Project report

On
Changing Face of Retail Industry in India

Submitted by Aaaaaaa bbbbbbb PGDM (RM) 07RM93

Centre for Retail

Birla Institute of Management Technology
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Table of Contents:
1. Abstract 1.1 Objective 2. Executive summary 3. Retailing: A Global Perspective 4. Retailing: In Asia 5. Retailing: In India 5.1 Retail Origin 5.2 Retail Current Scenario 6. Indian Markets Attracting the eales eye. 6.1 Unorganized sector- Untapped Market 6.2 Organized sector Potential for Growth 6.3 Retail - Largest customer base in India 6.3.1 Middle Class consumption patterns- Strivers Class 6.3.2 Youth Class 6.3.3 Women - The Decision Makers 6.3.4 Changing Consumer Mindset - Buying patterns 6.3.5 Financial Factors that help consumers grow 12 6.4Retail Changing Government Policies 7. Retail-Challenges Ahead 8. Retail-Emerging Trends-Unorganised to Organised 8.1 What 8.1.1 Sectors of retail 8.1.2 Organised Retailing - Various Formats 8.1.3 Players in retail 8.2 Why- advantages 8.2.1 Retail generating Employment 8.2.2 GDP 8.2.3 Others Sector Benefited 8.3 How 12 13 14 15 14 15 16 19 19 19 20 20 2 4 4 5 6 7 8 8 8 9 10 10 11 11 11 11 11

8.3.1 Logistic and SCM 8.3.2 Infrastructure real estate 8.3.3 Technology advancement 8.3.4 E-tailing 8.3.5 Rural retailing 8.3.6 Customer Conveniences 9. Retail Future Scope 2007 to 2015 10. Recommendations for the retail sector 11. Acknowledgement 12. Appendix 13. References

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CONTENT OF FIGURES:
Top 250 retailers, by sale GRDI 2005 country attractiveness Organised retail opportunity Sectors of retail Others sector benefited India retail landscape 6 9 10 14 20 24

CONTENT OF TABLES:
The top 9 retail big-wigs Retail - current scenario Global retail development index- top 5 emerging markets Age group statistics Organised retailing various formats Formats adopted by key players in India Major foreign players eyeing India Players in retail - early birds, debutants, in pipeline Expected retail headcount 7 8 9 11 15 15 16 17 19

Space occupied by retail Estimated growth of retail sector

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1. Abstract
The center of global retail gravity is gradually shifting towards India. A revolution is set to sweep across the country in the next three-to-five years, as traditional markets make way for departmental stores, hypermarkets and western style malls. While penetration of organized retail in India remains slightly below 4%, domestic major retail players have announced aggressive expansion plans even as a plethora of new flashy malls are mushrooming in metros and second-rung cities. In a growing market such as this, and as the retail pie continues to expand on the back of rising incomes and increasing consumer spending, there is room for everyone. The time to shift gears and accelerate the pace of retail development in India has arrived. It is now up to the government, retailers and potential investors to make this happen.

1.1 Objective
The focus of this research paper highlights the changes that are emerging in the retail sector in India from an unorganized to an organized business segment making the consumer the centre of activity and inturn providing beneficial boost to the economy.

2. Executive Summary
A business that sells products or services, or both, with a mix of the right merchandise, at the right price, at the right place, when the consumer wants it is Retailing. Indias retail industry is one of its fastest growing and has $320 billion in annual revenues even then the retail market of India is yet to evolve as only 4 % of the organized sector is growing, leaving the 96-97% untapped. The shift from unorganized to organized retailing is on the rise. The first signs of change in the growth of retail is the 50% FDI investment which when 100% will change the face of Indian retailing. As the horizons of retail are broadening this will definitely lead to more foreign players to come into India. Also with the increase in the Indian consumers disposable income and mindset there is a shift in the purchase patterns, which leads to more growth. The domestic retail industry is wearing new clothes doubling the growth of organized retail contribution to 25 to 30% and a turnover of $ 637 billion with over 40 players by 2015. The Indian Retail is the next sunshine industry, which will enlist India in the list of developed nations.

3. Retailing: A Global Perspective

Roaring its way across the globe, the retail sector is growing leaps and bounds encompassing within it the economical growth of the world. In certain counties like UK and US the contribution of retail to the economy is very large. Players like Wal-Mart, Carrefour, Tesco are the bigwigs of the retail industry thus defining the way ahead for retail. Global retail market size US $8.2 trillion, according to KSA Technopak study in 2007.

