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A PROJECT REPORT ON

“Organized Retail Sector”

- Challenges and Opportunities

Submitted in partial fulfillment of Bachelors of

Management Studies L.S. Raheja College of Arts and

Commerce University of Mumbai

Academic Year 2010-2011

Submitted by: Arbaaz Khan

Project Guide: Prof. Punit Neb D’Souza

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DECLARATION

This is to certify that the project report entitled Organized retail

sector – Challenges and Opportunities is submitted by me in partial

fulfillment of the requirement of Bachelors of Management Studies in the

academic year 2010-2011. The information it comprises of is true and

original as per my research and observation.

________________________

Signature of the student

ARBAAZ KHAN

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CERTIFICATE

This is to certify that Arbaaz Khan has completed the project under

the guidance of Prof. Punit Neb D’Souza in the academic year 2010-2011

and has submitted the university in partial fulfillment of the requirement of

Bachelors of Management Studies.

_____________________ ___________________

Signature of the Principal Signature of the Project

Guide

(Dr. Ms. M.B. Madlani) (Prof. Punit Neb D‘Souza)

________________________________

Signature of the External Examination

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ACKNOWLEDGMENT

This project was a great learning experience and I take this opportunity to

acknowledge all those who have helped in making this project.

At the onset, I would like to thank Mr. Nilesh Pednekar of Reliance Retail Ltd. for his

invaluable guidance and inspiration.

I would also like to thank my project guide Prof. Punit Neb D‘Souza for her support,

guidance and encouragement.

Let me take this opportunity to thank our course coordinator Ms. Kruti Shah for her

patience and constant motivation.

I would also like to thank our Principal Dr. Ms. M. B. Madlani.

Last of all I would like to thank for colleagues for their support and ideas that have gone

a long way in the making of this project.

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Executive Summary

The retail sector in India is witnessing a huge change in its retail industry as

traditional markets make way for new formats such as departmental stores, hypermarkets,

supermarkets and specialty stores. In this project an attempt has being made to

understand the current scenario of the organized retail sector in India and the future

challenges as well as the opportunities for the Indian retail sector. The challenges are

such as opening of the multi brand retail to foreign players, who are at present only

allowed to invest in single brand retail up to 51% and 100% in wholesale retail through

FDI and also the threat possessed by foreign players such as Wal-Mart, Carrefour and

Tesco because it is often said that emergence of this player changes the entire game of

retail in the country. It would be challenging for the Indian players to grow in the market

and grasp the hold on the consumers to bring them up shopping to their store. The history

of Indian retail sector is not much older but a couple of decades.

The major reform in the Indian retail sector started in the year 1991 after

liberalization measures were taken by the country. Since then the retail sector have being

growing but yet it has to emerge as at the top. This project will put light on steps being

adopted by some existing player to face this challenges possessed by emerging players

and unorganized retail segment with precise case study about Sahakari Bhandar who

have being in this filed for past 40 years and how it has evolved its business in recent

years especially after joining hand with Reliance Retail, in systematic manner through a

SWOT analysis of this firm and highlighting the some future opportunities for present

players in the rural market who have till now confined their operation only to I,II,III tier

cities. The project focuses majorly on opportunities in term of un-tapped market,

challenges from emerging player along with a case study on the oldest player in the

segment Sahakari Bhandar would be the essence of this project.

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Index

Sr. No Topic Page No

1. Introduction. 7_

a. History. 9_

b. Retail Sector in India. 11

2. Unorganized v/s Organized. 13

3. Foreign Direct Investment. 16

a. Present Scenario. 16

b. Benefits. 17

c. Concerns. 18

4. Types of Retail Operations. 20

5. Existing Players. 25

6. Emerging Players. 34

7. Rural Market- Yet to be explored. 36

8. Sahakari Bhandar- A Case Study. 40

a. Introduction and History. 40

b. Research Methodology. 42

c. Survey on the Customers of Sahakari Bhandar. 43

d. SWOT Analysis of Sahakari Bhandar. 48

e. Five Forces of Sahakari Bhandar. 56

9. Conclusion. 61

10. Appendix. 62

11. Bibliography. 68

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Introduction

The retail sector in India is majorly categorized into two forms i.e. organized

retail and unorganized retail. Organized retail consists of the modern retail stores such as

super market, hyper market, etc. on the other hand unorganized retail consists of the

traditional retail stores such as Kirana shop, general store, paanwala, etc. The retail sector

in India is witnessing a huge changing exercise as the traditional markets make way for

new formats such as departmental stores, hypermarkets, supermarkets and specialty

stores. Western-style malls have begun appearing in metros introducing the Indian

consumer to a shopping experience like never before. Retailing is one of the pillars of the

economy in India and accounts for about 35% of the GDP. Organized retailing refers to

trading activities undertaken by licensed retailers i.e. 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. Organized retail such supermarkets

accounts for just 6% of the market as of 2009. Regulations prevent most foreign

investment in retailing. Retailing is emerging as a sunrise industry in India and is

presently the largest employer after agriculture. Retailing includes all activities involved

in selling goods or services directly to final consumers for personal, non-business use.

India's vast middle class and its almost untapped retail industry are key attractions for

global retail giants wanting to enter newer markets. However the Indian retail sector is

still in an emerging stage. Organized retailing aims at providing an ideal shopping

experience for the consumer based on the advantages of large-scale purchases, consumer

preference analysis, excellent ambience and choice of merchandise. Efficient

management of the supply chain to ensure the profitability of the entire chain, large

outlets with modern ambiance and facilities, a wide product profile, self service facilities

etc are generally the features of a modern retail store.

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For a long time, the corner grocery store was the only choice available to the

consumer, especially in the urban areas. This is slowly giving way to international

formats of retailing. The traditional food and grocery segment has seen the emergence of

supermarkets/grocery chains. The Indian Retail sector has caught the world’s imagination

in the last few years. Topping the list of most attractive retail destination list for three

years in a row, it had retail giants like Wal-Mart, Carrefour and Tesco sizing up potential

partners and waiting to enter the fray. In fact all the three retail giants have already made

an entry in the Indian market and have made tie-up with Indian companies. India’s retail

growth was largely driven by increasing disposable incomes, favorable demographics,

changing lifestyles, growth of the middle class segment and a high potential for

penetration into urban and rural markets. Asian markets witness a shift in trend from

traditional retailing to organized retailing driven by the liberalizations on Foreign Direct

Investments. For example, in China there was a drastic structural development after FDI

was permitted in retailing. India has entered a stage of positive economic development

which requires liberalization of the retail market to gain a significant enhancement.

Hence the Indian government is looking forward to allow a 51% entry to the foreign

companies in organized retail sector. A vast majority of India's young population favors

branded garments. With the influence of visual media, urban consumer trends have

spread across the rural areas also. The shopping spree of the young Indians for clothing,

favorable income demographics, increasing population of young people joining the

workforce with considerably higher disposable income, has unleashed new possibilities

for retail growth even in the rural areas.

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History

In India retailing started from the emerged from the opening up of the nearby

Kirana stores. This in more specific terms can be said to be as a convenient store. The

government of India took steps in order to open up its economy and welcome the new

trend of modern retail. Very first franchise model of store chains in India was started by

the khadi and village industries commission. 1980’s brought more change as slowly the

economy was opening up. The textiles sector with companies like Bombay Dyeing,

Raymond’s, S Kumar’s and Grasim saw the emergence of retail chain stores. Later in a

few years Titan successfully created an organized retailing concept and established a

series of showrooms for its premium watches. With 1990’s there was more change and

now the manufacturers were shifting to become pure retailers. 1990’s brought the

emergence of shopping centers, mainly in the urban areas where facility of car parking

and home delivery provided a complete destination of shopping experience for all the

segments of the society. The traditional grocers, by introducing self-service formats as

well as value-added services such as credit and home delivery, have tried to redefine

themselves. However, the boom in retailing has been confined primarily to the urban

markets in the country. 2000’s brought the emergence of hyper markets and super

markets trying to provide with 3 V’s i.e. value, variety and volume.

