IIPM RM 3 Impact of Organized on Unorganized 13

8/8/2019 IIPM RM 3 Impact of Organized on Unorganized 13

1/13

IMPACT OF ORGANIZED &UNORGANIZED RETAIL


2/13

GENERAL

Real GDP will grow at 8% in next five years

620 million household with incomes aboveRs. 90,000 by 2011-12

Retail in India will grow at 13 per cent to Rs.

26 lakh crores by 2011-12.


3/13

GENERAL

10.69 million firms retail trade (5.23 in rural

and 5.46 in urban areas)

Total employment in these firms was 18.54

million (7.88 million in rural and 10.65 million

in urban sector)

This is 7.3 per cent of the country workforce

Wholesale trade contributed an employment

of 5.48 million (1.71 million in rural and 3.77

million in urban sector)


4/13

Will grow at 10% per cent

Sales from Rs. 14 Lakh crore in 2007 to Rs.

22.3 lakh crore by 2012. Weak financial state

Physical space constraint on expansion

Alone will not be able to meet growing retaildemand

UNORGANIZED PROFILE


5/13

Will grow at 45-50% per annum

Share will touch 16% 2012

Unorganized and organized retail can coexist

and grow in size

Unorganized retailers intend to continue and

compete rather than exit

ORGANIZED SECTOR PROFILE


6/13

Unorganized retailers close to organized

initially experience decline in business

This weakens over time

No evidence of decline in overall

employment

Annual closure rate of unorganized is 4.2% Much lower than international closure rate

small businesses

IMPACT ON UNORGANIZED


7/13

Improved business practices and technology

Extending more credit to attract customers

Only 12% have access to institutional credit

37% felt need for better access to bank credit

Only 10% preferred to become franchisees oforganized retailers

IMPACT ON UNORGANIZED


8/13

Overall consumer spending has increased

Lower income consumers saved morethrough organized retail purchases

Proximity major comparative advantage of

unorganized outlets

IMPACT ON CONSUMERS


9/13

Significant competitive strengths of

unorganized retailers

Consumer goodwill

Credit sales

Bargaining

Sale of loose items

Convenient timings

Home delivery.

IMPACT ON CONSUMERS


10/13

Some adverse impact on intermediaries

dealing fruit, vegetables, and apparel. > 70% plan to expand their businesses in

response to retail expansion

22% do not want the next generation toenter the same business

IMPACT ON INTERMEDIARIES


11/13


12/13

Large ones feel competitive impact through

price and payment pressure

They respond through

Building and reinforcing brand strength

Increasing own retail presence

Adopting small retailers

Setting up dedicated teams to deal with

modern retailers

IMPACT ON MANUFACTURERS


13/13

Organized retail is transforming the logistics

industry

This create significant positive externalities

across the economy.

Small manufacturers do not report any

significant impact of organized retail

IMPACT ON MANUFACTURERS

IIPM RM 3 Impact of Organized on Unorganized 13

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