Present Indian retail scenario

8/7/2019 Present Indian retail scenario

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Present Indian retail scenario

Retail is clearly the sector that is poised to show the highest growth in the next

five years. The sector is set for a revolution, as both the present players and new

entrants are gearing up to explore the market. This sector contributes 10% of

India's GDP and the current growth rate is 8.5%. The present size of the organized

retailing sector is approximately 3% and is expected to grow to 25-30% by the

year 2010. There are about 300 new malls, 1500 supermarkets and 325

departmental stores currently under construction. Many players are coming up

with huge investments, due to which the present 12 million mom-and-pop shopsand kirana stores fear losing their business. Most predictions say that the sector

might reach to US$ 400-600 billion by the year 2010. Global retail giants such as

Wal-Mart, Tesco, Germany's Metro AG and many others are ready to enter the

retail markets. The rising demand of branded products and increase in purchasing

power have lured these companies to enter the market.

Modern retail development in India is focused on the following cities:

West

y Mumbai

y Pune

y Ahmedabad

North

y Delhi and the National Capital Region

South

y Chennai

y Banglore


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y Hyderabad

East

y Kolkata

Leading Indian retailer Bata India Ltd, Big Bazaar, Crossword, Ebony Retail

Holdings Ltd., Food Bazaar, Globus Stores Pvt. Ltd., Liberty shoes Ltd., Music

World Entertainment Ltd., Pantaloon Retail India Ltd., Shoppers Stop, Subhiksha,

Titan Industries, Trent and the new entrants penetrating the market soon will

include Reliance Retail Ltd, Wal-Mart Stores, Carrefour, Tesco, Boots Group, etc.

Current scenario

A glimpse of the International Retail

y One of the world's largest industries exceeding US$ 9 trillion

y 47 global fortune companies & 25 of Asia's top 200 companies are retailers

y Dominated by developed countries

y US, EU & Japan constitute 80% of world retail sales.

y Biggest player in India is Pantaloon Retail India Limited.

Percentage of Organized Retail

USA - 85%

Taiwan - 81%

Malaysia - 55%

Thailand - 40%

Brazil - 36%

Indonesia - 30%

Poland - 20%

China - 20%


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India - 3%

Key trends

The existing players like Big Bazaar, Shoppers' Stop, Piramyd are expanding

to smaller towns and cities. Many other business houses are planning to

enter the retail sector either on their own or through partnerships. New

entrants like Reliance Retail Ltd and Wal-Mart are going to enter the

market soon. Even rural areas will provide a huge opportunity to be

explored.

Estimates and Predictions

y The industry is estimated to be more than US$ 400 billion by a study of

McKinsey.

y The Economist Intelligence Unit (EIU) estimates the retail market in India to

increase to US$608.9 billion in 2009 from US$394 billion in2005.

y A KPMG report says that the organized retail would grow at a higher rate

than GDP in the next five years.

y

The retail sector would generate employment for more than 2.5 million

people by the year 2010, says an analysis by Ma Foi Management

Consultants Ltd.

Benefits of FDI in Retail Sector

y Higher competition would lead to higher quality in products and services.

y Better lifestyle as better products would be introduced.

y Exports would increase due to greater sourcing of major players.

y Investment in whole supply chain would increase.

y Technology would be upgraded in terms of logistics, production, and

distribution channels.y The markets of the sector would flourish and develop.

y Employment would increase and skills & manpower will develop.


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y A strong retailing sector would promote tourism.

y Economies of scale would help lower consumer prices and increase the

purchasing power of the consumer.

y In the long term it will be beneficial in the up-gradation of agriculture and

small scale & medium scale industries.

Indian Consumerism

The Indian consumer behaviour is rapidly changing with a shift in new

generation's preference towards luxury commodities

Retail Space: A Scope for Real Estate Sector

With new boom in the retail industry, the country has identified new scope for

real estate development. The already revolutionizing urbanization and growing

demand for finished products has necessitated development of new space for

retail outlets.

formats of retailing in India

Popular Formats

Hypermarts

Large supermarkets, typically (3,500 - 5,000 sq. ft)

Mini supermarkets, typically (1,000 - 2,000 sq. ft)

Convenience store, typically (7,50 - 1,000 sq. ft)

Discount/shopping list grocer

Traditional retailers trying to reinvent by introducing self-service formats as well

as value-added services such as credit, free home delivery etc.

The Indian retail sector can be broadly classified into:

a) FOOD RETAILERS

There are large number and variety of retailers in the food-retailing sector.

