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The Changing Face of Indian Retail Industry : Its Growth, Challenges

And Opportunities
Submitted to

Swami Ramanand Teerth Marathwada University

For the award of

Doctor of Philosophy (Ph.D.)



Arvind W. Ubale

Under the guidance of

Dr. Harkal P.Y.

(M.Com, M.Phil, Ph.d.)

Department of Commerce and Management
Dnyanopasak College
Parbhani (MS)


1) Introduction

2) Importance of study

3) Review of literature

4) Objectives of study

5) Research methodology

6) Hypothesis

7) Chapter scheme

8) References

The Changing Face of Indian Retail Industry: Its Growth, Challenges and

The word ‘retail’ is derived from the French word ‘retaillier’ , meaning ‘to cut
a piece off’ or ‘to break bulk’. In simple terms, it implies a first –hand
transaction with customer.

Retailing involves a direct interface with the customer and the coordination
of business activities from end to end- right from the concept or design stage
of product or offering, to its delivery and post delivery service to customer.
The industry has contributed to the economic growth of many countries and
is undoubtedly one of the fastest changing and dynamic industries in the
world today.

The service sector accounts for a large share of GDP in most developed
economies. And the retail sector forms a very strong component of the
service sector. Retailing is not only an important aspect of the economic
structure but very much a part of our lives. Although trading of goods have
been existing since the olden days, it is only in the recent past that the
buying and selling of goods have become more of formal and a brand
dominated activity. In fact, today retailing is evolving into global high- tech
For centuries now, India has been operating within her own unique concept
of retailing . Retailing in its initial period was witnessed at the weekly haats
or gathering in a market place where vendor put on display their goods. Of
course, this practice is still prevalent in many towns and cities in India. Then
the market saw the emergence of the local baniya and his neighbourhood
“kirana shop”. These were the common local mummy-daddy or multipurpose
departmental stores, located in residential area. Such shops stocked goods
with multipurpose utility and were built with the vision of providing
convenience at the doorsteps of consumer.

The India Retail Industry is the largest among all the industries, accounting
for over 10 per cent of the country’s GDP and around 8 per cent of the
employment. The Retail Industry in India has come forth as one of the most
dynamic and fast paced industries with several players entering the market.
But all of them have not tasted success of the heavy initial investments that
are required to break even with other companies and compete with them.
The India Retail Industry is gradually inching its way towards becoming the
next boom industry.

The total concept and idea of shopping has undergone an attention drawing
change in terms of format and consumer buying behavior, ushering in a
revolution in shopping in India. Modern retailing has entered into the Retail
market in India as is observed in the form of bustling shopping centers,
multi-storied malls and the huge complexes that offer shopping,
entertainment and food all under one roof

A large young working population with median age 24 years, nuclear families
in urban areas, along with increasing workingwomen population and
emerging opportunities in the services sector are going to be the key factors
in the growth of the organized Retail sector in India .The growth pattern in
organized retailing and in the consumption made by the Indian population
will follow a rising graph helping the newer businessmen to enter the India
Retail Industry.

In India the vast middle class and its almost untapped retail industry are the
key attractive forces for global retail giants wanting to enter into newer
markets, which in turn will help the India Retail Industry to grow faster.
Indian Retail is expected to grow 25 per cent annually. Modern retail in India
could be worth US $ 175-200 billion by 2016. The food Retail Industry in India
dominates the shopping basket. The mobile phone Retail Industry in India is
already a US $ 16.7 billion business, growing at over 20 per cent per year
.The future of the India Retail Industry look promising with the growing of the
market, with the government policies becoming more favorable and the
emerging technologies facilitating operations.

India is the country having the most unorganized retail market. Traditionally
it is a family’s livelihood, with their shop in the back, while they run the retail
business. More then 99% retailer’s function in less then 500 square feet of
shopping space. Global retail consultants KSA Techno park have estimated
that organized retailing in India is expected to touch Rs.35,000crore in the
year 2005-06. The Indian retail sector is estimated at around RS
900,000crore of which the organized sector accounts for a mere 2 pre cent
indicating a huge potential market opportunity that is lying in the waiting for
the consumer-savvy organized retailer.

Purchasing power of Indian urban consumer is growing and branded

merchandise in categories like Apparels, cosmetics, shoes, watches,
beverages, food and even jewellery, are slowly becoming lifestyle products
that are widely accepted by the urban Indian consumer. Indian retailers need
to advantage of this growth and aiming to grow, diversify and introduce new
formats have to pay more attention to the brand building process. The
emphasis here is on retail as a brand rather than retailers selling brand. The
focus should be on branding the retail business itself. In their preparation to
face fierce competitive pressure, Indian retailers must come to recognize the
value of building their own as brands to reinforce their marketing positioning,
to communicate quality as well as value for money. Sustainable competitive
advantage will be dependent on translating core value combing product,
image and reputation into a coherent retail brand strategy.

