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Retail Management

By Varun Taneja

0911542

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Retail industry in India

SUMMARY

Introduction

Retailing includes all the activities involved in selling goods or services

directly to final consumers.Any organization that does thisselling is doing

retailing.A retailer or retail store is any business enterprise whose sales

volume comes primarily from retailing.

Retailing is the second largest industry in the US in terms of number of

people employed. Wal-Mart the largest retailer in the world with an

annual sales of $284 billion so also the largest employer in theUS

Retail is the booming sector of India in the present times. Retail, one of

Indias largest industries, has presently emerged as one of the most

dynamic and fast paced industries with several players entering the

market.Accounting for over 10 per cent of the countrys GDP and around 8

per cent of theemployment in the country.

Traditionally ,the retail industry in India compromised of large,medium and

small grocery stores and drugs stores which could be categorized as

unorganized retailing.

But today, as per the Global Retail Developmnet Index of 2010 India was

ranked among 10 largest retail market in the world. The retail sector in

India is worth USD 394 billion and is growing at the rate of 30% annually.

Challenges faced by Retail Industry

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 locallaws.

Taxation, which favourssmall retail businesses.

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Absence of developed supplyc

n and integrated IT management

Lac of trained work force Low skill level for retailing management Lack of etailing Courses and study options Intrinsiccomple ity of retailing rapid price c anges, constant threat

of product obsolescence and low margins

One very important measure to overcome some of the challenges faced

by retail, is for companies to invest heavily in training and recruitment, using

up to date cost efficient services One of the leading retail training

companies in India is etamorph Learning Pvt Ltd, a Bangalore -

headquartered, pan-India company which specialises in e-learning, content

development as well as blended training (classroom+virtual training) to

cater to retail and other companies across India

Indian market has high comple ities in terms of a wide geographic

spread and distinct consumer preferences varying by each region

necessitating a need for localization even within the geographic zones India

has highest number of outlets per person (7 per thousand) Indian retail

space per capita at 2 sq ft (0.19 m2)/ person is lowest in the world Indian

retail density of 6 percent is highest in the world.1.8 million households in

India have an annual income of over 45 lakh ( S$100,350).

While India presents a large market opportunity given the number and

increasing purchasing power of consumers, there are significant challengesas well given that over 90 of trade is conducted through independent local

stores. Challenges include Geographically dispersed population, small ticket

sizes, comple

distribution network, little use of IT systems, limitations of

mass media and eistence ofcounterfeit goods.

ajor etail Companies

Pantaloon etail (India) Limited, is Indias leading retailer that operates

multiple retail formats in both the value and lifestyle segment of the Indian

consumer market. Headquartered in umbai (Bombay), the company

operates over 16 million square feet of retail space, has over 1000 stores

across 73 cities in India and employs over 30,000 people.

The companys leading formats include Pantaloons, a chain of fashion

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outlets, Big Bazaar, a uniquely Indian hypermarket chain, Food Bazaar, a

supermarket chain, blends the look, touch and feel of Indian bazaars with

aspects of modern retail like choice, convenience and quality and Central, a

chain of seamless destination malls. Some of its other formats include

Brand Factory, BlueSky, aLL, Top 10 and Star and Sitara. The company alsooperates an online portal, futurebazaar.com.

Future Value Retail Limited is a wholly owned subsidiary of Pantaloon

Retail (India) Limited. This entity has been created keeping in mind the

growth and the current size of the companys value retail business, led by

its format divisions, Big Bazaar and Food Bazaar.

The company operates 148 Big Bazaar stores, 169 Food Bazaar stores,

among other formats, in over 70 cities across the country, covering an

operational retail space of over 6 million square feet.As a focussed entity

driving the growth of the group's value retail business, Future ValueRetail

Limited will continue to deliver more value to its customers, supply

partners, stakeholders and communities across the country and shape the

growth of modern retail in India.

A subsidiary company, Home Solutions Retail (India) Limited, operates

Home Town, a large-format homesolutionsstore, Collection i, selling home

furniture products and eZone focussed on catering to the consumer

electronics segment.

Pantaloon Retail is the flagship company of Future Group, a business group

catering to theentire Indian consumption space.

The Tata group expects its chain of electronics goods shops to generate

revenue ofRs 8,000 crore in two years. Infiniti Retail, which opened its first

shop in Mumbai on Monday, will invest Rs 400 crore to open 30 stores by

March 2008 and double outlets by end of 2009, the Tata Sons director, Mr

R K Krishna Kumar said. "'Weestimate, by theend of 2008 financial year, a

turnover in the region ofRs 8,000 crore, if all goes as planned," hesaid at

the opening of the group's first Croma outlet in Mumbai.

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CONCLUSION

Theretail industry in India is currently growing at a great pace and is

expected to go up to US$ 833 billion by the year 2013. It is further

expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%.As

the country has got a high growth rates, the consumer spending has also

gone up and is also expected to go up further in the future. In the last

four year, the consumer spending in India climbed up to 75%. As a

result, the India retail industry isexpected to grow further in the future

days. By the year 2013, the organized sector is also expected to grow at

a CAGR of 40%.