Traditional types of retailers, who operate small single-outlet businesses mainly


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using family labour, dominate this sector .In comparison, super markets account

for a small proportion of food sales in India. However the growth rate of super

market sales has being significant in recent years because greater numbers of

higher income Indians prefer to shop at super markets due to higher standards of

hygiene and attractive ambience.

b) HEALTH & BEAUTY PRODUCTS

With growth in income levels, Indians have started spending more on health and

beauty products .Here also small, single-outlet retailers dominate the market

.However in recent years, a few retail chains specializing in these products have

come into the market. Although these retail chains account for only a small share

of the total market , their business is expected to grow significantly in the future

due to the growing quality consciousness of buyers for these products .

c) CLOTHING & FOOTWEAR

Numerous clothing and footwear shops in shopping centers and markets operate

all over India. Traditional outlets stock a limited range of cheap and popular

items; in contrast, modern clothing and footwear stores have modern products

and attractive displays to lure customers. However, with rapid urbanization, and

changing patterns of consumer tastes and preferences, it is unlikely that the

traditional outlets will survive the test of time.

d) HOME FURNITURE & HOUSEHOLD GOODS

Small retailers again dominate this sector. Despite the large size of this market,

very few large and modern retailers have established specialized stores for these

products. However there is considerable potential for the entry or expansion of

specialized retail chains in the country.

e) DURABLE GOODS

The Indian durable goods sector has seen the entry of a large number of foreign

companies during the post liberalization period. A greater variety of consumer


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electronic items and household appliances became available to the Indian

customer. Intense competition among companies to sell their brands provided a

strong impetus to the growth for retailers doing business in this sector.

f) LEISURE & PERSONAL GOODS

Increasing household incomes due to better economic opportunities have

encouraged consumer expenditure on leisure and personal goods in the country.

There are specialized retailers for each category of products (books, music

products, etc.) in this sector. Another prominent feature of this sector is

popularity of franchising agreements between established manufacturers and

retailers.

Malls In India

Over the last 2-3 years, the Indian consumer market has seen a significant growth

in the number of modern-day shopping centers, popularly known as malls. There

is an increased demand for quality retail space from a varied segment of large-

format retailers and brands, which include food and apparel chains, consumer

durables and multiplex operators. Shopping-centre development has attracted

real-estate developers and corporate houses across cities in India. As a result,

from just 3 malls in 2000, India is all set to have over 220 malls by 2005. Today,

the expected demand for quality retail space in 2006 is estimated to be around 40

million square feet. While previously it was the large, organised retailers with

their modern, up-market outlets, and direct consumer interface- who had been a

key factor driving the growth of organised retail in the country, now it is the malls

which are playing the role.

Factors such as availability of physical space, population densities, city planning,

and socio-economic parameters have driven the Indian market to evolve, to a

certain extent, its own definition of a mall. For example, while a mall in USA is

400,000 to 1 million sq.ft. in size, an Indian version can be anywhere between80,000 sq.ft. and 500,000 sq.ft. By 2005, total mall space in the 6 cities of

Mumbai, Bangalore, Hyderabad, Chennai, Kolkata, and National Capital Region


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(Delhi, Noida, Gurgaon) is expected to increase to over 21.1 million sq. ft.

Compared to other big cities, Kolkata and Hyderabad are relatively new entrants

in the mall segment, but are witnessing quick growth. Smaller cities like Pune,

Ahmedabad, Lucknow, Ludhiana, Jaipur, Chandigarh and Indore, are also

expected to see a formidable growth in the growth of malls in the near future. But

malls in India need to have a clear positioning through the development of

differential product assortment and differential pricing, in order to compete

effectively in a growing mall market. Segmentation in malls, like up-market malls,

mid-market malls, etc. , proper planning, correct identification of needs, quality

products at lower prices, the right store mix, and the right timing, would ensure

the success of the mall revolution in India.

Challenges of Retailing in India

Retailing as an industry in India has still a long way to go. To become a truly

flourishing industry, retailing needs to cross the following hurdles:

Automatic approval is not allowed for foreign investment in retail.

Regulations restricting real estate purchases, and cumbersome local laws.

Taxation, which favours small retail businesses.

Absence of developed supply chain and integrated IT management.

Lack of trained work force.

Low skill level for retailing management.

Intrinsic complexity of retailing rapid price changes, constant threat of product

obsolescence and low margins.

The retailers in India have to learn both the art and science of retailing by closely

following how retailers in other parts of the world are organizing, managing, and

coping up with new challenges in an ever-changing marketplace. Indian retailers

must use innovative retail formats to enhance shopping experience, and try to

understand the regional variations in consumer attitudes to retailing. Retail

marketing efforts have to improve in the country - advertising, promotions, andcampaigns to attract customers; building loyalty by identifying regular shoppers

and offering benefits to them; efficiently managing high-value customers; and


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monitoring customer needs constantly, are some of the aspects which Indian

retailers need to focus upon on a more pro -active basis.