There is no doubt that the Indian retail scene is booming. A number of large
corporate houses-tata’s, Raheja’s, Piramala’s, Goenka’s –have already made
their foray into this arena, with beauty and health stores, supermarkets, self-
service music stores, new age book stores, every day-low-price stores,
computer and peripherals stores, office equipment stores, and home/building
construction stores. Today the organized players have attacked every retail
category. The Indian retail scene has witnessed too many players in too
short a time, Crowing several categories without looking at their core
competencies, or having a well thought out branding strategy.
However, the post liberalization era, saw retail industry undergoing a
revolutionary change. The changes in the organized retail industry is visible
in the form of new retailing formats , modern techniques, exclusive retail
outlets, emergence of retail chains etc.

Modern retail industry plays an important and vital role in the economies of
all modern societies. Retailing in India is currently estimated to be a US$ 200
billion industry, of which organized retailing makes up a paltry 3 percent or
US$ 6.4 billion. By 2010, organized retail is projected to reach US$ 23 billion.
For retail industry in India, things have never looked better and brighter.
Challenges to the manufacturers and service providers would abound when
market power shifts to organized retail.

Retail sales and employments are the key economic contributors and often
mirror trends in a nation’s overall economy. Retailing is a major part of
United States of America’s commerce. India is also embarking in this
direction, career in retailing are going to catch up and are on pathway to
success of young generation.

Retailing comprises of business activities involved in selling goods and

services to consumers for personal and family use. It is last stage in the
distribution process of product. Today, retailing has many challenges ahead.
Retail firms needs to plan for and adapt to a complex, challenging
competitive environment. It is very important to study the changing face of
retail industry.

Now –a-days, in India we see a rise in the purchasing power, and growth of a
middle class which follows the western lifestyle. Hence, conditions are
conducive for the rapid growth of organized retail in India. The Indian
environment is different from that of western countries in many ways. Indian
cities are congested and a large part of the population is still concentrated in
rural areas. The Indian houses are smaller and Indian consumer is still not
used to buying in bulk on weekends. The rapidly rising income levels and
accompanying changes in lifestyle greatly contributed to the growth of
organized retail in West. The Indian retail scene is hence very different from
that prevailing in the developed countries. As organized retail grows, retail
formats, which evolved in the West, needs to be modified and new formats
suitable to Indian conditions, have to evolve. Even as organized retail grows,
a large part of Indian retail is still likely to be unorganized. Hence, it is very
important to understand the difference in the retailing environment and
retailing institution in India.

Recently, retailers are increasing the sophistication of retail operations and

decision making tools for coordinating their supply chains, buying
merchandise, and managing stores operations. Retailing consists of all
activities involved in selling goods and services to consumers for their
personal, family, or household use. It covers sales of goods ranging from
automobiles to apparel and food products, and services ranging from hair
cutting to air travel and computer education. Hence it is very necessary to
understand the growth, challenges and opportunities of the retail industries.

A. “The retail sector has played a phenomenal role throughout the world in
increasing productivity of consumer goods and services. It is also the second
largest industry in US in terms of numbers of employees and establishments.
There is no denying the fact that most of the developed economies are very
much relying on their retail sector as a locomotive of growth. The India Retail
Industry is the largest among all the industries, accounting for over 10 per
cent of the country’s GDP and around 8 per cent of the employment. The
Retail Industry in India has come forth as one of the most dynamic and fast
paced industries with several players entering the market. But all of them
have not yet tasted success because of the heavy initial investments that
are required to break even with other companies and compete with them.
The India Retail Industry is gradually inching its way towards becoming the
next boom industry.”Paper Presented on Retail industries trends in India By
Dr. M. Dhankabham lecturer in Commerce , Department of Commerce ,
Rajastan University.

This paper provides detailed information about the growth of retailing

industry in India. It examines the growing awareness and brand
consciousness among people across different socioeconomic classes in India
and how the urban and semi-urban retail markets are witnessing
Significant growth. It explores the role of the Government of India in the
industry’s growth and the need for further reforms. In India the vast middle
class and its almost untapped retail industry are the key attractive forces for
global retail giants wanting to enter into newer markets, which in turn will
help the India Retail Industry to grow faster.
B. “In addition small retailers, entrepreneurs in retailing, the second
generation of traditional retailers can bring in science to the art of retailing.”
Book -Modern Retail Management. Author- J. N. Jain and P.P. Singh.
Publication – Regal, New Delhi .
First Edition - 2008.

This book has given more emphasis on electronic aspect of retailing and
provides a strategic look at retailing, current coverage and organization
around a strategic decision- making model.

