PREPARED BY:

ABHISEK SARKAR
P/MN/R/09/171
SECTION – A
WHAT DO WE MEAN BY RETAIL?
Retailing consists of the sale of goods or merchandise from a fixed location, such
as a department store, boutique or kiosk, or by mail, in small or individual lots for
direct consumption by the purchaser. Retailing may include subordinated services,
such as delivery. Purchasers may be individuals or businesses. In commerce, a
"retailer" buys goods or products in large quantities from manufacturers or
importers, either directly or through a wholesaler, and then sells smaller
quantities to the end-user. Retail establishments are often called shops or stores.
Retailers are at the end of the supply chain. Manufacturing marketers see the
process of retailing as a necessary part of their overall distribution strategy. The
term "retailer" is also applied where a service provider services the needs of a
large number of individuals, such as a public utility, like electric power.
Shops may be on residential streets, shopping streets with few or no houses or in
a shopping mall. Online retailing, a type of electronic commerce used for
business-to-consumer (B2C) transactions and mail order, are forms of non-shop
retailing.

RETAIL INDUSTRY IN INDIA:

The Indian retail industry is the fifth largest in the world. Comprising of organized
and unorganized sectors, India retail industry is one of the fastest growing
industries in India, especially over the last few years. Though initially, the retail
industry in India was mostly unorganized, however with the change of tastes and
preferences of the consumers, the industry is getting more popular these days
and getting organized as well. With growing market demand, the industry is
expected to grow at a pace of 25-30% annually. The India retail industry is
expected to grow from Rs. 35,000 crore in 2004-05 to Rs. 109,000 crore by the
year 2010.
The Indian retail market, which is the fifth largest retail destination globally, has
been ranked as the most attractive emerging market for investment in the retail
sector by AT Kearney's eighth annual Global Retail Development Index (GRDI), in
2009. As per a study conducted by the Indian Council for Research on
International Economic Relations (ICRIER), the retail sector is expected to
contribute to 22 per cent of India's GDP by 2010.
In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic
Product) of the country. In 2009, it rose to 12%.
A McKinsey report, 'The rise of Indian Consumer Market', estimates that the
Indian consumer market is likely to grow four times by 2025. Commercial real
estate services company, CB Richard Ellis' findings state that India's retail market
has moved up to the 39th most preferred retail destination in the world in 2009,
up from 44 last year.
With rising consumer demand and greater disposable income, the US$ 400 billion
Indian retail sector is clocking an annual growth rate of 30 per cent. It is projected
to grow to US$ 700 billion by 2010, according to a report by global consultancy
Northbridge Capital. The organized business is expected to be 20 per cent of the
total market by then. In 2008, the share of organized retail was 7.5 per cent or
US$ 300 million of the total retail market.
India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to
US$ 1.3 trillion by 2018, at a compound annual growth rate (CAGR) of 10 per
cent. As a democratic country with high growth rates, consumer spending has
risen sharply as the youth population (more than 33 percent of the country is
below the age of 15) has seen a significant increase in its disposable income.
Consumer spending rose an impressive 75 per cent in the past four years alone.
Also, organized retail, which is pegged at around US$ 8.14 billion, is expected to
grow at a CAGR of 40 per cent to touch US$ 107 billion by 2013.
Further, this sector is expected to invest around US$ 503.2 million in retail
technology service solutions in the current financial year. This could go further up
to US$ 1.26 billion in the next four to five years, at a CAGR of 40 per cent.

FUTURE OF RETAIL INDUSTRY IN INDIA:

According to industry experts, the next phase of growth is expected to come from
rural markets.

According to a new market research report by RNCOS titled, 'Booming Retail

Sector in India', organized retail market in India is expected to reach US$ 50
billion by 2011.

 Number of shopping malls is expected to increase at a CAGR of more than

18.9 per cent from 2007 to 2015.
  Rural market is projected to dominate the retail industry landscape in India
by 2012 with total market share of above 50 per cent.
 Organized retailing of mobile handset and accessories is expected to reach
close to US$ 990 million by 2010.
 Driven by the expanding retail market, the third party logistics market is
forecasted to reach US$ 20 billion by 2011.

POLICY INCENTIVES FOR RETAIL INDUSTRY:

 100 per cent FDI is allowed in cash-and-carry wholesale formats. Franchisee
arrangements are also permitted in retail trade.
 51 per cent FDI is allowed in single-brand retailing.

