Market Ting Project

8/2/2019 Market Ting Project

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A PROJECT ON

ORGANISED AND UNORGANISED

RETAIL MARKETING

Submitted to the University of Calicut in partial

fulfillment of the

requirement for the award of Bachelor of

Commerce (B.Com)

BY

Under the supervision and guidance of

P.ABDUL AZEEZ

LECTURER

DEPARTMENT OF COMMERCE


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FAROOK COLLEGE, CALICUT

2008-2009


FAROOK COLLEGE

CERTIFICATE

This is to certify that the project report entitledORGANISED

AND UNORGANISED RETAIL MARKETING is an

authentic

report prepared by in partial

fulfillment of the

requirements for the award of degree of bachelor

of commerce under my

guidance and supervision.


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P.ABDUL AZEEZ

LECTURER


DECLARATION

We here by declare that the

project report entitled

ORGANISED AND UNORGANISED RETAILMARKETING is

an authentic and original work done by us under

the guidance and

supervision of lecturerP.ABDUL AZEEZ, in partial

fulfillment of the

requirements for the award of degree of Bachelor

of Commerce (B.Com) of

university of Calicut. We further declare that,

project report or any part

there of has not been submitted for the award of

any degree, diploma, title


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recognition before.

GROUP MEMBERS

ROLL

NO

NAME SIGN

1 DULKIFIL

3 JUNAID

4 HUSSAIN

5 SHABEEB

7 SHAMI

8 SALIH

61 SADAT


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ACKNOWLEDGEMENT

This study wouldnt be complete without

expressing my sincere

gratitude to all those who helped me to bring out

this report.

I specially convey my sincerity and indebtedness ofthe following

resource persons.P.ABDUL AZEEZ, lecturer of

commerce department

for his continued support, guidance and supervision

during the years of

my B.Com course to rest of my professors for their

unflinching piece of

advice through out the course program.


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Above all I am grateful to the almighty

for his

blessings all along.

Contents

SL NO TOPIC PAGE

NO

1 INTRODUCTION 6

2 OBJECTIVE OF STUDY 7

3 AN OUTLOOK TO INDIAN RETAIL MARKETING 8

4 POPULAR ORGANISED RETAIL FORMATS 9

5 REASONS FOR RETAIL BOOM IN INDIA 11

6 ORGANISED v/s UNORGANISED 15


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7 WAL-MART ENTERS INDIA 19

8 CONCLUSION

Introduction

Retail is currently the booming sector of the Indian economy. This trend is

expected to continue uninterrupted for at least the next two-three decades,attracting

huge attention from all quarters of the economy -entrepreneurs, business heads,

investors as well as real estate owners and builders-. Retail sector is also expected

to create huge employment as it will expand across the country at a massive scale.

The reasons for this expansion of retail is evidently related to the liberalization and

opening up of the Indian economy which had immense effects on the consumer

demand, tastes and preferences as well as the buying capacities of the Indians

(specially the growing middle class) over the past few years. Slowly and steadily


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retail has witnessed considerable growth while a new form of organized retail

sector has emerged within the retail industry. Stated simply, it refers to the

organized retail chains managed by big corporate houses such as the

Pantaloons group, K. Raheja group, the Piramals and so on. These are modeled on

American forms of organized retail chains such as Wal-Mart, one of the largest in

the world.

Objectives of the Study

1. To study about the organized and unorganized retail marketing in India

2. To make an detailed idea about the retail market structure prevailing in India

3. To analyse the characteristics of both in relevance with Indian marketing system

4. To have a clear idea about the new entrances to Indian retail market, mainly to

organised sector.


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An outlook to Indian retail marketing

The Indian retail market, which is the fifth largest retail destination globally, was

ranked second after Vietnam as the most attractive emerging market for investment

in the retail sector by AT Kearney's seventh annual Global Retail Development

Index (GRDI), in 2008. The share of retail trade in the country's gross domestic

product (GDP) was between 810 per cent in 2007. It is currently around 12 per

cent, and is likely to reach 22 per cent by 2010.