Despite the presence of the basic ingredients required for growth of the retail

industry in India, it still faces substantial hurdles that will retard and inhibit its

growth in the future. One of the key impediments is the lack of FDI status. This

has largely limited capital investments in supply chain infrastructure, which is a

key for development and growth of food retailing and has also constrained access

to world-class retail practices. Multiplicity and complexity of taxes, lack of proper

infrastructure and relatively high cost of real estate are the other impediments to

the growth of retailing. While the industry and the government are trying to

remove many of these hurdles, some of the roadblocks will remain and will

continue to affect the smooth growth of this industry. Fitch believes that while

the market share of organised retail will grow and become significant in the next

decade, this growth would, however, not be at the same rapid pace as in other

emerging markets. Organised retailing in India is gaining wider acceptance. The

development of the organised retail sector, during the last decade, has begun to

change the face of retailing, especially, in the major metros of the country.

Experiences in the developed and developing countries prove that performance

of organised retail is strongly linked to the performance of the economy as a

whole. This is mainly on account of the reach and penetration of this business and

its scientific approach in dealing with customers and their needs. In spite of the

positive prospects of this industry, Indian retailing faces some major hurdles (see

Table 1), which have stymied its growth. Early signs of organized retail were

visible even in the 1970s when Nilgiris (food), Viveks (consumer durables) and

Nallis (sarees) started their operations. However, as a result of the roadblocks

(mentioned in Table 1), the industry remained in a rudimentary stage. While

these retailers gave the necessary ambience to customers, little effort was made

to introduce world-class customer care practices and improve operating

efficiencies. Moreover, most of these modern developments were restricted to

south India, which is still regarded as a Mecca of Indian Retail.


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Scope of Indian retail market

The scope of the Indian retail market is immense for this sector is poised for the

highest growth in the next 5 years. The India retail industry contributes 10% of

the countries GDP and its current growth rate is 8.5%. In the Indian retail market

the scope for growth can be seen from the fact that it is expected to rise to US$

608.9 billion in 2009 from US$ 394 billion in 2005.

The organized retailing sector in India is only 3% and is expected to rise to 25-

30% by the year 2010. There are under construction at present around 325

departmental stores, 300 new malls, and 1500 supermarkets. This proves thatthere is a tremendous scope for growth in the Indian retail market.

The growth of scope in the Indian retail market is mainly due to the change in the

consumers behavior. For the new generation have preference towards luxury

commodities which have been due to the strong increase in income, changing

lifestyle, and demographic patterns which are favorable.

The scope of the Indian retail market have been seen by many retail giants and

thats the reason that many new players are entering the India retail industry. The

major Indian retailers are:

y Pantaloons Retail India Ltd

y Shoppers Stop

y Bata India Ltd

y Music World Entertainment Ltd

Judging the scope for growth in the India retail industry many global retail giants

are also entering the Indian retail market. They are :

y Tesco

y Metro AGy Wal- Mart


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The scope for growth in the Indian retail market is seen mainly in the following

cities:

y Mumbai

y Delhi

y Pune

y Ahmedabad

y Bangalore

y Hyderabad

y Kolkata

y

Chennai

The scope of the Indian retail market is very vast. And for it to reach its full

potential the government and the Indian retailers will have to make a determined

effort.

Strategic planning in retailing:

The retail strategy can be defined as a clear and definite plan that the retailer

outlines to tap the market and build a long-term relationship with the consumers.

A retail strategy is fundamental to the existence of the retail organization. It helps

the organization, it purpose and hoe the retailer will face various challenges in the

environment and marketplace.


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Ste s i t e r cess if strategic la i g i retail

efi e t e busi ess issi

C uct t e situati au it

I e tify strategic la

Evaluate t e la

Establis s ecific bjectives

evel t e retail ix

Evaluate t e erf r a ce a

ake a just e ts


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Ste 1. Defi et ebusi ess missi

T e mission statement is a statement of t e long-term purpose of t e

organization.It describes whattheretailer wishesto accomplish in the markets in

which itchoosesto compete.It highlightsthefollowingelements

y The productsand servicesthat will be offered.y Thecustomers who will beserved.y Thegeographicareasthat organization choosesto operate in.y The manner in which thefirm intendsto compete in itschosen markets.