In the past few years, India’s retail journey seemed picture perfect with the most

attractive ‘stops’ still unexploited and under-penetrated. Favorable demographics, steady

economic growth, easy availability of credit, and large scale real estate developments

were fuelling the growth of Indian retail market. The opportunity was there for all to see

and India was the destination of choice for top global retailers. One can assume that the

retailing revolution is emerging along the lines of the economic evolution of

society. India has sometimes been called a nation of shopkeepers. Even among retail

enterprises that employ hired workers, the bulk of them use less than three workers.

India's retail sector appeared underdeveloped not only by the standards of industrialized

countries but also in comparison with several other emerging markets in Asia and

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elsewhere. There were only 14 companies that ran department stores and two with

hypermarkets. While the number of businesses operating supermarkets was higher most

of these had only one outlet. The numbers of companies with supermarket chains were

very few which now has grown to a great number proving India’s potential in this sector.

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Retail Sector in India

The Indian retail market is the 5th most attractive market in the world. The retail

market in India is still mostly untapped and needs to be explored. The growth in the

market is forecasted due to the vast middle class that prevails in India. The turnover of

the retail sector in India is of about $510 billion. This figure is expected to grow by about

15 to 20 % in the next coming decade. The India Retail Industry is the largest among all

the industries, accounting for over 12 per cent of the country’s GDP and around 8 percent

of the employment. One of the reason for the sector not being too much successful as in

the other developed countries is the initial investment that is required to break even with

the other companies and compete with them. India Retail Industry is gradually inching its

way towards becoming the next boom industry. India continues to be among the most

attractive countries for global retailers. At US$ 511 billion, its retail market is larger than

ever and drawing both global and local retailers. Apparel, along with food and grocery,

has being the leading organized retailing in India. India has one of the largest numbers of

retail outlets in the world. A report by Images Retail estimates the number of operational

malls to grow more than two-fold, to cross 412, with 205 million square feet by 2010,

and a further 715 malls to be added by 2015, with major retail developments even in tier-

II and tier-III cities in India. The future in Indian retail looks more promising as the

market is growing and the government’s policies are becoming more favorable and

emerging technologies are facilitating operations. The Indian population is witnessing a

significant change in its demographics. A large young working population with median

age of 24 years, nuclear families in urban areas, along with increasing working-women

population and emerging opportunities in the services sector are the key growth drivers of

the organized retail sector.

However there are a few loopholes in the retail sector which might be needed to

be overcome. The manufacturers cannot directly reach all retailers in a particular

geographical area. Therefore, the manufacturers cannot maintain the desired relationship

with the retailers which in turn make management of the channel complicated. This also

makes the possibility of a direct feedback loop from the retailers almost

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remote. Therefore, the member operating between the manufacturers and retailers

become more powerful as they can block the channel of communication between the two.

So the dependence of retailers on other channel members increases to a high extent. Thus

the participation of retailers in the flows of marketing mix becomes lower than

desired. The financial strength of the Indian retailers, in general, is very low and hence

the investment capabilities. This makes the retailers more dependent on the other channel

members. However, these characteristics are peculiar to the small retail outlets and may

not be present at every kind of retail level. Indian market has high complexities in terms

of a wide geographic spread and distinct consumer preferences varying by each region

necessitating a need for localization even within the geographic zones. India has highest

number of outlets per person (7 per thousand) Indian retail space per capita at

2 sq ft/person is lowest in the world Indian retail density of 6 percent is highest in the

world. Delving further into consumer buying habits, purchase decisions can be separated

into two categories i.e. status-oriented and indulgence-oriented.

CTVs/LCDs, refrigerators, washing machines dishwashers, microwave ovens and

DVD players fall in the status category. Indulgence-oriented products include plasma

TVs, home theatre systems, iPods, high-end digital cameras, camcorders, and gaming

consoles. Consumers in the status category buy because they need to maintain a position

in their social group. Indulgence-oriented buying happens with those who want to enjoy

life better with products that meet their requirements. When it comes to the festival

shopping season, it is primarily the status-oriented segment that contributes largely to the

retailer’s cash register. While India presents a large market opportunity given the number

and increasing purchasing power of consumers, there are significant challenges as well

given that over 90% of trade is conducted through independent local stores. Challenges

include: Geographically dispersed population, small ticket sizes, complex distribution

network and little use of IT systems, limitations of mass media and existence of

counterfeit goods.

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Unorganized v/s Organized

The retail industry is divided into organized and unorganized sectors. Over 12

million outlets operate in the country and only 4% of them being larger than 500 sq ft

(46 m2) in size. Organized 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. Unorganized 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/beedi shops, convenience stores, hand cart and pavement vendors, etc.

Most Indian shopping takes place in open markets and millions of independent

grocery shops called kirana. Organized retail such supermarkets accounts for just 4% of

the market as of 2008. Regulations prevent most foreign investment in retailing.

Moreover, over thirty regulations such as "signboard licenses" and "anti-hoarding

measures" may have to be complied before a store can open doors. There are taxes for

moving goods to states, from states, and even within states.

Unorganized Retailing

In India, the most of the retail sector is unorganized. The retail business

contributes around 12 percent of GDP. Of this, the organized retail sector accounts only

for about 5 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 refers to the traditional formats of low-cost

retailing, for example, hand cart and pavement vendors, & mobile vendors, local kirana

shops, owner manned general stores, paan/beedi shops, convenience stores, hardware

shop at the corner of your street selling everything from bathroom fittings to paints and

small construction tools; or the slightly more organized medical store and a host of other

small retail businesses in apparel, electronics, food etc. The main advantage in

unorganized retailing is consumer familiarity that runs from generation to generation. It is

a low cost structure and they are mostly operated by owners, have very low real estate

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and labor costs and have low taxes to pay as compared to the organized sector. India has

sometimes been called a nation of shopkeepers. Small-store (kirana) retailing has been

one of the easiest ways to generate self-employment, as it requires limited investment in

land, capital and labor.  It is generally family run business, lack of standardization and the

retailers who are running this store they are lacking of education, experience and

exposure. These kirana 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

organized retail store, so this kirana stores are the only place for them to fulfill their

needs. Another reason might be the proximity of the store. 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.

Organized retailing

Organized retail business in India is relatively very small but has tremendous

scope. This organized retail sector includes supermarkets, hypermarkets, discounted

stores, specialty stores and departmental stores. For example, Spencer network has 69

stores, which includes seven Spencer hypermarkets, three Spencer super markets and 49

Spencer daily’s. The organized sector is expected to grow faster than GDP growth in next

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few years driven by favorable demographic patterns, changing lifestyles, and strong

income growth. The Indian Retail sector has caught the world’s attention in the last few

years. Topping the list of most attractive retail destination list for three years in a row, it

had retail giants like Wal-Mart, Carrefour and Tesco signing up potential partners and

waiting to enter the Indian market. Organized retailers have not been successful to

provide services that match those of kirana stores. The true reason of their troubles is that

the business capacity of the kirana shop owners and buyers is high in India.

Mom and Pop stores already have a model that is preferred by consumers and is

also cost efficient. The big stores are still trying to get their model right in providing an

alternative to neighborhood retailers who offer convenience, credit and personalized

service. The major constraint of the organized retail market in India is the competition

from the un-organized sector. Traditional retailing has been deep rooted in India for the

past few centuries and enjoys the benefits of low cost structure, mostly owner-operated,

therein resulting in less labor costs and little or no taxes to pay. Consumer familiarity

with the traditional formats for generations is the greatest advantage to the un-organized

sector. On the contrary, organized sector have big expenses like higher labor costs, social

security to employees, bigger premises, and taxes to meet. The Indian population is

witnessing a significant change in its demographics. A large young working population

with median age of 24 years, nuclear families in urban areas, along with increasing

working-women population and emerging opportunities in the services sector are going

to be the key growth drivers of the organized retail sector. The organized retail sector is

yet to be completely explored by the Indian players in order to match the competencies of

those foreign players.