A report by global consultancy firm, AT Kearney said "The consumer spending in

India has increased by an impressive 75 per cent in the last four years and willquadruple in the next 20 years." Moreover, India recently topped the Nielsen

Global Consumer Confidence study, conducted by Nielsen, a market research

company. The biannual report revealed that Indians are "the most optimistic lot


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globally who think that their country will be out of the economic recession in the

next twelve months."

According to the recent report by McKinsey & Company titled 'The Great Indian

Bazaar, Organized Retail Comes of Age in India', India's overall retail sector is

likely to grow to US$ 450 billion by 2015. Another McKinsey report 'The rise of

Indian Consumer Market', estimates that the Indian consumer market is likely to

grow four times by 2025.

Retailing, one of the largest sectors in the global economy, 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, Nilgiris, Apna Bazaar), convenience stores (ConveniO, HP

Speedmart) and fast-food chains (McDonalds, Dominos).

It is the non-food segment, however that foray has been made into a variety of new

sectors. These include lifestyle/fashion segments (Shoppers' Stop, Globus,

LifeStyle, Westside), apparel/accessories (Pantaloon, Levis, Reebok),

books/music/gifts (Archies, Music World, Crosswords, Landmark), appliances and

consumer durables (Viveks, Jainsons, Vasant & Co.), drugs and pharmacy (Health

and Glow, Apollo).

Organized retailing in India has penetrated maximum in case of shoes(22%) and

apparel (12%) followed by books and music (entertainment products) (9%)and

jewelry and accessories (8%). However, food and grocery and pharmaceutical

products are still largely over represented by traditional unorganized sector retail

formats (1%).


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The most popular organized retail formats

Malls: Shopping malls are the largest form of organized retailing today. These are

located mainly in metropolitan cities, in proximity to urban outskirts. The area of

shopping malls ranges from 60,000 sq ft to 7,00,000 sq ft and above. The idea is to

lend an ideal shopping experience which includes an amalgamation of product,

service and entertainment all under a common roof. Examples include Inorbit Mall

in Mumbai, Ansal Plaza in Delhi, South City mall in Kolkata.

Specialty Stores: these are stores that focus on specific market segments,

specializing on particular products such as entertainment and recreation products,gift items and so on. The most notable among these include chains such as the

Bangalore based Kids Kemp, the Mumbai books retailer Crossword, Times Group's

music chain Planet M.

Discount Stores: As the name suggests, discount stores or factory outlets, offer

discounts on the MRP through selling in bulk reaching economies of scale or

excess stock left over at the season. The product category range includes variety ofperishable/ non perishable goods.

Department Stores: Large stores ranging from 20000-50000 sq. ft, catering to a

variety of consumer needs. These include localized departments such as clothing,

toys, home, groceries, etc. the popular among these are Big Bazaar, DMart etc.

Hypermarkets/Supermarkets: Large self service outlets, having a strong focus

on food & grocery and personal sales are termed as Supermarkets. Super Markets

can further be classified into mini supermarkets typically 1,000 sq ft to 2,000 sq ft

and large supermarkets ranging from of 3,500 sq ft to 5,000 sq. ft. These stores


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today contribute to 30% of all food & grocery organized retail sales. Examples are

Foodland Fresh, Haiko, Shoprite etc.

Convenience Stores: These are relatively small stores (400-2,000 sq. feet)

usually located near residential areas. They stock a limited range of high-turnover

convenience products and are usually open for extended periods during the day,

seven days a week. Prices are slightly higher due to the convenience premium.

MBOs: Multi Brand outlets, also known as Category Killers, offer several brands

across a single product category. These usually do well in busy market places and

metropolitan cities.

Reasons for retail sector boom in India

The most important factors responsible for retail sector development in India are

liberalization of the economy, upward mobility of middle class, shifting consumer

demands, and expansion of ICTs (A. T. Kearney Report, 2007). Liberalization of

the economy since the 1990s is definitely the single-most important factor leading

to a shift towards a new organized form of retailing. Organized retailing is expected

to bring about positive employment impact in terms of quantity (more jobs will be

created) and quality (security of job, benefits etc. will be better). Since the

liberalization of the economy there has been a visible impact on the income level of

the middle class, which as a whole is upwardly mobile, with a huge disposable

income in hand.