C. “Retailing is one of the world’s largest private industry. Liberalizations in

FDI have caused a massive restructuring in retail industry. The benefit of FDI
in retail industry superimposes its cost factors. Opening the retail industry to
FDI will bring forth benefits in terms of advance employment, organized
retail stores, availability of quality products at a better and cheaper price. It
enables a country’s product or service to enter into the global market.”
By www.fiber2fashion .com

On this site focus on - Restrictions on FDI are considered as trade barriers as

they deny direct market access to foreign firms. Retail giants who are at
their wings, seeking entry into foreign market look for other available
alternatives. These restrictions on the global retailers regarding the inflow of
Foreign Direct Investment, leads them towards acquiring the market entry
through franchises. Thus, countries which offer promising market
potentialities for retail growth offers substantial growth in the franchising
sector as well.

D. “Although retailing in its various formats has been around in our country
for many years, it was confined for a long time to family or mom-and-pop
stores. Now, various professional organizations are setting up shops and
retailing in India; they have a passion to be closer to customers.”

Book –Retail Management functional principles and Practices

Author – Gibson G. Vedamani

Second Edition – 2007.

Publication – Jaico Publishing House, Mumbai.

This book skillfully blends the overview of the global and Indian retailing
scene, along with trends and growth prospects for industry in India. The book
also elaborates the key concepts of operations, customer service,
merchandising and buying.

Retailing has come to occupy a prominent position in today’s modern society
therefore it is very important to do study on the following area of Retail

a) To study growth, prospects and challenges of Retail Industry in India

with special reference to Maharashtra and Karnataka state.

b) To study impact of organized retail industry on unorganized retail in


c) To study various retail location strategy.

d) To find out the factors attracting New Entrepreneurs and Foreign

Retailer in India.

e) To do comparative study of Rural and Urban Retailing in Maharashtra.

f) To study Changes in the Social Structure and Consumer Behaviour in

Metro and Small town.

g) To study pros and con of FDI in Retail Industry in India.

h) To find out impact of organized retail industry on employment in India

and to study the manpower challenges to be addressed by the retail

sector in India.

i) To study franchising form of retailing and its advantages in retailing in


j) To study different kinds of research undertaken in Retail industry.

k) To study Retail Academies in Maharashtra.

l) To study government Taxation Policy for Organized Retail Industry.

The present study leads to explore the changing face and growth of
Indian Retail Industry and Its challenges and opportunities in India with
special reference to Maharashtra State. The study tries to analysis
trend of organized Retail Industry and FDI in India. The study will do
comparative study of unorganized and organized retailing in
Maharashtra. The present study is a descriptive type which includes
surveys and fact-finding enquiries of different kinds. The research
models selected ‘Ex post facto --research’ for descriptive research
study, Empirical, Quantitative and historical nature.

The major components of the study are as follows:


Primary data is the foundation on which analysis of the present

study is based. It is proposed to collect primary data by adopting the
method of observations and questionnaire. The interviews will be
conducted of the people who engaged in unorganized and organized
sector as well as different type of consumer which will help in
collecting the information regarding growth and challenges of Retail
Industry in India, changing behavior pattern of consumer.
Surveys and Interviews will be conducted with the help of which the
data may be collected. Statistical tools such as central tendency,
correlation etc will be used to analyse the data. Analysis will help in
interpretation of the problem and drawing conclusions.


Secondary data will be another important source of data on which

the present dissertation is based. The researcher has collected the
secondary data from various published and unpublished sources. The
researcher used following sources for collection of secondary data:

I. Reports and Publications of National and International Institutes.

II. Reports of Government and NGOs.

III. Various Research Journals, Periodicals and Newspapers.

IV. Internet Browsing.

The secondary data was also analyzed and used for drawing


The data will be collected through primary and secondary sources as

described above and will be property classified, tabulated and presented in
graphical form wherever necessary. The statistical tools such as
percentages, averages, comparative analysis, correctional etc. will be used
for analysis.

The hypothesis of the present research work is as follows:

1. There is positive correlation between growth of retail industry and

Indian economy.

2. Organized Retail Industry created an ample job opportunities in India.

3. The increase in the purchasing power of the Indian middle classes and

the heavy influx of FDI in the retail sectors in India.


The researcher has planned to divide the present study in following


1. Introduction

2. Research Methodology

3. Review of Literature

4. Research Problem

5. Data Interpretation

6. Conclusion and Recommendations

7. Bibliography

Sr.No Author Title Publication Year

1. Suja Nair Retail Management Himalaya Publication 2006

2. J.N. Jain Modern Retail Regal Publication 2008


3. Barry Berman Retail Management – Pearson Education 2006

A Strategic Approach Publication

4. Dr. Talluru Service Sector in Modern Publication 2006

Shrineevasan Indian Economy.

5. Gibson G. Retail Management Jaico Books 2008

and Functional

6. J.V.Prabhakara Rao Globalisation Kanishka Publisher 2005

Challenges and

7. Planning FDI in India Government of India 2004


8. C. R. Kothari Research New Age International 2005


9. www.fiber2fashion. ------ ------------------ 2008


Research Guide Name and Signature Research

Student Name and Signature