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Foreign Direct Investment(FDI)

Present Scenario

The Indian economy is highly regulated and the most significant regulation is the

restriction of foreign ownership. The DIPP (Department of Industrial Policy and

Promotion) is the governing council of foreign direct investment in retail who takes care

of all the issue relating to FDI in every sector of the economy. Presently India only

allows 100% FDI in wholesale cash and carry business which was opened completely in

2006 and as per the recent on 31st march 2010 sales to 'group companies' should not

exceed 25% of cash & carry company’s turnover and should only be for ‘internal use’.

Government has also open-up FDI to 51% in single brand retail in late 2008 and has

prohibited FDI in multi brand retail which soon is expected to be open for foreign player.

Government has always try to promote and opt policy in the best interest of its society

and economy in large, that by strengthening its domestic players and protecting the

interest of it unorganized player in the market. Even Indian companies are trying to

capitalized this opportunities by joining hand with their foreign counter-part by a joint

venture in order to avail the expertise knowledge of big MNC in this sector. The recent

example could be Wal-Mart and Bharti group, Carrefour and Future group, Tesco and

Reliance.

Currently there is a big and controversial discussion is going on in the parliament

about the bill which has being passed a few days earlier on opening up of FDI in multi

brand retail. Prime Minister Manmohan Singh recently said, “We need greater

competition and, therefore, need to take a firm view on opening up of the retail trade” and

on the other side opposition party BJP said that “opening up of this sector would threaten

the existence of unorganized players”. There are both pros and cons related to this

issue ,lets us put light on some concerns and benefits which India could deprive if FDI in

multi brand retail in opened and try and arrive at the conclusion.

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Following are the benefits which India is expected to deprive if it open’s

door for FDI in multi brand retail:

1. Improvement in backend :

The supply chain will improve as the large retailers will be able to bring their

advanced expertise to bear. More importantly, the likes of Wal-Mart, Tesco and

Carrefour will be able to bring a global scale in their negotiations with the MNCs

such as Unilever, Nestlé, Reckitt, P&G, Pepsi, Coke, etc. They will be able to pass on

these reduced prices to their customers and, India being a price-sensitive market, this

will certainly help them pick up sales. On the other hand, these companies will not be

able to bring skills to bear on the F&V side, this is an area fraught with inefficient

intermediaries such as the arthiyas and mandis, and while you can set up a direct

distribution linkage with farmers, managing it successfully on an end-to-end basis is

not an easy task which is something that even the likes of Reliance and Pantaloon

have also not been able to manage so far.

2. Provide customers better shopping experience :

Those customers who go to the large retail outlets will get better pricing and a better

shopping experience, but whether it beats the convenience of kirana down the street

for day-to-day shopping is highly debatable. So, wherever organized retail is

available, there will be some shifting of shopping baskets such that the monthly

shopping might move to the larger hypermarket, but the convenience and day-today

vegetable shopping will continue from neighborhoods stores.

3. Generate new employment:

As the Indian GDP grows so will the need for new retail formats, experiences and

outlets. New stores, whether kirana, organized retail or FDI, will automatically lead to

new employment generation, it really depends on how much of the incremental spend

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each of these three categories captures.

It is a fallacious argument that employment generation will go up only because FDI

retailers are entering the system as penetration of any form of retail goes up in India,

it will inevitably lead to new employment generation. One can argue that the speed of

this penetration will increase through more competition and, therefore, employment

generation will get hastened.

Apart from these benefits the biggest benefit would be that the Indian companies

would be getting an opportunity to learn from these big MNC’s and not only help

them to develop their business skills but also help them to get an exposure to the

foreign market for expansion. Opening up of the FDI will help our economy as the

retail giants will bring in lots of investment. The competition will get tougher and this

help the consumers as each company would like to give the best to the customers.

Concerns about opening up of FDI:

It is unlikely that perishables would receive too much attention from global

retail chains in the initial stages As it has been seen that organized retail

usually starts with non-food items and slowly moves to dry food category and

over a period of time enters into fresh food category. In general, perishables

are difficult to manage and it is unlikely that it would receive too much

attention from global retail chains in the initial stage.

And most unemployment created due to emergence of MNC such as Wal-

Mart, who reduces the cost of by 10-12% , now if this is the case then an

unorganized store won’t be able face such stringent competition and hence

would forced to close down their operation. Now this is big cause of concern

because Indian retail sector comprises largely of unorganized sectors, and

closer of this segment would create huge unemployment. There is no reason to

believe that capital-intensive global retail chains would create more jobs.

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Other worry is that the global player will wipe out the struggling domestic

players who are already facing legacy issue, harvest age and poor supply

chain management.

And the worst part in that Government haven’t specified any provision in their

proposal to cater this segment which will be unemployed due to emergence of

this MNC’s.

Now after goings through all the pros and cons it would recommend that a

country could not confined itself and has to open its market for foreign players which is

in turn is going to benefit its people. Government should not allow 100% at once but may

do so slowly and gradually which is what being preferred by the Indian players. Here

India could learn a lesson from China who opened up its retail sectors for MBR back in

1992 by allowing 26 % of FDI by 2002 it has raised that limit to 49% and by 2004 it

completely opened these sectors by allowing 100% FDI. Its retail market is now $580

million in size and at present now in China 25% is organized were as in India it is only

5%.

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Types of Retail Operations

Retailing is one of the largest sectors in the global economy. It is going through a

transition phase not only in India but the world over. For a long time, the corner grocery

store was the only choice available to the consumer, especially in the urban areas. This is

slowly giving way to international formats of retailing. The traditional food and grocery

segment has seen the emergence of supermarkets/grocery chains (Food World, Apna

Bazaar, More, etc.), convenience stores (HP Speed mart) and fast-food chains. It is the

non-food segment however that has been made into a variety of new sectors. These

include lifestyle/fashion segments (Shoppers' Stop, Globus, Lifestyles, Westside),

apparel/accessories (Pantaloon, Levis, Reebok), books/music/gifts (Archie’s, Music

World, Crosswords, Landmark), appliances and consumer durables (Viveks, Jainsons,

Vasant & Co.), drugs and pharmacy (Health and Glow, Apollo). Retail Management

System targets small and midsize retailers seeking to automate their stores. The package

runs on personal computers to manage a range of store operations and customer

marketing tasks, including point of sale, operations, inventory control and tracking,

pricing, sales and promotions, customer management and marketing, employee

management, customized reports and information security.

The traditional grocers, by introducing self-service formats as well as value-added

services such as credit and home delivery, have tried to redefine themselves. However,

the boom in retailing has been confined primarily to the urban markets in the country.

Even there, large chunks are yet to feel the impact of organized retailing. There are two

primary reasons for this. First, the modern retailer is yet to feel the saturation' effect in

the urban market and has, therefore, probably not looked at the other markets as

seriously. Second, the modern retailing trend, despite its cost-effectiveness, has come to

be identified with lifestyles. In order to appeal to all classes of the society, retail stores

would have to identify with different lifestyles. In a sense, this trend is already visible

with the emergence of stores with an essentially `value for money' image. The

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attractiveness of the other stores actually appeals to the existing affluent class as well as

those who aspire for to be part of this class evolution of society. 

Following are the types of organized retail operations or organized

retail formats:

Malls

Malls are the largest form of organized retailing today. Most malls give space out

to individuals on lease and these are enticed by the economies resulting from the sharing

of costs. In malls like these, the combined brand pull of all outlets is used to create a pull

for the mall. Malls are located mainly in metro cities and in urban localities. Malls range

from about 60,000 sq ft to 7, 00,000 sq ft and above. They lend an ideal shopping

experience with an amalgamation of product, service and entertainment all under one

roof. Examples of such malls are In-orbit mall, Thakur mall, etc.

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Departmental stores

Departmental stores are expected to take

over the apparel business from exclusive brand showrooms. These stores range over

about 30,000 sq ft. Among these Raheja’s Shoppers Stop has being one of the most

successful stores. It has even its own set of brand for clothes called Stop.

Specialty Stores

Specialty stores are those stores which look to target one specific segment of the

market. Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer

Crossword, RPG's Music World and the Times Group's music chain Planet M, are

focusing on specific market segments and have established themselves strongly in their

sectors. Absence of discounting as a dominant format of retailing in India is a glaring peculiarity.