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There has been a remarkable change in consumer taste and preferences over a last

few years since the opening up of the market, entry of foreign brands and their

products. Withincreasing disposable income and exposure to global products and

the media the preference for the relatively expensive but quality-guaranteed

branded products hasincreased. Urban population today in increasingly becoming

fashion conscious and hencebrand names are more important to them more than

the utility aspect of the products.

Exposure to the internet and privatization of the television channels also

contributedimmensely to shifts in consumer demands leading to the need for more

sophisticated retail chains to cater to their varied and specialized demands. The

huge proportion ofyoung population in India implies a demographic dividend for

the retail sector since thisportion of the population is more brand conscious and

ready for spending more onconsumer goods.

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 organised

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


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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 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. Hence, one can assume that the retailing

revolution is emerging along the lines of the economic evolution of society.

Spread of organised retailing

Organised retailing is spreading and making its presence felt in different parts of

the country. The trend in grocery retailing, however, has been slightly different

with a growth concentration in the South.

However, the Mecca of retailing is undoubtedly Chennai. What was considered a

`traditional', conservative' and `cost-conscious' market, proved to be the home

ground for most of the successful retail names Food World, Music World, Health

and Glow, Vitan, Subhiksha and Viveks -to name a few.


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The choice of Chennai as the `retail capital' has surprised many, but a variety of

factors acted in its favour. Chennai, in spite of being a rapidly growing metropolis

offers reasonable real estate prices, one of the most critical elements for the

industry. Chennai has been witnessing a high industrial growth and increasing

presence of the MNCs, both in the IT sector as well as outside it. The industrial

boom has led to the emergence of new residential areas with aggregation of

professionals as well as a rapid increase in the number of `double-income'

households and growth of the nouveau riche/upper middle class with increased

purchasing power. This has been combined with the increasing need for touch and

feels shopping (especially for the large migrant population). All the factors have

acted favourably in nurturing the industry.

Organised and unorganised sectors Increasing

convergence and symbiosis

LIBERALISATION of the economy has had contradictory effects on employment

and labour. Gains in industries that expanded due to low tariffs or removal oflicensing were partly offset by losses made in formerly protected industries facing

competition from new entry.


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The unorganised sector played a large role in the story of India's structural

adjustment. Recent National Sample Survey (NSS) studies redress that gap greatly.

The organised sector: Employment in the organised sector industry grew from 8.3

million in 1991 to 10.2 million in 1996, or at over 4 per cent annually. There is no

previous episode of such high growth rates sustained for five years. It is also clear

that the rate of growth of average real wages slowed down greatly in the 1990s, and

the rate of growth of real productivity (value-added per worker) increased.

The unorganised sector: There are interesting similarities and contrasts between

the patterns of growth in the organised and unorganised sectors over the 1990s. The

major point of similarity is that both experienced growth in productivity and

stagnation in real wages in much of this decade, perhaps suggesting a kind of

convergence in labour market institutions.

On the other hand, there is a significant contrast in employment growth. In 1989-

95, while employment in the organised sector grew from 8.3 million to 9.4 million,

in the unorganised sector, it declined from 35 million to 33.4 million.

This decline was an average over rapid growth in sectors such as garments and

leather products, and fall in traditional consumer goods such as handlooms and

earthenware.

Organized vs Unorganized Retail

In the developed economies, organized retail is in the range of 75-80 per cent of

total retail, whereas in developing economies, the unorganized sector dominates the

retail business. The share of organized retail varies widely from just one percent in

Pakistan and 4 per cent in India to 36 per cent in Brazil and 55 per cent in


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Malaysia. Modern retail formats, such as hypermarkets, superstores, supermarkets,

discount and convenience stores are widely present in the developed world,

whereas such forms of retail outlets have only just begun to spread to developing

countries in recent years. In developing countries, the retailing business continues

to be dominated by family-run neighborhood shops and open markets. As a

consequence, wholesalers and distributors who carry products from industrial

suppliers and agricultural producers to the independent family-owned shops and

open markets remain a critical part of the supply chain in these countries.