Leading 250 retailers: An overview

A study conducted involving the 250 top retail players based in 27 countries in the world states that US has the highest revenue generated through the retail sector, with Germany being the second largest.

The Top 9 Retail Bigwigs

4. Retailing - In Asia
The centre of economic gravity in the world today is shifting to the east, towards Eastern Europe and Asia. The Asian market spanning three time zones cover over 40% of the worlds population and over 20% of the global GDP, with a recurrent average growth of 8-9%. In a growing market such as this, and as the retail pie continues to expand on the back of rising incomes and increasing consumer spending, there is room for everyone.

5. Retail - In India
In India, the retail industry is large. Retail is the countries largest source of employment after agriculture, has the deepest penetration in rural India and generates more than 10% of Indias GDP1. With close to 12 million retail outlets India has the highest unorganized retail outlet density in the world.

5.1 Retail - Origin

Traditionally retailing in India dates back to: Emergence of melas and mandis moving towards Kirana stores, Store chains run by Khadi & Village Industries Commission in the rural retail sector. In 1980s slow change took place standalone retail chains like Bombay Dyeing and exclusive showrooms like Titan started out. The year 1991 saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers like Shoppers Stop. Post 1995 onwards saw an emergence of shopping centers, hyper and super markets, mainly in urban areas. In 2000 the size of the Indian organized retail industry was Rs.13, 000 cr.

5.2 Retail - Current Scenario

As per the data shown above it is interpreted that organised retail has shown a growth over the years but this increase is still not very significant as India is still an untapped market.
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Source FICCI - ICICI Property Service Study Source: KSA Technopac

6. Indian Markets Attracting the Eagles eye:

An AT Kearney study on global retailing trends found that India is the least competitive as well as least saturated of all major global markets.

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As per the chart above in comparison to the developing countries India is placed near to the first quadrant which indicates that India is a high returns minimum risk country and it ranks first amongst the other therefore Indian retail sector has developed a magnetic effect attracting investment from domestic as well as international players due to the contribution of the following factors:

6.1 Unorganized Sector Untapped market

India being a nation with a vast population thrives mainly on the 97 % unorganized section of retailing mainly the Kirana store. Every 20 families in India have one kirana store accessible to them thus increasing the store count to 12 million retail outlets with an average size 50 sq. ft.

6.2 Organised Sector Potential for growth

Organized retailing in India has been largely an urban phenomenon with affluent classes and growing number of double-income households. This contributes only 3% to the retail sectors contribution to the GDP of the nation but considering the quiet revolution sweeping across the country, analysts estimate this sector to contribute almost 30% by 2010 to the GDP.

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6.3 Retail: Largest consumer base in India

India is witnessing an increasingly assertive consumer population driving their way to become the king of the market place. Following are the important considered classes: 6.3.1 Middle Class consumption patterns- Strivers Class NCAER estimated that approximately 2.5 million households earned above Rs. 500,000.These income levels do leave a good margin for discretionary spending. 487 million middle-class Indians will spend an additional $420 billion during the next four years. The concept of the urban middle class and aspiring middle class in the rural areas the Indian consumer base is on the rise. 6.3.2 Youth Class:

A young population with 54% population below 25 years, who earns for themselves and is terribly brand conscious. 6.3.3 Women - The decision makers:

Large no. of Women entering in the Workforce. Over 16 percent of the population of Indian women works full-time and they are the decision makers of their household purchase. Increased demand by women is 10 per cent over the next five years

6.3.4 Changing consumer mindset - Buying Patterns The Indian consumers mindsets are changing and so are their shopping habits. Consumers are becoming more brand conscious Demand more variety Exposure to international brands

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Growing literacy Growing urbanization increasing media penetration. Emphasis on effective prices High seekers of quality Shopping is a fulfilled activity Easy payment-criteria Bulk buying

The maximum of these populations are concentrated in the semi urban and metro cities the Tier 2 and Tier 1 cities. 6.3.5 Financial Factors that help consumers grow: Cheap and ready availability of Personal, Home Loans etc. coupled with low interest rates to meet the aspirations and requirements of the consumer. Plastic money easy credit policies Increase in disposable income

6.4 Retail - Changing Government Policies

Prior to 2000 FDI was not allowed in India until lately: The Indian government allowed FDI of 51% in retailing single-branded products, 100% FDI for operations on cash-and-carry wholesale and Franchises and strategic licensees for multiple brand retailers.