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The reasons are two-fold. Unlike most Western countries, Indian retailers have much less

bargaining power. They thrive as small store and don't have the clout to negotiate terms with the

manufacturers. The other reason is that the retailers themselves have no economies of scale to

offer discounts on their own. However, the scenario is now changing. Increased investments and

the entry of big business houses in retailing is leading to the emergence of bigger retailers, who

can both bargain with the suppliers, as well as, reap economies of scale. Hence, discounting is

becoming an accepted practice.

Discount Stores

As the name suggests, discount stores offer discounts on the MRP through selling

in bulk reaching economies of scale or excess stock left over at the season. A discount

store sells products at a lower price by reducing its own margins. This type of stores

target high volumes to ensure profitability. The product category can range from a variety

of perishables as well as non-perishable goods. Big bazaar is the company’s foray into

the world of hypermarket discount stores, the first of its kind in India. Price and the wide

array of products are the USP’s in Big Bazaar. Close to two lakh products are available

under one roof at prices lower by 2 to 60 per cent over the corresponding market prices.

The high quality of service, good ambience, implicit guarantees and continuous discount

programs has helped in changing the face of the Indian retailing industry. Examples of

discount stores are More, Reliance Fresh, Sahakari Bhandar, etc.

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Super Markets

Super markets are self service outlets catering to varied shopper’s needs are

termed as supermarkets. These are similar to department stores but with a focus on food

and household maintenance products. This is more of a self-service operation wherein a

customer just goes and picks what he wants. Super markets can be further classified into

mini super markets typically of about 1,000 sq ft to 2,000 sq ft and large super markets

typically of about 3,500 sq ft to 5000 sq ft. They have a strong focus on food and grocery.

Convenience Stores

These are relatively small stores of about 750 to 1,000 sq ft located near

residential areas. They stock a limited range of high turnover convenient products and are

surely open 7 days a week. Prices are little bit cut down by the stores so as to compete the

kirana stores in the residential areas. More, Reliance fresh, Apna bazaar, etc are a few

examples of convenient stores.

25

Existing Players

Future Group

One of the pioneers of organized retail in India is Kishore Biyani and his future

group is one of the leading organized retailers in India. Pantaloon Retail (India) Limited,

is India’s leading retailer that operates multiple retail formats in both the value and

lifestyle segment of the Indian consumer market. Headquartered in Mumbai, the

company operates over 16 million square feet of retail space, has over 1000 stores across

73 cities in India and employs over 30,000 people. The company’s leading formats

include Pantaloons, a chain of fashion outlets,  Big Bazaar, a uniquely Indian

hypermarket chain, Food Bazaar, a supermarket chain, blends the look, touch and feel of

Indian bazaars with aspects of modern retail like choice, convenience and quality and

Central, a chain of seamless destination malls. Some of its other formats include Brand

Factory, Blue Sky, Top 10 and Star and Sitara. The company also operates an online

portal, futurebazaar.com. Future Value Retail Limited is a wholly owned subsidiary

of Pantaloon Retail (India) Limited. This entity has been created keeping in mind the

growth and the current size of the company’s value retail business, led by its format

divisions, Big Bazaar and Food Bazaar. 

The company operates 120 Big Bazaar stores, 170 Food Bazaar stores, among

other formats, in over 70 cities across the country, covering an operational retail space of

over 6 million square feet. As a focussed entity driving the growth of the group's value

retail business, Future Value Retail Limited will continue to deliver more value to its

customers, supply partners, stakeholders and communities across the country and shape

the growth of modern retail in India.

26

A subsidiary company, Home Solutions Retail (India) Limited, operates Home

Town, a large-format home solutions store, Collection I, selling home furniture products

and eZone focused on catering to the consumer electronics segment. Pantaloon Retail is

the flagship company of Future Group, a business group catering to the entire Indian

consumption space.

K Raheja Group

K Raheja Corp are the pioneers in organized retail by taking

a first giant step to successfully establish a retail store know as

"Shopper's Stop". The group is expanding its retail chains across the

country on the back of the vast experience it gathered from feedbacks

and keen observance of people's taste keeping in tune with its culture,

customs, traditions and income. Crossword, In orbit Mall & Hyper City have set new

bench marks on the basis of information and adaptation of worldwide changes,

innovations and new techniques in retailing practices. Shopper’s Stop Ltd., has redefined

retail in India, taking it to the next level. From being just the sale of goods to consumers,

the company has created a unique aura around retail and turned it into an experience, an

27

indulgence. Shopper’s Stop Ltd., has been instrumental in bringing about a retail

revolution in the country and has become the highest benchmark for the industry. Since

its inception in 1991, Shopper’s Stop Ltd, which was founded by the K Raheja Group

(Chandru L Raheja Group), one of the leading players in the country in the business of

real estate development and hotels, has been offering premium and luxury value for the

entire family.

It is the only retailer from India to become a member of the prestigious

Intercontinental Group of Departmental Stores (IGDS). They have signed a 50-50 joint

venture with the Nuance Group for Airport Retailing. The group has announced plans to

establish a network of 55 hypermarkets across India with sales expected to cross the

US$100 million mark by 2010.

TATA group

28

Established in 1998, Trent - one of the subsidiaries of Tata Group - operates

Westside, a lifestyle retail chain and Star India Bazaar - a hypermarket with a large

assortment of products at the lowest prices. In 2005, it acquired Landmark, India's largest

book and music retailer. Trent has more than 4 lakh sq. ft. space across the country.

Westside registered a turnover of Rs 3.58 million in 2006. Tata’s has also formed a

subsidiary named Infiniti retail which consists of Croma, a consumer electronics chain. It

is a 15000-17000 sq. ft. format with 8 stores as of September 2007. Another subsidiary,

Titan Industries, owns brands like “Titan”, the watch of India has 200 exclusive outlets

the country and Tanishq, the jewellery brand, has 87 exclusive outlets. Their combined

turnover is Rs 6.55 billion.

29

RPG Group

One of the first entrants into organized food & grocery retail with Food world

stores in 1996 and then formed an alliance with Dairy farm International and launched

health & glow (pharmacy & beauty care) outlets. Now the alliance has dissolved and

RPG has Spencer’s Hyper, Super, Daily and Express formats and Music World stores

across the country. RPG has 6 lakh sq. ft. of retail space and has registered a turnover of

Rs 4.5 billion in 2006. It ventured into books retail, with the launch of its own bookstores

“Books and Beyond” at the end of 2007. An IPO was also offered, with expansion to

450+ Music World, 50+ Spencer's hyper outlets covering 4 million sq. ft. by 2010.

30

Landmark Group

Lifestyle by the Landmark group was launched in 1998 in India. Lifestyle is

spread across six cities, covering 4.6 lakh sq. ft. with a turnover of Rs 7.5 billion in 2009.

A new division named Lifestyle International has emerged for their international brands

business comprising Bassano, Kappa and Springfield in their portfolio. Their retail mix

includes Home solutions (Home centre), fashion (lifestyle, landmark International), value

retailing (max retail), hypermarkets & supermarkets (Max), kids entertainment (Fun city).

They plan to invest Rs. 300 crore in the next two years to expand on Max chain, and Rs

100 crore on City max 3 star hotel chains. They have already instituted a separate

company christened City max Hotels (India).

Piramal Group

In September 1999, Piramal Enterprises announced their arrival into retail with

the launch of three retail concepts: India's first true shopping mall of international

standards, called Crossroads; a lifestyle department store named Piramyd Megastore; and

a family entertainment centre known as Jammin. Piramyd Megastore and Jammin were

anchor tenants for Crossroads (recently sold to Pantaloon for Rs 4 billion). In 2001, the

group entered the business of food & grocery retail with the launch of TruMart

supermarkets in Pune. They have around 18 TruMart stores covering 1.90 lakh sq. ft.

registering a turnover of Rs 57.6 million in 2009. Piramyd Megastore’s contributes more

31

than 70 % to their retail mix with a turnover of Rs 112.8 million. They plan to open 150

stores covering 75 million sq ft of retail space in the next 5 years.

Bharti-Wal-Mart

Their plans include US$ 7 billion investment in creating retail network in the

country including 100 hypermarkets and several hundred small stores. They have signed

a 50:50 percent joint venture agreement with Wal-Mart. Wal-Mart will do the cash &

carry while Bharti will do the front-end.