Indian retail is dominated by a large number of small retailers consisting of the

local kirana shops, owner-manned general stores, chemists, footwear shops, apparel

shops, paan and beedi shops, hand-cart hawkers, pavement vendors, etc. which

together make up the so-called unorganized retail or traditional retail.

The last 3-4 years have witnessed the entry of a number of organized retailers

opening stores in various modern formats in metros and other important cities. Still,

the overall share of organized retailing in total retail business has remained low.

Impact of Organized Retailing

There has been a huge growth in organized retail in India since 2002-03 and this is

associated with the growth in the economy and the attendant rise in consumption

spending. Organized retailing has begun to tap the enormous market but its share

indeed is small. A number of large business houses have entered the retail business

with very ambitious expansion plans. Big foreign retailers are also keen to invest in

India but their entry depends on changes in the governments FDI policy regarding


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retailing. Organized retailing played a significant role in the present-day developed

countries during their period of high growth

Organized Retailing Advantages to the Indian Economy

Indias Planning Commission, in its Approach Paper for the Eleventh Five Year

Plan,(2006, pp. 27-8) has noted:

Organized retailing brings many advantages to producers and also to urban

consumers, while also providing employment of a higher quality. Organized

retailing in agricultural produce can set up supply chains, give better prices to

farmers for their produce and facilitate agro-processing industries. Modern

retailing can bring in new technology and reduce consumer prices, thus stimulating

demand and thereby providing more employment in production.

Link with Agriculture

Organized retailers have already started procuring fruit and vegetables from

farmers directly bypassing the various intermediaries who add more costs than

value to the food chain. They are investing heavily on logistics in the form of

centralized warehousing and distribution centers, transport and cold storage, either

directly or through engaging third party logistics companies. They are also

employing a large number of unskilled workers for sorting, grading, packaging and


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labelling. All these will enhance farmers realizations, improve quality of products

at the shop and reduce the ultimate consumer price.

Link with Manufacturing

The Planning Commission has identified four sectors as the major employment

generating sectors for the Eleventh Plan period, 2007-12.

They are: (i) food processing industry; (ii) textiles and clothing; (iii) tourism; and

(iv) construction. Of these sectors, all except tourism are getting a fillip with the

growth of organized retail.

Boost to Exports

Organized retails link with exports comes through foreign players. International

retailers look for sources around the world and a country in which they operate

becomes a source for their global sales. Some of the international retailers that

have plans for India in the future have already developed suppliers in the country

and have started exporting from India. For example, Wal-Mart exported an

equivalent of US$ 600 million, and IKEA about 380 million Euros from India in

2006-07.

Impact on Growth and Productivity

Organized retailing will remove various inefficiencies that characterize the

present Indian distribution system, which in turn will provide better price for the

farmers and suppliers on the one hand, and lower prices for consumers.


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Impact on Employment and Prices

The growth of organized retail will enhance the employment potential of the Indian

economy. While providing direct employment in retail, it will drive the growth of a

number of activities in the economy which in turn will open up employment

opportunities to several people. This includes the small manufacturing sector

especially food-processing, textiles and apparel, construction, packing, IT,

transport, cold chain, and other infrastructure. It may adversely affect employment

in unorganized retail and the trade intermediaries associated with the traditional

supply channels but the additional jobs created will be much higher than those that

are lost.

Improvement of Government Revenues

Another significant advantage of organized retailing is its contribution to

government revenues. Unorganized retailers normally do not pay taxes and most of

them are not even registered for sales tax, VAT, or income tax. Organized retailers,

by contrast, are corporate entities and hence file tax returns regularly. The growth

of organized retail business will be associated with a steady rise in tax receipts for

the central, state, and local governments.