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7. Retail - Challenges Ahead

Converting the unorganized sector to organized. Shortage of trained manpower. Need for an increase in FDI investment. Space Crunch- availability of retail estate. Huge logistical requirement. Effective pricing to differentiate from the competitor. Effective Supply Chain Management. Need to be at the right place at the right time. Challenge to the local players due to the entry of FDI. Under developed infrastructure. Still only 4-5% of population people know Frequent use of computer.

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8. Retail Changing Trends Unorganized to Organised

Retail is the sunshine industry of India for the coming years; organised retail is to grow to Rs 2 lakh crores by 2010. The first step in this process is turning all Kiranas to form a part of the organised retail pie. In order to highlight the change in the purview of retailing we put forth the trends in a 2W 1 H concept, which dwells a clear understanding as follows:

8.1 What is currently present in organised retailing?

8.1.1 Sectors of Retail

Business Today, Dec Issue Pg 82

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8.1.2 Organised Retailing Various Formats

There are various kinds of formats, which are included in the sector and give a boost to the shopping experience.

Formats adopted by key players in India

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Major foreign

players eyeing India

8.1.3 Players in retail

Retail has accounted to announce the presence of almost 40 players in the coming years in India. Many companies have invested for future retailing like Reliance Industries-Rs 25,000-crore, Aditya Birla Groups Rs 15,000-crore retail foray, and Wal-Marts entry in a joint venture with Bharti.

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List of the current major retail players:

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Source: Indian management issue Jan

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8.2 Why the retail growth is beneficial to India?

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Source: Indian management issue Jan

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8.2.1 Retail Generating Employment: Organised retail in India would grow into Rs 2,00,000-crore business by 2010 thus meeting suitable manpower requirements and generating the same. Organised retail in India has the potential to generate 2.5 million direct jobs and 10 million more jobs in support activities.6 The retail sector is likely to generate jobs in areas such as : Contract production and processing Supply chain and logistics Real estate development and management. Farmers will also benefit from the retail revolution.

8.2.2 GDP Retail sector will contribute to the GDP by almost 20% in 2010 by bringing about a boom in the economy.

India Retail Report 2007

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OTHER SECTORS BENEFITED FROM RETAIL

8.3 How is backend support helping retail grow?

8.3.1 Logistics/SCM Reaching the right product at the right place at the right time is only possible through appropriate Logistics and Supply Chain Management which keep track of transportation, stock records, availability and timely transactions. 8.3.2 Infrastructure Real Estate o Pantaloon plans to have an operational retail space of 30 million sq ft by FY10 and is confident of reaching a run rate of Rs 2,500 crores in June 2010. o Shoppers Stop is looking at a retail space of 5-6 million sq ft by FY10. o Trent is confident of taking its retail space from the current 600,000 sq ft to 1.5-2 million sq feet by FY10.

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o Similarly, RPG group, Provogue, Brand House (S Kumars), and Max Retail are rolling out ambitious plans across Indias metros, tier 1 and tier 2 cities.
Source: ET THE NEXT BIG BANG

Given the fact that large pockets of land are more easily available in smaller towns than in the metros, players such as Reliance have announced major retail forays in tier 2 towns. Other players such as Pantaloon and Spencers have already built up significant presence in tier 2 cities. Tier 2 and 3 cities will be the major growth drivers.

8.3.3

Technological Advancements: Customer Interfacing Systems Bar Coding and Scanners Payment through credit Cards Internet Operation Support Systems ERP System CRM Systems Advanced Planning and Scheduling Systems

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8.3.4 E-tailing electronic retailing: In India, the e-tail market is still in its infancy. It is retailing through internet. The McKinsey-CII joint study estimates total online sales at anywhere between Rs 10 crore and Rs 65 crore. The number of Internet users in India is estimated at four million. Pantaloons initiative of futurebazaar.com and Westside.com are steps to grow in this sector. 8.3.5 Rural Retailing Indias main consumer base lies in the rural parts of India, which comprises of almost 70% of the population. Tier 2 and Tier 3 cities are the untapped markets wherein the opportunity to make them the organised sectors is being considered. Players like Reliance Fresh have expanded their base in such cities rather than the Tier 1 cities. ITC launched the countrys first rural mall Chaupal Sagar, offering a diverse product range from FMCG to electronics appliance to automobiles, attempting to provide farmers a one-stop destination for all of their needs. Escorts, Tata Chemicals + Tata Kisan Sansar, DCM Sriram Group - Hariyali Bazaar have initiated this move. Therefore the change in focus towards rural retailing is the next big option in the pipeline. 8.3.6 Customer Convenience: Customer is the king in todays retailing scenario; therefore customer convenience is of utmost important for every player. Aquiring new consumers is costlier than retaining old consumers therefore there are loyalty programs, direct mailing services, customized benefits, social offers to allure the consumers. Retail players are striving to be as close as they can to the consumer and be the first to serve them.