32

Reliance Retail

India’s most ambitious retail plans are by reliance, with investments to the tune of

Rs. 30,000 crore to set up multiple formats with expected sales of Rs 90,000 crore by

2009-10. There are already more than 300 Reliance Fresh stores and the first Reliance

Mart Hyper mart has opened in Ahmadabad. The next ones are slated to open at

Jamnagar, followed by marts in Delhi / NCR, Hyderabad, Vijay wada, Pune and

Ludhiana. Reliance retail under the chairmanship of Mr. Mukesh Ambani is the most

expected growth retail organization in the near future. They have also entered into a joint

venture with the Sahakari Bhandari in order to get their expertise in the retail sector to

use.

33

A V Birla Group

They have a strong presence in apparel retailing through Madura garments which

is a subsidiary of Aditya Birla Nuvo Ltd. They own brands like Louis Phillipe, Van

Heusen, Allen Solly, Peter England, Trouser town. In other segments of retail, AV Birla

Group has announced investment plans of Rs 8000 - 9000 crore in the first 3 years till

2010. The Group’s foray into the retail sector began in December 2006 when it acquired

Trinethra, the chain of stores based in south India. May 2007 saw Aditya Birla Retail

Limited (ABRL) launch their own brand of stores called 'More.' Till end-September

2009, the company had set up 640 supermarkets and five hypermarkets. All the

supermarkets are branded More and the hypermarkets are branded More Megastore. The

company has around 11,000 employees and has a pan-India presence. More supermarkets

are neighborhood stores with the core proposition of offering value, convenience and

trust to the customers and averaging 2,500 sq ft area. The hypermarkets are self-service

superstores offering value and range in food and non-food products and services at a

single location.

Within a short span of less than three years, More has more than 1.6 million

members as part of its loyalty program. More has also launched a huge range of private

labels in food and grocery, staples and apparel which have already obtained a significant

share of category as well as salience with the consumer. Aditya Birla Retail Limited is

the retail arm of Aditya Birla Group, a USD 28 billion Corporation. The Company

ventured into food and grocery retail sector in 2007 with the acquisition of a south based

supermarket chain. Subsequently Aditya Birla Retail Ltd. expanded its presence across

the country under the brand "more." with 2 formats Super market Hypermarket.

34

Emerging Players

Indian retail sector recognized that it can no longer operate in a water tight

environment and in 2006 INDIAN recognizing the need to globalize this sector open-up

gate for foreign MNC by allowing 51% foreign direct investment in wholesale cash and

carry business which leads in emergence of retail giant Wal-mart in Indian retail industry.

Further improvising on its step government of India allowed 100%FDI in wholesale cash

and carry business and 51% in single brand retail which in turn invited international

players such as US firm Wal-mart, French retailer Carrefour and British firm Tesco and

METRO enter Indian organized retail sector.

Let’s put light on the some emerging player and their India plans

Wal-mart

Wal-mart, $2 billion company with their operation in almost every context of the

world has entered India in 2006 with a joint venture with Bharti retail for cash and carry

store and supply chain store and it will operate under the of easy day whose operation

are fully taken care by Bharti. Wal-mart has plan to invest around $10000 million dollars

in 5 years in India and in 3years have open around 12 store across India and by 2012 is

planning to open around 80 store across the country. It is being said that Wal-mart has cut

down the operating cost by 10-12% in market were its conducts its operation and which

in turn has helped them to give better price to its customer now it would be interesting to

see how does existing player sustain such emerging competition.

35

Carrefour

Carrefour world second largest retailer,

which has tied up with the country’s largest retailer

Future Group for India entry, is reported to have

secured properties for cash-an-carry outlets in New

Delhi, Bangalore, Chennai, Hyderabad and

Mumbai. And it is expected to open its first

store at Seelampur in New Delhi this. According to the source its is planning to roll-out

30 store in coming 3 years across the country under the brand of KB Best Price with the

investment of around $5000 million in last 3 to 4 years.

Tesco

British retail giant Tesco, Annual profit of 3.18 billion pounds, expects to open its

first cash-and-carry store in India by the end of this year. In India, Tata Group firm Trent

is the joint venture partner of Tesco for the cash-and-carry business. Tesco spoke person

said in an interview that. "Our local management team is helping our franchise partner,

Trent, to develop its Star Bazaar hypermarket operation. Plans for our wholesale business

are also on track with our first cash and carry store expected to open towards the end of

this year. Now it would be interesting to see how existing strong player like Bharti, future

group and Trent mobilize this opportunities In term of straightening their back hand

infrastructure which will help them to sustained the upcoming the challenge face by this

player once after FDI in multi brand retail is opened. Till then is it’s just a wait and watch

situation in India’s most booming retail sectors.

36

Rural Market :- Yet to be explore

While most of the new entrants in organized retailing are focusing on urban

markets, some companies are now experimenting with the different models of organized

retail in rural areas. The interest in rural retail stems from its market potential. For

example, rural market in India account for almost 100% of the agriculture input sales,

53% sales of the fast-moving consumer goods sectors, and 59% of the durable goods

sales. Good monsoons and improvement in agricultural productivity has fuelled greater

affluence, transforming rural markets into a large consuming class. As rural markets are

considered to be drivers of future growth, companies are fine tuning their models of

organized retail in rural markets. For their agriculture input requirement, farmers have

been buying from the local traders who supply fertilizers, seeds, pesticides and so on at

the time of sowing. At the same time, retailing for consumer products in rural India has

been traditionally driven by grocery stores who also stocks different FMCG product this

shops which carry a limited number of merchandise and brands often suffer from

frequent stock-outs. Companies have started initiatives in rural retails to address these

issues by building shopping plazas in the villages with long term plan to build partnership

with rural consumers. some prominent in rural retailing in India include hariyali kissan

bazaar promoted by DCM sriram consolidated ltd., choupal sagar, set up by the

international business division of tobacco major ITC ltd, and Aadhaar promoted by

godrej agro vet ltd.

37

Hariyali kissan bazaar, a pioneer in new format rural retailing, started with

catering to a wide range of requirements of farmers such as farm implements and other

agriculture inputs through stores housed over an area of 2 to 3 acres, catering to a cluster

of villages. These are self-services stores wherein farmer’s pick-up product from DCM

sriram products as well as agric-products sourced from other companies kept in the

shelves. In case farmers needs advice abound agricultural practices, it provides by an

agric-graduate who is stationed in the store. After initial experiments of carrying

agriculture inputs, these stores have expanded their merchandise to include an assortment

of consumers and household products Choupal sagar, the second layer of physical

infrastructure supporting the internet kiosk e-choupal of ITC, has been set up to serve two

purposes

.

38

One purpose is to acts as a collection center for farm output that the farmers

would like to sell to ITC, based on the prices across the mantis and ITC’s buying prices

inform them through e-choupal in the villages, the second and the more important

purpose is to function as a high quality low cost channel for rural India, offering a wide

variety of products ranging from personal care to household utility product. Typically,

these shops have floor space of 7000 to 10000 square feet. While choupal sagar stocks

ITC brands along with other national brands for consumer merchandise sourced directly

from manufacturers, it has partner with TVS and either to showcase and sell motorcycle

and tractors, respectively. As in the case of urban malls, large parking spaces, which

accommodates over 150 tractors/ is also provided? Currently there are 20 choupal sagars

in rural areas of Madhya Pradesh, Uttar Pradesh and Maharashtra.

Godrej agro vet ltd. (GAVL) entered the organised rural retailing by opening up

large-formats stores named Aadhaar. The stores provided the farmers with the high

quality supplies of agriculture inputs like pesticides, seeds , and fertilizers along with the

others consumer products, grocery, apparel, utensils, and other household items.

Implemented as the hub and spoke modal, a typical spoke store is spread over about 1000

square feet area of floor space and hub store has a floor area of 7000-10000 square feet.