Wal-Mart enters India in 50:50 JV with Bharti

The world''s largest retailer Wal-Mart Stores Inc and Sunil Mittal''s Bharti

Enterprises today announced the entry of Wal-Mart in India with the signing of


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their equal joint venture agreement that had been awaiting government approval for

the past several months.

The wholesale retailing venture, Bharti Wal-Mart Private Ltd, is a wholesale cash-

and-carry and back-end supply chain management, the two companies said, in line

with government of India guidelines that prohibit foreign multi brand retail

operators in the country, though foreign single-brand retailers are allowed a 51-per

cent stake in joint ventures.

The JV will open 10 to 15 cash-and-carry facilities over seven years. The first of

the stores, which will sell groceries, consumer appliances and fruits and vegetablesto retailers and small businesses, is slated to open in north India by the end of 2008.

The venture will support farmers and small manufacturers who have limited

infrastructure and distribution strength, and the supply chain will enable minimum

wastage, particularly of fresh foods and vegetables.

In addition, Bharti Retail, the 100-per cent subsidiary of Bharti Enterprises, thatwill own and manage the retail stores, has entered into a franchise agreement with

Wal-Mart, which will provide technical support to Bharti Retail.

Wholesale cash-and-carry operations provide small retailers and business owners a

wide range of quality products at competitive wholesale prices that help them

enhance their businesses and profitability.

The Bharti Wal-Mart business-to-business (B2B) wholesale cash-and-carry joint

venture will serve kirana (grocery shops) stores, fruit and vegetable resellers,

restaurants and other business owners. It also will serve other retailers such as

Bharti Retail, which is setting up a chain of stores in India that are 100 per cent


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owned and operated by Bharti. The wholesale cash-and-carry venture will invest in

setting up an efficient supply chain and link farmers and small manufacturers

directly to retailers, thereby maximising value for farmers and manufacturers on the

one end and retailers, and in turn, consumers on the other.

The most important factors responsible for retail sector development in India are

liberalization of the economy, upward mobility of middle class, shifting

consumerdemands, and expansion of ICTs (A. T. Kearney Report, 2007).

Liberalization of the economy since the 1990s is definitely the single-most

important factor leading to a shift towards a new organized form of retailing.Organized retailing is expected to bring about positive employment impact in terms

of quantity (more jobs will be created) and quality (security of job, benefits etc. will

be better). Since the liberalization of the economy there has been a visible impact

on the income level of the middle class, which as a whole is upwardly mobile, with

a huge disposable income in hand.

Conclusion

By doing this project on ORGANISED AND UNORGANISED RETAIL

MARKETING we got an detailed idea about the scope of organised and

unorganized retail sector in India and also their future in Indian marketing sector.

The major findings of this study are:


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Retail trade is expected to grow at 13 per cent per annum during 2007-12. Its

value will then be about US$ 590 billion in 2011-12. With this expected

increase it is inconceivable that the rising demand would be effectively met by

the unorganized sector. As in other countries, this provides the basis for the

expansion of organized retail.

The share of organized retail in total trade has risen in all developing countries

in recent years. In China it was 20 per cent in 2006, Brazil 36 per cent, South

Korea 15 per cent, Indonesia 30 per cent, Poland 20 per cent, Thailand 40 per

cent, and Vietnam 22 per cent.

The international experience shows that in nearly all emerging economies,

governments have taken policy measures to improve the operating conditions

for unorganized retail.

The major factors that attract unorganized retailers to consumers are

proximity, goodwill, credit sales, bargaining, loose items, convenient timings,

and home delivery.

Consumers have generally gained with the emergence of organized outlets

through the availability of better quality products, lower prices, one-stop

shopping, choice of additional brands and products, family shopping, and

fresh stocks.

Lower income consumers have saved more from purchases at organized

outlets.

Intermediaries do not appear to be adversely affected so far although there are

signs of their losing business in products such as, fruit, vegetables, and

apparel.


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Farmers have benefited through direct procurement by organized retailers as

this provides an alternative channel for selling their produce with better

revenue realization.

Market Ting Project

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