RETAIL FORMATS IN INDIA:

 Hyper marts/ supermarkets
 Mom-and-pop stores
 Departmental stores
 Convenience stores
 Shopping malls
 E-trailers
 Discount stores
 Vending
 Category killers
 Specialty stores

CHALLENGES FACING INDIAN RETAIL

INDUSTRY
 The tax structure in India favors small retail business
 Lack of adequate infrastructure facilities
 High cost of real estate
 Dissimilarity in consumer groups
 Restrictions in Foreign Direct Investment
 Shortage of retail study options
 Shortage of trained manpower
 Low retail management skill
KEY PLAYERS IN INDIAN RETAIL SECTOR:
1. FUTURE GROUP, PANTALOONS
2. A. V. BIRLA GROUP
3. RELIANCE
4. K RAHEJA CORP GROUP
5 LANDMARK GROUP
6 TRENT

FOOD AND GROCERIES RETAIL

IN INDIA
Retail is being hailed as India’s industry of the future, incited by the country’s
huge urban middle class population. Food and grocery is the second-largest
segment of the retail industry and the potential for new entrants in this
segment is enormous, particularly in untapped markets like rural and semi-rural
areas. Growing at the rate of 30%, the Indian food retail is going to be the major
driving force for the retail industry. The paper on “FOOD RETAIL –AN EMERGING
FACET” maps out the Background of food retailing as well as current scenario
catching up the retail front, Up-and-coming multiple formats of food retail.

INTRODUCTION:
The food industry is on a roller coaster ride as Indians continue to have a feast.
Fuelled by– large disposable incomes – the food sector is witnessing a remarkable
change in consumption patterns, especially in terms of food. Food retailing has
come of age -- from a period when food items were sold in small road side grocer
shops & mandis, haats and bazzars by vendors to a stage when food products
(processed and groceries) are retailed through supermarket stores where
consumers can inspect, select and pick up the products they like in a comfortable
ambience and still pay a fair price for the product and the merchandise and
sometimes even pay less than the price they would have paid at the nearest food
stores. Shopping for groceries is no longer a strenuous and uncomfortable affair.
FOOD RETAIL TALE:

Traditionally, Indians were used to buying their sugar, wheat, pulses, rice etc.
from their neighborhood baniya. The majority of food and food products were
and still are retailed through neighborhood kirana (baniya) stores. This concept is
still popular in B-class and II Tier cities of India and giving employment to
thousands of its inhabitants. Initially the food retail format was seen in A-class
cities like Mumbai, Delhi, Chennai which had co-operative stores like "Apna
Bazaar" in Mumbai and "Kendriya Bhandar" in Delhi. Both were very successful
and are operating many outlets in all strategic localities in the city. The first visible
sign of the change in food retailing was seen in mid-eighties. Around that time a
few new food stores were set up in all metro cities in India. Calcutta was the only
exception where it started a little later. At that time couple of leading food stores
started operating such as "Morning Stores" and "Modern Stores" in Delhi,
"Nilgiri" in Bangalore, and “Food Land" in Mumbai, "Spence’s Food Stores" in
Chennai. Spencer’s were the first to tie up with a Singapore based large retail
chain -- "Dairyland" and had set up the food stores in Chennai. Until the late
1990s, food retailing has been concentrated in the south of the country. Southern
India has been witnessing revolutionized activity in food retailing. It has
thoroughly experienced the food retailing in various formats such as the
supermarkets, hypermarkets and neighbourhood stores. These include Food
World, Subhiksha, Nilgiris, Margin Free, and Big Bazaar.

FOOD RETAILING – THE BUZZ WORD:

Indian retail food industry has revolutionized shopping experience of Indian
customers. Growing at the rate of 30%, the Indian food retail is going to be
and no doubt is the major driving force for the retail industry. Food accounts
for the largest share of consumer spending. Food and food products account for
about 50% of the value of final private consumption. This share is
significantly higher compared to developed economies, where food and food
products account for about 20% of consumer spending. Ireena Vittal, principal,
McKinsey & Co in Food Forum 2008, said, "At US$ 175 billion today the food
industry is likely to grow to US$ 400 billion by 2025. The percentage of income
spent in households will drive growth in the food market. Indian consumers are
happy with store goods than branded goods and are very conservative on packaged
goods. There are 10 million street vendors in India, of which 6 million only sell
food. Currently, the retail food sector is US$ 70 billion and is expected to rise
to US$ 150 billion by 2025. Food has the largest consumption in the Indian
economy and will remain the single largest category."

Modern state of the food retailing is not a demand led but the supply led one.
Major spending on food and increasing usage of out of home food consumption
represent a significant opportunity for food retailers and food service companies.
Speaking in Food Forum India 2008, on the government's role in the food retailing
development, Dave said, "The retail stores need to empower its stakeholders and
deliver what the consumer wants. The vision for 2020 should be appropriate
extension network, implementation of appropriate practice at farmers' level and
infrastructure in the country."