39

In addition to these big companies, some smaller initiatives have also been made by co-

operative to cover rural market. The warn bazaar set up by sugar co-operative in

Kolhapur and single district of Maharashtra consists of superstores of 10000 sq feet area

and smaller stores of 500-1000 square feet area. They have a product mix covering agric-

inputs, food and groceries, apparels, consumer’s durables and vehicles. Similarly, caste

society, based near Ahmednagar in Maharashtra, which operates three supermarkets, has

several shops arranged in a shopping center format spread over 5000 square feet area.

This was the some business giants who have recognized the potential of the untapped

rural markets. But still it has only being able to conquer the tip of an ice berg and

therefore it would be interesting to see how the existing and emerging players explore

this opportunity by extending their operation to rural masses.

40

Sahakari Bhandar-A Case Study

History and Introduction

Sahakari Bhandar a government owned co-operative was started in the year 1966.

Sahakari Bhandar has about 20 retail stores in the Mumbai city. It can be said that

Sahakari Bhandar has captured the whole Mumbai city for its retail operations. Though

Sahakari Bhandar exists in the market for more than 40 years it has restricted its

operations to Mumbai city only. Sahakari Bhandar was an old-fashioned Indian state

owned department store until sometime, in the year 2006 Reliance retail entered into a

management agreement with Sahakari Bhandar. As Reliance being new to the retail

sector it can make use of the expertise of SB. Thus Reliance has made the effort to make

the old fashioned Sahakari Bhandar into a new modern store and it has being able to

achieve it as well. The new department stores of Sahakari Bhandar are completely

renovated and air conditioned their staff in a well dressed uniform. Reliance Retail can

make use of the stores as a secret test bed for product lines and a new system of supply

chain management. With RIL coming into the picture it is expected to see more number

of shops of Sahakari Bhandar not just in Mumbai but in other cities as well. Reliance

Retail’s tie-up with Sahakari Bhandar is perceived to transform the face the organized

retail industry in India. Reliance has reached an understanding with the Sahakari Bhandar

to manage the supply chain for the latter's 20 stores in the city. Sources close to the

development indicate the arrangement is likely to be upgraded into a franchise agreement

later. A buyout is unlikely since it is partly owned by the government.

Another possibility is scaling up the total store presence across the city once it has

finished renovating the existing stores. Sahakari Bhandar has over the years built its

brand on affordability, offering marginal discounts on branded products. The unbranded

commodities, for which the store is popular on account of its competitive prices, have

been put under another label, SB Home. To drive home this USP, the store's long history

(since 1966) is visible at various touch points, along with a new tagline, "Sahi Quality

Sahi Price". While sections like kitchen appliances and jewellery are missing in the new

41

format store, there have been additions like a pharmacy, bakery, music and DVD counter

along with a fresh fruit and vegetables section. The tie up with Sahakari Bhandar works

well for Reliance, which is betting big on retail, as it provides a presence in some of the

choicest locations in the city without the hassles of finding the correct property.

42

For the better understanding of the operation of the company I interviewed 100

customers and the executive of Sahakari Bhandar based on the information gathered

through our research and our observation following thing were found.

Research methodology

Sample size: - 100

Geography area: - Mumbai

Locations of research:-

Store manager:-

Sahakari Bhandar Juhu/ Vile-Parle / Breach Candy / Dadar

Customer:-

Sahakari bhandar, Agar bazzar. Prabhadevi, dadar (w).

Method adopted:-

Simple average

(Where the question answers which were identical is being segregated

accordingly and average was take on the scale on 100)

43

A survey on the customers of Sahakari Bhandar

1. Why do you prefer Sahakari Bhandar?

AvailabilityBetter shopping expe-rienceOthers

2. Are your expectations met by the store?

YesNo

8

25

67

80

20

44

3. How frequently do you visit Sahakari Bhandar?

Once a weekOnce in 15 daysOnce in a monthMore than once a week

4. What category of product do you mainly purchase from Sahakari

Bhandar?

Fruits and VegetablesProcessed FoodNon Food ItemsStaplesDairyApparelUtensilsNon-Veg

1461

7

18

40

57

32

10

312

45

5.What difference did you find at Sahakari Bhandar?

AvailabilityBetter shopping experienceOthers

.

6. Are you able to locate the product easily?

YesNo

7. Did you find the promotions attractive?

6030

10

96

4

46

YesNo

8. Are you in the Loyalty Member Club?

YesNo60

70

40

30

47

9. Are you happy with the services offered by Sahakari Bhandar?

YesNo

SWOT Analysis of Sahakari Bhandar

97

3

48

Strength

Loyalty:-

Sahakari Bhandar was among the first organized co-operative store which started

operation from 1966, providing a diversified range of product and service to its customer.

Now what make Sahakari Bhandar different from other player is their closeness to their

customer and the relationship being built with them. In short they know A to Z about

their customer, who is being coming to them since years and loyal to them. Now this has

given them edge over their competitors even though having the same facility and goods,

it’s the emotional attachment and the closeness with the brand Sahakari Bhandar that

brings them to their outlet. Through our observation and research it was found that

customer and employee relation is so good that customer knows an employee by his/her

name. This was really worth noticing that how a employee have become as part of

customer life, and there efficiency in dealing with their customer is the real strength of

this brand and this element of customer service is being created over 40 years of

consistent and successful operation, which is really working miracles for the brand SB

and making them one of the most competent players in terms of sales per square feet.

In this competitive environment where company are taking proactive step to

retain its customer and create loyalty for their brand must surely learn lesson from this

Sahakari Bhandar whose base is their loyal customer, who are being shopping in from

them since inception of their outlets had has no plans to switch their loyalty to others

players in the vicinity. As observed by us during our research that 60 % of the total

sample size of customer was above the age of 45 and are being shopping from the same

were store since their childhood. Now they have not only created customer but also retain

them through their proactive customer service. Proficient customer service and the

empathy (i.e. knowing customer needs) part of their service is the key strength of

Sahakari Bhandar and a thing which they can cherish upon.

49

Availability:-

Gone are the days when people confined their thinking about Sahakari Bhandar as

mere general store, if the still feel so they must visit the nearest store to them , I am sure

they would surely change their perception about SB(Sahakari Bhandar). A properly

designed store matching all the needs of modern superstore with properly design layout,

eye catchy infrastructure, with proper mechanism with technically advanced point of sale

computers, properly air conditioned has revolutionized Sahakari Bhandar image in the

minds of customer from old-fashioned Indian state-owned store to a well established

modern supermarket this is mainly after the tie-up with reliance retail who are working

with this brand on management agreement, which has really helped then to strengthen

their logistical arm. Both the player is working with great synergy to provide its customer

“Sahi quality Sahi price” which is theirs new tag line and even USP form past 40 year.

If you still have a suspicious in our mind visit regarding Sahakari ad I insist the reader to

visit Sahakari Bhandar Prahabhadevi store Sahakari Bhandar first effort to provide a true

50

family experience, this is the biggest of Sahakari Bhandar having almost every

merchandise under it right from staples, vegetables to apparels almost everything, which

truly give us a feeling of having everything under one roof with “Sahi quality sand Sahi

price”

Now this the store where we conducted research and it was found that the reason

the shoppers loyalty with this brand was firstly trust for the brand as specified earlier and

then the availability factors which this store and every store of Sahakari Bhandar provide

i.e. right from peas to CD and apparel to utensils everything is being try and made

available for the convenience of the customer. Why availability is the strength and makes

them different from other players in vicinity is keeping goods as per local appeal. Were in

was found during our research that vile-Parle (e) Sahakari Bhandar especially kept fast

food article for their Jain customer which is their in masses in the proximity of the store

and like this store very store have try and alter its their product merchandise as per the

demand of their customer which is not being done by any organized current player at

least in Mumbai. Making goods available as per local taste and understanding the want of

the customer is what differentiate a kiranas or mom-pops store and has a advantage upon

over organized player is what is being said by various expert but Sahakari Bhandar in this

regime have proved them wrong by catering customer as per their demand with the

maintaining close relationship with their customer through their dedicated employee have

made them a high tech kirana store.