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S-W-0-T Analysis

STRENGTHS

y Demographic favory Rising disposable incomey Increase in number of people in earner category. y Urbanizationy Shopping convenience y Low labor cost ofskilled ones.y Changing consumer habits and lifestyles. y Plastic card revolution.y Greater availability of quality retail space.

WEAKNESS

y Policy related issues- lack of industry status for retail. - numerouslicence,permits and registration

requirement.

- farmer and retailer unfriendly APMC act. y Limited consumer insight

-lack of detailed region specific customer data.

-less data on spending pattern.

y Inadequate human resources -lack of trained personnel at all level.

-stringent employment and industry laws.

-fragment approach to human resources.

y Taxation hurdle-inconsistent octori and entry taxstructure.

-vat and multiple taxation issues.

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-large grey market presence.

y Underdeveloped supply chain-underdeveloped logistics infrastructure.

-absence of national cold chain networks. -lack of national distribution networks and hubs

y Lack of adequate utilities -lack of basic infrastructure like power, transport and communication

creates difficulty in sustaining retail operations across the large

geographical spread of country.

OPPURTUNITIES

y Potential for investment.y Locational advantage. y Sectors with high growth potential. y Fastest growing formats.y Rural retail.y Wholesale trading. y

Falling real estate costy E-retailingy Retail franchising

THREATS

y Political issues.y Social issues.y Inflation.y Nostalgiay Lack of differentiation among the malls that are coming. y Poor inventory turns and stock availability measures.

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Question And Answers

1.The current retail format in India is as follows

y Hypermarts supermarkets: largeself-servicing outlets offeringproducts from a variety of categories.

y Mom-and-pop stores: they are family owned business catering tosmall sections; they are individually handled retail outlets and have a

personal touch.

y Departmental stores: are general retail merchandisers offering qualityproducts and services.

y Conveniencestores: are located in residential areas with slightlyhigher prices goods due to the convenience offered.

y Shopping malls: the biggest form of retail in India, malls offerscustomers a mix of all types of products and services including

entertainment and food under a single roof.

y E-trailers: are retailers providing online buying and selling of productsand services.

y Discount stores: these are factory outlets that give discount on theMRP.

y Vending: it is a relatively new entry, in the retail sector. Herebeverages, snacks and other small items can be bought via vendingmachine.

y Category killers:small specialty stores that offer a variety ofcategories. They are known as category killers as they focus on specific

categories, such aselectronics and sporting goods. This is also known

asMulti Brand Outlets or MBO's.

y Specialty stores: are retail chains dealing in specific categories andprovide deep assortment. Mumbai's Crossword Book Store and RPG's

Music World are a couple ofexamples.

Over the last few years, retail has become one of the fastest growing sectors in

the Indian economy. The organized retail however is at a very nascent stage

though attempts are being made to increase its proportion to 15-25% by the

year 2011 bringing in a huge opportunity for prospective players. Thesector is

the largest source of employment after agriculture, and has started to

penetration into rural India generating more than 10% of India's GDP.

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We had started from small medium and semi large grocery stores and now is

theera of malls, super markets and hyper markets where different categories

of commodities are sold under one roof.The good old idea of grocery shops

have been left far behind.However we arestill developing when compared to

the U.S.Today 10% of GDP is from retail and we are striving for more.Thechallenges that come our way are

y The taxstructure in India favorssmall retail business y Lack of adequate infrastructure facilities y High cost of real estatey Dissimilarity in consumer groupsy Restrictions in Foreign Direct Investmenty Shortage of retail study options y Shortage of trained manpowery Low retail management skill

However the future ofRetail seems very bright with a large group ofMulti-

national companiesentering the retail market taking the concept of

globalization on a new scale.

2.Walmart is a big name in the retail market. It has the largest number of

employees any retail company can have as well as it is ranked t largest retail

name in the world.It is god news that Wal-Mart wants to invest in Indian Retail

industry giving it the right amount of boost that we need.

There are two basic conditions that a MNC like Wal-Mart, etc are looking for

when they come to expand their business in countries like India.

y Cheap Laboury Cheap Real-estate

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These are the two basic conditions that are required by a company to

score big in the retail industry.Availability ofspace is a major concern

When it comes to setting up a retail business.The next highest cost

incurred is theemployee cost which every big retail has to have when

they decide on selling consumer products that will be directly consumedby the customers.

A country like India who isjust preparing to get into the shoes of big

retail giants is the perfect place for an already established company to

operate.The cheap labour and real-estate gives these big multi national

companiesenough reason to set up their operations and for a country

liek India where employment of few of its citizens could help in

contributing to the nationswealth,a company like Wall-mart is always

welcome. It always gives India the required Global recognition that could

be very beneficial for them.

Our government has also opened up to a 51% investment from a foreign

company to come to India and do business for example Wal-mart has

been allowed tojoint venture with Bharti Enterprise.