RETAIL INDUSTRY IN

INDIA
Scope and future
 RETAIL IN INDIA - PRESENT
• At present the Retail industry in India is accelerating. Though India is
still not at an equal pace with other Asian counterparts, Indian is
geared to become a major player in the Retail Market.

• The fact that most of the developed nations are saturated and the
developing ones still not prepared, India secures a great position in the
international market.

• Also with a highly diverse demography, India provides immense scope

for companies brining in different products targeting different
consumers.

• According to the Global Retail Development Index, India is positioned

as the foremost destination for Retail investment and business
development.
• The factor that is presently playing a significant role here is the fact that a
large section of Indian population is in the age group of 20-34 with a
considerably high purchasing power; this has caused the increase in the
demand in the urban market resulting in consistent growth in the Retail
business.
• And though the metros and other tier 1 cities continue to sustain Retail
growth, the buzz has now shifted from these great cities to lesser known ones.
• As the spending power is no longer limited to metros, every tier 2 city in the
country has good market for almost every product or service.
• Due to this, tier 2 cities like Chandigarh, Coimbatore, Pune, Kolkata,
Ahmedabad, Baroda, Hyderabad, Cochin, Nagpur, Indore, Trivandrum etc.
provide a good platform for a brand to enter Indian market.
• However there are a few precautions for every brand that explores Indian
market. As Indian consumers are very curious and have a broad perspective,
they respond well to a new product or concept and there are very fair chances
of a brand surviving well, but every Indian consumer be it an urbanite or a
small town dweller needs a feeling of value for money.
• Although labeled as tight fisted, Indian consumers are great spenders once
they realize that they are getting value for their money.
• Also new product /service concepts from the western world are better
adopted first by the urban Indians, the smaller markets respond well to the
need based retailing rather than luxury concepts.
• As the Indian retailing is getting more and more organized various retail formats
are emerging to capture the potential of the market.
• Mega Malls
• Multiplexes
• Large and small supermarkets
• Hypermarkets

• Departmental stores are a few formats which flourishing in the both big and
small regional markets

• As the major cities have made the present retail scenario pleasant, the future of
the Indian Retailing industry lies in the rural regions. Catering to these
consumers will bring tremendous business to brands from every sector. However
as the market expands companies entering India will have to be more cautious
with their strategic plans. To tap into the psyche of consumers with different
likes and dislikes and differing budgets a company has to be well prepared and
highly flexible with their product and services. In this regard focusing on
developing each market separately can save a brand from many troubles.
RETAIL IN INDIA - THE FUTURE
• According to a study the size of the Indian Retail market is currently estimated at Rs.
704 crores which accounts for a meager 3 % of the total retail market. As the market
becomes more and more organized the Indian retail industry will gain greater worth.
The Retail sector in the small towns and cities will increase by 50 to 60 % pertaining
to easy and inexpensive availability of land and demand among consumers.

• Growth in India Real estate sector is also complementing the Retail sector and thus it
becomes a strong feature for the future trend. Over a period of next 4 years there will
be a retail space demand of 40 million sq. ft. However with growing real estate sector
space constraint will not be there to meet this demand. The growth in the retail sector
is also caused by the development of retail specific properties like malls and
multiplexes.

• According to a report, from the year 2003 to 2008 the retail sales are growing at a
rate of 8.3% per annum. With this the organized retail which currently has only 3%
of the total market share will acquire 15-20 % of the market share by the year 2010.
Factors that are playing a role in fuelling the bright future of the Indian Retail are
as follows:

• The income of an average Indian is increasing and thus there is a proportional

increase in the purchasing power.

• The infrastructure is improving greatly in all regions is benefiting the market.

• Indian economy and its policies are also becoming more and more liberal making
way for a wide range of companies to enter Indian market.

• Indian population has learnt to become a good consumer and all national and
international brands are benefiting with this new awareness.

• Another great factor is the internet revolution, which is allowing foreign brands
to understand Indian consumers and influence them before entering the market.
Due to the reach of media in the remotest of the markets, consumers are now
aware of the global products and it helps brands to build themselves faster in a
new region
• However despite these factors contributing to the growth of Indian
retail Industry, there are a few challenges that the industry faces
which need to be dealt with in order to realize the complete scope of
growth in Indian market.

• Foreign direct investment is not allowed in retail sector, which can be a

concern for many brands. But Franchise agreements circumvent this
problem. Along with this regulations and local laws and real estate
purchase restrictions bring up challenges. Other than this lack of
integrated supply chain and management and lack of trained
workforce and flux of the market in terms of price and product choice
also need to be eliminated.

• Despite these challenges many international brands are thriving in the

Indian market by finding solutions around these challenges. A
company that plans to enter Indian market at this time can definitely
look forward to great business if it analyzes and puts efforts on all
parameters.
KEY CHALLENGES
LOCATION

"Right Place, Right choice“

Location is the most important ingredient for any business that relies on
customers, and is typically the prime consideration in a customers store
choice. Locations decisions are harder to change because retailers have to
either make sustainable investments to buy and develop real estate or
commit to long term lease with developers. When formulating decision
about where to locate, the retailer must refer to the strategic plan:

* Investigate alternative trading areas.

* Determine the type of desirable store location
* Evaluate alternative specific store sites
MERCHANDISE
The primary goal of the most retailers is to sell the right kind of
merchandise and nothing is more central to the strategic thrust of the
retailing firm.

Merchandising consists of activities involved in acquiring particular

goods and services and making them available at a place, time and
quantity that enable the retailer to reach its goals.