As said by Mr. Nilesh Pednekar (Strategist Reliance Retail)

“We don’t want our customer, come to us only on weekend and shop for a week, but

we want them to come to us daily and shop for a day”. This statement helps us to

know that how Sahakari Bhandar has always belief in breaking the rule of retail were in

this competitive organized sector they still have their own distinct identity were they

belief that ”our competitor are not Wal-mart, Bigbaazar in real case but are the

roadside kirana wala who possess the same customer relationship and closeness to

customer like we have and that was make them our main competitor” this thing can

51

even be for fact that staples and other foods item are the most selling and the goods for

which Sahakari Bhandar is admired for in terms of its quality and price.

Location:

Location has being a key strength for Sahakari Bhandar which has located its

outlets in the cities some of the key location such as Matunga, Juhu, and Breach candy,

etc. If observed this are some location were real estate cost are touching sky, and the store

are either at residential areas or area in the close proximity of station. Now a new players

could not even imagine opening up store hear because their majority profit would firstly

eaten up in real estate cost and secondly the competition they will face from this

established players. Reliance which is largely betting big on retail, would have consider

place as a driving force while tying-up with Sahakari Bhandar which provides a presence

in some of the choicest locations in the city and even the stigma of co-operative is

working miracle for this stores.

Weakness

52

(The following weaknesses are being completely based on the research sample size and

based on their opinions.)

Inefficient replenishment of food and vegetables:

During our research it was often being found that many customer of were

dissatisfied with the quality of vegetables during the noon time as compared to morning

and this often caused inconvenience to its customer especially the working crowd who

normally shop during noon time. So this was one of the weaknesses of this store. When

this was informed to management its was being know that this thing is often the biggest

fences SB is trying to work on, because while get the goods from distribution center to

stores there is lots of inconvenience being created through toll nakas and clearance agents

and this consumed lots of time and unable them to replenish their stocks quickly. Even

customer often compliant about, the improper cleanliness at the area of food and

vegetables and requested us to inform this to the management to ensure proper and

hygienic environment at their foods and vegetables segment which will help them to

enhance the shopping experience of customers.

Low Youth customer strength:

If observed above the age-group below the 30 is only 15-20% in term of number

of foots falls which is the great cause of concern for the brand whose major strength is

their loyal customer or in short are the base of this brand, but five year down the line this

can often be a great cause of concern if considerable steps are not being taken to attract

this young masses who often posses high disposal income and drive them to their store,

which would surely arrive them long benefits. This could often being done by offering

value added services which will help attract this high demanding young crowd.

Less and inefficient payment counter:

When asked about would like to recommend any changes in this store?

53

More than 70% of the customer complaint about less cash counter and point of sales

computer not working, skills of employee etc and the considerable amount of time wasted

in queue’s standing for payment of bill, causing lot of inconvenience to the customer.

Therefore SB really needs to take proactive steps in this regards, either by increase

number of payment counter or by introducing any such mechanism which would enable

them to make payment quickly and easily. This is the necessary steps which often need to

be taken fast if the compared their business or competes with kiranas.

Inefficient marketing communication:

Firstly, SB being an establish brand doesn’t go for huge advertisement, but it does

go for sales promotion by coming up with timely scheme of discount, offers etc. when

customer were asked about the attraction and influence this promotion cause in their

shopping behavior we were amazed to know that majority of their customer were

unaware about the scheme and offer. This could majorly due the fact that, customer were

not being communicated about such scheme and offers and its was often found that

majority of the customer where unable to listen the in store announcement properly, so to

start up and to overcome this problem we would recommend that initially they can work

on proper in store announcement and then start providing for value-added services to

their customer if they what to retain their customer because youth, along with good price

expect better shopping experience and proper communication which is the core quality

determinants of any service provider .

54

Opportunities

Rural market:

As Specified in the earlier part of my project about rural market its capabilities to

turn around the fortune of any business, if being expected by rural masses. Therefore it

throws a goodly opportunity for this long existing player with a traditional name Sahakari

Bhandar depicting a Maharashtrian culture could flourish well in the rural areas of

Maharashtra if it diversifies its business to this untouched rural segment.

Private label:

This is the most recent activity being started by each and every organized retail

players to produced in-house product with their own brand labels, having better margins

and as per the collected sources working well for these players. The players such as Big-

bazaar and MORE are the players started with this trend of selling private labels goods in

segment such staples and even processed food etc. Now Sahakari Bandar being a late

adapter should start with the private label merchandise for staples and other processed

food items which in future can help them to increase their product portfolio with better

margins.

55

Threats

Unorganized players getting organized:

It is observed and heard more frequently about how unorganized players

(traditional kirana wala) have diversified its business and getting organized in every

aspects of his business. This often posses the biggest threat to SB because even this brand

having sharing the same story and strength which often a Karana’s have, such as loyalty,

good relationship, etc and therefore is a great cause of concern and is surely the area

which have to be looked into.

Emerging foreign players and existing players:

Other threats which are is quite often being observed and seen by every customer

is the price war among the existing players, every one quoting about the quality at

reasonable price often creating a clutter like situation. This players, which are focusing

more on upcoming generation and especially youth by providing various add-on and

complementary services with good shopping experience often posses a big threat in

future to SB, whose biggest strength is the customer loyal customer above the age of 45.

Even the recently emerging player such as Wal-mart, Tesco, and Carrefour along with

their strong Indian counter-parts will make the competition more stringent for Sahakari

Bhandar.

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Michael Porter’s Five Forces

Michael Porter formulated the five forces in the year 1979 in order to study the

competitive advantage of the firm when compared with the other competitors present in

the market. Strategy consultants occasionally use Porter's five forces framework when

making a qualitative evaluation of a firm's strategic position. According to Porter, the five

forces model should be used at the line-of-business industry level; it is not designed to be

used at the industry group or industry sector level. An industry is defined at a lower, more

basic level: a market in which similar or closely related products and/or services are sold

to buyers. A firm that competes in a single industry should develop, at a minimum, one

five forces analysis for its industry. Porter makes clear that for diversified companies, the

first fundamental issue in corporate strategy is the selection of industries (lines of

business) in which the company should compete; and each line of business should

develop its own, industry-specific, five forces analysis. The average Global 1,000

Company competes in approximately 52 industries (lines of business).

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Following are the Five Forces for Sahakari Bhandar:

1. Threat of new entrants: (high)

There can be a threat of a new entrant in the market. The retailers have to fight for

the same audience. This force helps an existing company to know what effect it might

have on its business on the entrance of a new player in the market. As Sahakari Bhandar

has believed that their biggest competitors are the kirana walas they are the biggest threat

from their business as especially after the facts that many of them are getting organized in

every aspects of the business. There are Emerging players such TESCO, Wal-Mart and

Carrefour who with their expertise and support of their Indian counterpart will give

continuous challenge to SB in term of price and quality. Even though SB having a

location advantage as well as well as high loyalty factor in their business threat of new

and well organized business remains HIGH. Because every customer looks at better

service and the one who consistently meet their expectation would be a winner 5 years

down the line.

2. Rivalry amongst the existing firms: (high)

Rivalry exists in any kind of business and in the case of retailers there is a lot of

rivalry as they need to get the customers to their store first. The firms have to be sure

about the effectiveness of their strategy before implementing it. The retailers have to

conduct a research on the products that have to be merchandised at their store. In case of

Sahakari Bhandar they have a rivalry with the kirana wala where they have the advantage

of their big store and the shopping experience they provide. The merchandising of their

products have being very effective. Though there are other stores such as more, big

bazaar, etc, they are in the business from the last 40 years which is an advantage for them

and they also specialize in grocery which is their major strength. The rivalry is going to

benefit the consumers as the firms are going to provide the best products and best service

in order to attract and retain the consumers. At present SB have edge over their

58

competitor in various aspects of the business like location, established brand and many

more but 5 years down the line it would really be difficult to assess the stability of any

firm in the business( closer of Vishal mega mart and spinach superstore) making this

business very uncertain with changing policy and immense competition among the player

threat from the existing player, to every players in the sectors would always remain

HIGH and especially after the joint-venture between Indian and foreign established

players such as between Wal-mart and Bharti, future group and Carrefour the task to

retain and diversify the business is really going to be difficult.

