about 4.6% to the total trade.3. The retail sector in India contributes 10% to the Gross Domestic Product and 8% to the employment of the country.4. In terms of growth the FMCG retail sector is the fastest growing unit and the retail relating to household care, confectionery etc, have lagged behind .5. The foreign retail giants were initially restricted from making investments in India. But now FDI of 51% is permitted in India only through single branded retail outlets. Multi brand outlets are still beyond their reach. Again they can only enter the market through franchisees,. This was how Wal-Mart had entered joining hands with Bharati Enterprises.

6. On line retailing is still to leave a mark on the customers due to lacunae that we have already mentioned.

In a nutshell we may conclude that the retail industry in India has a very bright future prospect. It is expected to enrich the Indian Economy in terms of income and employment generation.

Size of Indian Retail Industry and Present Scenario

The size of retail industry in an economy depends on many factors and the level of consumer spending is the most important among these factors. The retail   sector  in India has grown by leaps and bounds in the last five years. The reason behind this growth has been the synergy of many propellants. However the growth is not always genuine as there are exaggerations as well. But these exaggerations also have benefits since they given a feel of growing competition all around. Secondly the present situation is just a depiction of nascent stage. The future of the trajectory may not be as steep as it is now or may be even slope downward. 'What will be the future size of the retail industry' is the mind boggling question. Another moot point that will gain importance in due time concerns the future of the unorganized retail   market  which constitute a significant proportion of the whole industry. The retail stores have proved to be a vantage point for the customers. This implies that the small farmers who used to sell their product in the sabji-mandis and on roadsides are going to lose a significant market   share  as they can't employ the two profit maximizers-economies of scale and economies of scope.

Retailing in India: the present scenario

The present value of the Indian retail market is estimated by the India Retail Report to be around Rs. 12,00,000 crore($270 billion) and the annual growth   rate  is 5.7 percent. Retail market for food and grocery with a worth of Rs. 7,43,900 crore is the largest of the different types of retail industries present in India. Furthermore around 15 million retail outlets help India win the crown of having the highest retail outlet density in the world. The contribution of retail sector to GDP has been manifested below:

Country Retail Sector's share in GDP (in %)

India

10

USA

10

China

8

Brazil

6

Source:CII-AT Kearney Retail Study

As can be clearly seen, retailing in India is superior than those of its contenders. Retail sector is a sunrise industry in India and the prospect for growth is simply huge. There are many factors that have stimulated the rise of the shopping centers and multiplex-malls in a jiffy. Some of them can be listed as follows:1. Rise in the purchasing   power  of Indians- the rise in the per capita income in the last few years has been magnificent. This has led to the generation of insatiable wants of the upper and middle class. The demand of new as well as second hand durables has risen throughout the country thus providing the incentive for taking up retailing.2. Favorable to farmers- retailing has helped in removing the middlemen and has thus enhanced the remuneration to farmers. This is a new revolution in the agricultural sector in India and will go a long way in amending the condition of agriculture, a major concern among policy makers.3. Use of credit- a typical Indian is most conversant with using credit cards than carrying money. This has led to a shift of the consumer base towards supermarkets and make the payments in the form of credit.4. Comfortable Atmosphere- a visit to a retail store appears to be more soothing for the generation-Y. People and kids prefer to shop in an air conditioned a tech savvy manner.The retail industry is the second largest employer in India. It currently employs about 7 percent of the total labor force in India. Finance Minister P. Chidambaram's recent statement “salaries ought not be legislated” is a welcome move as most of the organized retail is in private hands. However only about 4.6% of the total retail trade is in organized sector. It generates about Rs.55,000 crore ($12.4 billion). The major and minor players desperately need to work hard in this direction so that next time the figures look more decent. The government must also make an attempt to ameliorate the situation as political instability and infrastructurenamely power and roads are the major roadblocks in the path of smooth functioning of the market.

Retail sectors in neighboring countries:

China- the total sales from retail market in China reached US$755 billion in 2005. However organized retailing in China accounts for only 20% of it. Also the fragmentation of China's retail market is so high that top 100 retailers make up for only 10.5% of the total market. The registered sales of department stores grew by 25.7% and that of convenience stores grew by 36.5% in 2005. The Chinese retail market is expected to reach new highs as the population of strong middle class is expected to double by 2020 andmergers   and   acquisitions  among retailers are3 going in great guns. The WTO restrictions are also expected to have a favorable impact on its retail sector.

Japan- total annual sales for the Japanese retail industry for 2003 amounted to JPY 133,273 billion. Japan had 1.2 million retail establishments in June 2004 and there were 42,738 specialty superstores. Between 2002 and 2004 annual sales per store increased by 3.8%. The growth was mainly driven by the grocery superstores but the number of superstores specializing in clothes gradually came down. The organized retail sector in Japan couldn't perform at its full efficiency because of collapse of the 'bubble economy' in the early 90s.