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9. Retail Future Scope 2007-2015

The way India shops may change forever. India is now ready to leapfrog into the next stage of evolution with the organized retail industry, which contributes 4 % to increase its share by 20% in 2010 and going forward to 64 % in 20157. The gradual entry of FDI into retail space in some form or the other is also responsible for the coming up rapid transformation .As foreign players enter, the domestic front will be faced with strife competition, but at the same time it will also enhance the quality and increase the consumers basket of choices.

New malls are springing up in the country every other day. If the expansion drives of new entrants go as per plans, the total operational retail space will touch around 100 million sq ft by 08 with about 500 malls across the country. Retail setups in the rural areas are the next big market for retailers especially the Tier 2 and Tier 3 cities. Food Retailing, Apparel retailing are set to be the biggest potential areas for growth.

SOURCE - ET- 7 Dec

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Retail Players aim to strike a chord at every contact point with the consumer by providing the consumer with convenience at their fingertips. India is definitely witnessing the change and the emergence of the retail revolution, which will take the entire nation in its stride to make India a developed nation.

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10. Recommendations
100 % FDI should be allowed into the country in order to increase the foreign reserves as well as generating more employment for the people, making India the retail czar. Boost the growth of unorganized retailers so that they are not threatened by the entry of international players. Provide basic amenities like infrastructure, transportation, and power at subsidized rates to motivate the growth. Retail must concentrate on providing the consumers with value, variety and premium quality. The sector can invest more in customer retention. Retailers should keep innovating strategies with product mix to increase the consumer base. More customer driven initiatives and facilities should be provided. The supply chain management of companies must be strengthened to make the right product reach at the right time. Internet selling is one of the most profitable areas, which need to be looked at in detail. Easy payments and credit facility for consumers. Converting the rural sector into target markets for the growth of retail. Shopping can be a time saving affair as the percentage of working population is bound to increase. Thus the changing trends in the retail sector in India is bringing up a sea of changes taking each and every consumer in its stride and taking India to the list of developed nations for years to come.

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ACKNOWLEDGEMENT A retail research of this kind is possible only because of the references from various articles from newspaper which are mentioned in the bibliography while many others still remain anonymous. Also to all those scholars who have guided us through their ideas both in person or through their writing. I acknowledge our indebtedness and express my great appreciation to Prof. Dr. Archana Shrivastava without which structuring would have been impossible. Also to our well-wisher without whose feedback project completion was impossible. I am grateful to them for their suggestions. I sincerely thank the members of Research Faculty of Birla Institute of Management Technology for continuously supporting my initiatives in doing research. Their encouragement and support, this work would not have been undertaken. ABHISHEK KUMAR PGDM(RM)- 2nd Year

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Appendix
Asia Buying patterns Challenges Current scenario Customer convenience Emerging trends Employment E-tailing Financial factors Formats Future scope GDP Global Government policies India Indian markets Infrastructure Logistic and SCM Middle class Organized sector Origin Players Real estate Recommendations Retail Rural retailing Sectors Technology Unorganized sector Women Youth class
7 11 13 8 22 14 19 22 12 15 23 19 6 12 8 9 20 20 11 10 8 16 20 25 5 22 20 21 10 11 11

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11. Bibliography:
Magazine References: Business World Oct Issue Business Today- Dec Issue Indian Management January Issue Retailer January Issue Newspaper References: Economic Times Noemie Bisserbe ET Intelligence Group, Retails the next big-bang story, 5th January, Economic Times. Anandita Singh Mankotia, India Incs retail play gets big & real, 14th January, Economic Times BE-Knowledge @ Wharton exclusive, The Great Wal Of India, 10th January, Brand Equity

Financial Express Business Standard Report References: Mc-Kinsey Report AT Kearney Report 2005 Website References epnet.com Ksa-technopak.com mckinsey.com rvgonline.com retailyatra.com

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