Merchandising is perhaps, the most important function for any retail

organization, as it decides what finally goes on shelf of the store.
PRICING

Pricing is a crucial strategic variable due to its direct relationship with

a firm's goal and its interaction with other retailing elements.

The importance of pricing decisions is growing because today's

customers are looking for good value when they buy merchandise and
services.

Price is the easiest and quickest variable to change.

TARGET AUDIENCE
"Consumer the prime mover“

"Consumer Pull", however, seems to be the most important driving

factor behind the sustenance of the industry.

The purchasing power of the customers has increased to a great

extent, with the influencing the retail industry to a great extent, a
variety of other factors also seem to fuel the retailing boom.
SCALE OF OPERATIONS

Scale of operations includes all the supply chain activities, which

are carried out in the business.

It is one of the challenges that the Indian retailers are facing.

The cost of business operations is very high in India.

PRESENT INDIAN SCENARIO
* Unorganized market: Rs. 583,000 crores

* Organized market: Rs.5, 000 crores

* 5X growth in organized retailing between 2000-2005

* Over 4,000 new modern Outlets in the last 3 years

* Over 5,000,000 sq. ft. of mall space under development

* The top 3 modern retailers control over 750,000 sq. ft. of retail space

* Over 400,000 shoppers walk through their doors every week

* Growth in organized retailing on par with expectations and projections of the last 5
Years: on course to touch Rs. 35,000 crores (US$ 7 Billion) or more by 2005-06
MAJOR PLAYERS
- Food and grocery
- Fashion
- Others
- Food world
- Shoppers' Stop
- Vivek's
- Subhiksha
- Westside
- Planet M
- Nilgris
- Lifestyle
- Music World
- Adani- Rajiv's
- Pyramid
- Crossword
- Nirma-Radhey
- Globus
- Life spring
INDIAN RETAIL IS MOVING INTO
SECOND GEAR
• 1) FIRST GEAR:
(Create awareness)
* New retailers driving awareness
* High degree of fragmentation
* Real estate groups starting retail chains
* Consumer expecting 'value for money' as core value

• 2) SECOND GEAR:
(Meet customer expectations)
* Consumer-driven
* Emergence of pure retailers
* Retailers getting multi-locational and multi-format
* Global retailers evincing interest in India
 3) THIRD GEAR:
(Back end management)
* Category management
* Vendor partnership
* Stock turns
* Channel synchronization
* Consumer acquisition
* Customer relation's management

4) FOURTH GEAR:
(Consolidation)
* Aggressive rollout
* Organized retail acquitting significant share
* Beginning of cross-border movement
* Mergers and acquisitions
CONCLUSION
• For a start, these retailers need to invest much more in capturing more
specific market. Intelligence as well as almost real-time customer purchase
behavior information.

• The retailers also need to make substantial investment in

understanding/acquiring some advanced expertise in developing more
accurate and scientific demand forecasting models. Re-engineering of
product sourcing philosophies-aligned more towards collaborative planning
and replenishment should then be next on their agenda.

• The message, therefore for the existing small and medium independent
retailers is to closely examine what changes are taking place in their
immediate vicinity, and analyze Whether their current market offers a
potential redevelopment of the area into a more modern multi-option
destination
• If it does, and most commercial areas in India do have this potential, it
would be very useful to form a consortium of other such small retailers in
that vicinity and take a pro-active approach to pool in resources and
improve the overall infrastructure.

• The next effort should be to encourage retailers to make some

investments in improving the interiors of their respective establishments
to make shopping an enjoyable experience for the customer.

• As the retail marketplace changes shape and competition increases, the

potential for improving retail productivity and cutting costs is likely to
decrease.

• Therefore, it will become important for retailers to secure a distinctive

position in the marketplace based on value, relationships or experience.
• Finally, it is important to note that these strategies are not strictly
independent of each other; value is function of not just price,
quality and service but can also be enhanced by personalization
and offering a memorable experience.

• In fact, building relationships with customers can by itself

increase the quality of overall customer experience and thus the
perceived value.

• But most importantly for winning in this intensely competitive

marketplace, it is critical to understand the target customer's
definition of value and make an offer, which not only delights the
customers but also is also difficult for competitors to replicate.
FUTURE OF RETAIL IN INDIA
• The Indian retail sector is ready to take on challenges from global retail
players such as Wal-mart and Carrefour because unlike them, they have
a better understanding of the Indian consumer’s psyche.

• Ultimately, a successful retailer is one who understands his customer.

The Indian customer is looking for an emotional connection, a sense of
belonging. Hence, to be successful any retail outlet has to be localized.

• The customer should feel that it is a part of his culture, his perceived
values, and does not try to impose alien values or concepts on him.
Indian customer is not keen to buy something just because it is sold by
an international company.

• Ultimately, it boils down to how much localization and adaptation the

company is willing to do for India
Other than tremendous money power, global companies have nothing
extra or special that the Indian retail business does not have.

We live in exciting times. Only two percent of India’s retail market is

organised. The future shows tremendous potential for growth in the retail
sector.

Almost all large companies worldwide are looking to establish a base or

stake in the Indian market. In this scenario, the Indian retail sector itself
must seize the initiative to realise the dreams of contributing to a
prosperous and booming economy.

The focus should be on the Indian horizon before looking for retail
opportunities in other countries because India itself is a big retail
market.In the near future India will see a phenomenal growth of shopping
malls and speciality retail stores.

The speciality stores will cater for home, electronics, furniture, watches,
sunglasses and assorted items. There will be more fashion stores for youth.
RETAILERS VIEW
• I firmly believe that the next 5 years will be the defining period
as far as organized retail is concerned.....those format which are
India specific will emerge successful and those that are Xerox
copies of the western formats are bound to perish....