Ste 2. C uctt esituati au it:

Situation audit is an analysis of the opportunities and threats in the retail

environmentand thestrengthsand weaknesses ofthe retail businessrelativeto

itscompetitors.In situation analysis oneconductaresearch on followingfactors:

MarketFact rs

Size growth, seasonality, and Business Cycles

C mpetitiveFact rs

Barriers to entry, bargaining power of vendors, and competitive rivalry

Barriers e try- instituteconditions in a retail marketthat make it difficult for

other firms to enter themarket, such as scale economics, customer loyalty, and

the ability for great locations.

Scale ec

mics- are cost advantages due to a retailer!

s size.


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Bargai " i " g power of ve " # ors- Markets are less attractive when only a few

vendorscontrol the merchandisesold in it.In thesesituations, vendors havethe

opportunity to dictate prices other terms (like delivery dates), reducing the

retailer$

s profits.

Competitive Rivalry- defines the fre % uency and intensity of reactions to

actions undertaken by competitors. When rivalry is high, price wars erupt,

employee raids occur, advertising and promotions expenses increase, and profit

potential falls. Conditions that may lead to rivalries are: large number of

competitorsthatareall aboutthesamesize, slow growth, high fixed costs, and a

lack ofperceived differences between competingretailers.

EnvironmentalFactors

Technology, economic, regulatory, and social

Strengt & s and weaknesses analysis- indicates how well the business can seize

opportunitiesand avoid harm from threats in theenvironment.

Step 3. Identifystrategic plan:

In thisstep theretailerconsiderthevariousalternativesavailablefortappingthe

market.Igor Ansoffpresented a matrix, which looked atgrowth opportunities by

focusing on thefirms present and potential products in the existing and new

markets. This matrix, which is popularly known as Ansoffs Matrix, helps us

understand the optionsavailableto aretailer.Thesealternativesavailableto the

retailerare:


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Step 4.Evaluate the plan:

This determines the retailers potential to establish a sustainable competitive

advantage and reap long-term profits from the opportunities being evaluated.

Retailer must focus on opportunities that utilize its strengths and its competitive

advantage

Step 5. Esta' lish specific o' jectives:

Objectives are a translation of the mission statement into operational terms. They

indicate the results to be achieved. The purpose of setting objectives is to give

direction and set standards for the measurement of performance. Management

normally sets both long-term and short-term objectives. One-or two-year time

Existing New Retail formats

Existing Market penetration:

y Increase the

market size

y Increase the

customers

y Increase the

purchase

frequency

Market development

/Expansion

y New market

segments with

existing format

y New customer

base

New Retail format

development

y New format with

existing customers

Diversification

y New retail formats

directed at new

market segments

Market segments

Formatted: Font: 16 pt, Bold


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frames for achieving specific targets are short-term. Long-term objectives are less

specific than short-term targets and reflect the strategic dimensions of the firm.

Good objectives are measurable, are specific to time and indicate the priorities

for the organization. Main organizational objectives are:

Market performance objectives: Sales Objectives - Volume or growth goals

are often seen

Customer Traffic Objectives - Get new people into the store through

promotions, sales, special services

Customer Loyalty - Get customers for life. The sale is the beginning ofcustomer contact not the end

Market Share - sales goals stated in terms of share of market in comparison

to local competitors

Retail Image - Re-identifying the target market and the future growth

potential (e.g. Sears)

Vendor relations - increase sales through better coordination with vendors

Financial performance: objectivesTargeted Returns - Ratio of calculated net

income to sales (ROS) or to total assets (ROA) or to equity (ROE)

Earnings per share - Important consideration for publicly traded retail firms

Stockholder dividends

Labor productivity - Sales per employee is a common retail measurement

Space productivity - Sales per square foot of space (or per square foot of

selling space) is another common measurement

Merchandise productivity - Inventory turnover goals


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Personal objectives: Self-Gratification - Owners, managers, and employees

will probably choose working in a retail environment they enjoy

Status and Respect - Managing a store or being an employee of the month

adds to individuals status and self-respect

Power and authority - Retail employment usually provides for more

responsibility than factory employment

Societal objectives: Social responsibilities are becoming more important

The amount of social responsibility that comes from a true concern for

society (e.g. Ben & Jerrys) versus the amount that is triggered by the desire

for positive publicity and promotion (Drug store health fairs) is unknown

Societal concerns often are at the expense of financial objectives.

Step 6. Develop a retail mix:

This is to develop a retail mix for each opportunity in which an investment will be

made and control and evaluate performance

Step 7.Evaluate performance and make adjustments:

This step is to evaluate the results of the strategy and implementation program. If

the retailer is meeting or exceeding the objectives, changes arent needed.