There are various factors paving the way to revolutionizing food retailing in
India. Among them few are:

 Changing life styles and tastes

 Growing need for convenience
 Increasing disposable income
 Increasing numbers of working women
 Change in consumption patterns
 Higher aspirations among youth
 Impact of western lifestyle
 Plastic Revolution – Increased use of credit cards and debit cards

UP-AND-COMING FOOD RETAIL FORMATS:

With the changing food consumption patterns, consumers need for convenience,
choice and value for money the set-up of retail format is changing. The Indian
consumers do visit about eight to ten outlets to purchase various food products,
which make up the daily consumption basket. These outlets include
neighbourhood kirana stores, bakeries, fruit and vegetable outlets, dairy booths
and chakkies (small flour mills), which is very time-consuming and unproductive
way of shopping for food. With changing lifestyle there is growing scarcity of time,
and convenience in food shopping is emerging as an important driver of growth of
one-stop retail formats that can offer consumer 'value for time' in addition to
'value for money'. These are giving an opportunity to various other retail
formats:
1. Neighbourhood Stores: In India about 90% of food purchases are made within
a distance of 1.5 km from the customer's home. This means that an organized
retailer would need to have a 'neighbourhood store' close to customers in order
to capture the share of wallet that is spent on food.
2. Supermarkets: This format caters to the consumers' need for choice and
variety. These needs translate into 'more width' and 'more depth' in each
category. These stores cater to the consumers in a catchment area with a radius
of 3 to 4 km and therefore need to be destination stores.
3. Hypermarkets: Hypermarkets are essentially destination stores catering to the
consumers' bulk shopping needs in both food and non-food categories .
4. Cash & Carry (C & C) Stores These stores sell their products to their members
only. The members are typically retailers and institutions. The key added value is
a wide range of products under one roof, available at wholesale prices.

KEY DEVELOPMENTS IN FOOD RETAIL:

The major development in food retail is consideration of Foreign Direct Investment

(FDI) with a limitation that all companies would have to meet mandated export
obligations. Food processing minister Subodh Kant Sahay told ET that “We are
considering a proposal to allow FDI in food retail. It should be in such a way that it
would boost our agriculture. Our farmers must also get benefits of economic
liberalization”. The government is also considering the opening up of the $330-
billion retail market with adequate provisions to protect neighborhood stores.

In every retail format food trade is growing. More and more corporate houses such
as HLL, ITC, Godrej and Reliance are already working into food retail. Huge
increase is expected from the corporate players, which will help grow the entire
food retail sector. Well-established players such as Subhiksha, Food Bazaar and
Spencer's Daily are also tapping into backward linkages, while trying to match
their expanding geographies with retail formats. Also, most food retail players
have been region-specific as far as geographical presence is concerned. Take the
RPG Group's FoodWorld, Nilgiris, Margin Free, Giant, Varkey's, all of which
are more or less spread in the Southern region; Sabka Bazaar, Big Apple has a
presence only in and around Delhi.
OPPORTUNITIES IN RETAIL SECTOR
 Rising Investment: There are strong opportunities in food retail as a result
of encouraging changes in consumer purchasing patterns, the availability of
real estate and supply chain development. Organized food retail presents a
unique investment opportunity for corporate looking to diversify.
 FDI Policy for Retail: Gates have been opened up for single brand retailers.
In February 2006, the door was opened to some extent when the
government allowed 51% FDI by single brand companies subject to
government approvals.
 Emergence Of Logistic Providers: The present lack of logistic support
exposes the need for an integrated logistics provider. As retail activity
gathers momentum and large quantities of perishables are sold in modern
formats, the logistic service providers would have a crucial role to play in
bridging the supply gap. Retail players would also benefit from an efficient
supply chain inventory management.

CONCLUSIONS:
The past 4-5 years have seen increasing activity in food retailing. Various business
houses have already planned for few investments in the coming 2-3 years. Though
the retailers will have to face increasingly demanding customers and intensely
competitive rivals, more investments will keep flowing in and the share of
organized food sector will grow rapidly. Organized food retailing in India is surely
poised for a takeoff and will provide many opportunities both to existing players as
well as new entrants.

REFERENCES AND SOURCES:

1. http://www.economywatch.com/business-and-economy/indian-
retail-industry.html
2. http://business.mapsofindia.com/india-retail-industry/
3. http://www.ibef.org/industry/retail.aspx
4 http://www.chillibreeze.com/articles_various/Food-Retail-
industry.asp