3. Threat of substitute products: (not applicable)

The products offered by the players are a close substitute of each other. Thus it is

the price factor that has to be considered in this case. Sahakari Bhandar are specialized in

grocery and they have to make sure that the quality has to be maintained so as to keep

their customers satisfied and see to it that they came back again. The products that are

provided by Sahakari Bhandar are also available at the other stores. If we see from the

point of view of merchandise kept by each store then the threats is high of substitute

because each in the sectors almost keep kept the same very product, but what

differentiate every players is add-on services or complementary services provided by this

players and in this regard threat of substitute is low due the emotional attachment being

created with customer from their consistent service from past forty years. Now a threat

from substitute product doesn’t exist since it not deal in private label product.

4. Bargaining power of the suppliers: (low)

The suppliers play a very important role as a business cannot be efficiently run

without their support. A company has to ensure that their suppliers are happy and

Sahakari Bhandar has being effective in doing this. It can be very costly for a firm to

switch from one supplier to another but at the same time it has to see that the existing

supplier does not takes advantage of it. The question that arises here is how much power

does the supplier have over the company? Sahakari Bhandar has a good sale of the

59

grocery and F&V thus the suppliers of these both have a business with them and hence

even they are in a need to sell. Sahakari Bhandar has the advantage over the suppliers as

there are substitutes available. In case there are a very few suppliers of the required

product then the suppliers have the upper hand. Sahakari Bhandar purchases in bulk

quantity and thus their economy of scale is efficient enough.

5. Bargaining power of the buyers: (high)

Consumers are the king of the market and any business organization has to satisfy

its customers anyhow. The buyers have the bargaining power more than the sellers

because there are many sellers in market. In case of retail the buyers cannot bargain

directly with the sellers but they can switch from one store to another if they are not

satisfied with that seller. Therefore the bargaining power of the customer is HIGH as

there is a great chance of switching always prevails. Sahakari Bhandar has taken various

steps in order to retain their customers and has provided a number of offers to the

customers. Sahakari Bhandar is the only store where the customers are seen bargaining

not for price but for the quality or availability. This is a good sign for them as it shows

the loyalty of the customers that they want to complaint also and they want to shop at the

same place. Sahakari Bhandar comes up with discounts and offers on every occasion of

60

festival or change or the season. They have being giving offers in summer, winter, during

Diwali, etc. Thus the bargaining power of the customers of Sahakari Bhandar is even

with them as they are satisfied to enough. The bargaining power of the customer

There are certain thing which Sahakari Bhandar really need to take into

consideration otherwise Sahakari Bhandar is surly the place, to have a better shopping

experience with reasonable price and better quality i.e. to have “Sahi quality, Sahi price”.

61

CONCLUSION

With India's retail sector set to continue exploding, everyone from France's

Carrefour to Germany's Metro AG to Britain's Tesco is trying to get a foothold into the

country. One can reach a reasonable conclusion that consumer driven economy of India is

on the right course. A big leap forward economically, which is happening, just about

now, is also helping to develop a very large middle class. This in turn is leading to

consumerism.

To beat the competition, stand out in a saturated marketplace and succeed despite

tightening margins, savvy retailers should focus on customer-centric services,

personalization and loyalty programs to attract and retain customers. Retaining and

growing profits requires new solutions to:

Get shoppers into stores

Create a complete customer view and determine customer value

Improve contact strategies to strengthen relationships

Uncover future multichannel growth opportunities

This leads to the conclusion that the retail industry in India has moved from being a

retailer driven industry to a customer driven industry, and to succeed in this scenario, the

companies have to follow one motto: THE CUSTOMER IS THE KING!

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APPENDIX

CUSTOMER QUESTIONNAIRE

PERSONAL DETAILS

Name: ____________________ Age: _______Occupation: ____________________

1. Why do you prefer Sahakari Bhandar?

Availability Better shopping experiences others, please

specify__________________________________________________

2. Are your expectations met by the store?

Yes No

If NO, why?

________________________________________________________

________________________________________________________

3. How frequently do you visit the store and since how much time you

are a Sahakari Bhandar customer?

More than Once a week once a week once in 15 days

once a month.

4. What kind (category) of product do you purchase?

Fruits and vegetables Non food items Dairy Apparel

Processed food staples home Utensils pharmacy and

medicines Non-Veg

63

5. What difference did you find at Sahakari Bhandar?

Availability Better shopping experiences others, please

specify____________________________________________

6. Are you able to locate product easily?

Yes No

7. Did you find the promotion attractive?

Yes No

8. Are you in loyalty member club?

Yes No

If yes,

Are you happy with this initiative? Please share your experience, if

any?

________________________________________________________

________________________________________________________

9. Are you happy with the service offered by Sahakari Bhandar?

Yes No. If no, why?

10.Would you like to recommend any changes that you would like to see

at Sahakari Bhandar?

________________________________________________________

________________________________________________________

________________________________________________________

64

Thank you for your precious time….

The End

PERSONAL DETAILS

(These details are required for communication purposes only and will not be disclosed)

NAME: ________________________________

POSITION:_____________________________

BUSINESS UNIT: _______________________

CONTACT DETAILS

TELEPHONE: _________________________

EMAIL: ______________________________

1. What makes SAHAKARI BHANDAR different from other players in

the same sector?

________________________________________________________

________________________________________________________

2. What are the lessons learn from the past slowdown and what changes

have you brought since then?

________________________________________________________

________________________________________________________

3. Has the incidence of the Subhiksha and Vishal retail affected the

creditability of other players in the same sector?

________________________________________________________

________________________________________________________

65

4. Do you have any tie-up with real estate firm in order to keep the rental

cost under control which normally takes away a huge share of your

profit?

________________________________________________________

________________________________________________________

5. How much effect do big emerging players such as Wal-mart,

Carrefour, and Tesco will have on your business operation?

________________________________________________________

________________________________________________________

6. As compared to other players in the market Wal mart has 12-15% less

price. What challenge does this poses to your company and what are

your plans regarding the same?

________________________________________________________

________________________________________________________

7. Why is India lacking in its back hand infrastructure? Has your firm

taken any measure to strengthen the same?

________________________________________________________

________________________________________________________

8. It is clear that government is trying to promote its Indian players

before opening up 100% FDI in multi brand retail? How well have

your firm capitalized this opportunity till now and want are the future

steps?

________________________________________________________

________________________________________________________

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9. How the ever changing FDI policy affecting your operation?(with ref

to recent amendment in wholesale business on 31 march)

________________________________________________________

________________________________________________________

10.Are you happy with the current discussion being made on opening up

of FDI in multi-brand retail?

Yes No

11.Are Indian retailers ready for it?

Yes No

12.How will it impact the entire retail sector?

________________________________________________________

________________________________________________________

13.What all changes are expected to be made if FDI in MBR is opened?

________________________________________________________

________________________________________________________

14.There are various questions being raised on this controversial issue

and biggest of all is unemployment created in the unorganized

sectors? Please give your views on this?

________________________________________________________

________________________________________________________

15.Want all trends are yet to be emerged in this sector?

________________________________________________________

________________________________________________________

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16.Why have this sector confined their operation to I, II & III tier cities?

________________________________________________________

________________________________________________________

17.There are organization such as ITC and future group taking proactive

steps to emerge in rural market, are your firm focusing on this

segment?

Yes No

If yes, what steps are being taken to entire this segment?

________________________________________________________

________________________________________________________

18.How well are you equipped to face future challenges? What is present

position of your firm when you deal with various forces of society(in

relation to bargaining power)

________________________________________________________

________________________________________________________

Thank you for your precious time….

The End

68

Bibliography

Nilesh Pednekar (Strategist: - Reliance Retail)

Books/magazines

Philip Kotler: - marketing management

Business world magazine

Newspaper:

Economics times

Mint

Online articles

www.shivusira.webs.com

www.shoppersstop.com

www.mywestside.com

www.futurebazaar.com

www.indiainbusinness.nic.in

www.chillibreeze.com

www.orissadiary.com

www.fibre2fashion.com

http://business.mapsofindia.com

www.financialexpress.com

www.siescoms.edu

www.rediff.com

www.articlesbase.com

www.economictimes.indiatimes.com

www.ndtvindia.com