Introduction of the retail unit:

The foundation of shoppers stop was laid on October 27,1991 by the K. Raheja

Crop. group of companies. Being amongst Indias biggest hospitality and real

estate players, the group crossed yet another milestone with its lifestyle venture -

Shoppers stop. From its inception, shoppers stop has progressed being a singlebrand shop to becoming a fashion & lifestyle store for the family. Today,


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Shoppers Stop is household name, known for its superior quality products,

services and above all, for providing a complete shopping experience.

Retail location strategies:

selecting the location for the store is in the hands of retailers because before

selecting the location they have to check many factors like walking traffic,

competitor, parking infrastructure etc. they also have to decide that they want to

buy the site or they will take it on rent. So after deciding all these things they

reach to the final decision. In jaipur after evaluating all the above things they

select two places:

1. Triton mall, jhotvara

2. Gaurav tower, malviya nagar

The retail location which we select for the survey is Shoppers stop at

Malviya nagar. The factors considered for location selection are:

1. it is a centralized location which cover the consumers of Malviya Nagar,

Jawahar Nagar, mansarover etc. areas so people reside there come to GT

for shop.

2.

Huge availability of transport like taxi, buses etc.3. Facility of free and ample parking increased the number of footfall in GT .

4. Clientage for shoppers stop prefer to shop in malls and convince store

rather than an individual store so a store in mall is good than an individual

shop.

Customer Profile:

Shoppers Stops customers fall between the age group of 16 years to 35 years,

the majority of them being families and young couples with a monthly household

income above Rs. 20000 and an annual spend of Rs.15000. A large number of Non- Resident Indians visit the shop for cultural clothes in the international

environment they are used to which means people from abroad are also


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interested in shopping in Shoppers stop. Their target customers are upper middle

class and upper class.

Customer Rewards:

Shoppers Stops customer loyalty program is called The First Citizen. The program

offers its members an opportunity to collect points and avail of special benefits.

Currently, Shoppers Stop has a database of over 2.5 lakh members who

contribute to nearly 65% of the total sales of Shoppers Stop. They also offer a co-

branded credit card with Citibank for their members.

SCM:

Understanding the importance of distribution and logistics in ensuring that

merchandise is available on the shop floors has led Shoppers Stop to streamline

its supply chain. The company has developed process manuals for each part of the

logistics chain. These modules include vendor management, purchase order

management, stock receiving systems, purchase verification and inventory

buildup, fixing of price and store tags, dispatch of stocks to the retail floor and

forwarding of bills for payment. If we talk about various brands then the answer is

that they have a direct tie ups with different companies and companies deliver all

the needed products to their door-step means deliver all the goods to every

shoppers stop showroom. But there are some companies which do not provide

them these services so for those they have their own carrier.

CRM (customer relationship management) Strategies:

Retail chain Shoppers Stop Ltd, is eyeing over 50 per cent sales this year from its

customer relationship management (CRM) initiatives. The company has also lined

up an aggressive expansion plan targeting smaller towns and cities in the country.

BS Nagesh, managing director and CEO of Shoppers Stop, told FE that the

company has given a new direction to its CRM initiatives after it acquired a

business intelligence software called Business Solutions about eight months

ago. The new software helps generate intelligent data from Shoppers Stopcustomer base of about 2,30,000. The company then collects this data and

touches base with customers via direct mailers informing them of all new


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promotions that is currently on and also updates them about the upcoming

events. Shoppers Stop claims that it has taken its CRM initiatives to a new height

and now calls its loyalty programmes Customer Experience Management. If we

find from the data that a customer had bought a pair of trousers, we tell him

about a new range of shirts that we have just brought into our store, says Mr

Nagesh. We are planning to open 35 outlets within the next three years. We

have identified 21 new locations including Kanpur, Amritsar, Jalandhar,

Ahmedabad and Indore, among others to set up these outlets, Mr Nagesh said.

Use of IT in the store:

Shoppers Stop was the first few retailers to use scanners and barcodes and

completely computerise its operations. Today it is one of the few stores in India to

have retail ERP (Enterprise resource planning) in place, which is the best retail

planning system in the world. With the help of the ERP, they are able to open new

stores faster and get information about merchandise and customers online, which

reduces the time in taking quick decision.

Major competitors of Shoppers stop:

In India competitors for Shoppers Stop are mainly foreign players and also

Individual stores. The name of few competitors is given below:

Lifestyle

Globus

Central

Pantaloons

Westside

Ebony

The retail unit at malviya nagar the major competitors for Shoppers Stop are:


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Documents

Present Indian retail scenario