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REPORT

ON
FOOD & GROCERY RETAIL IN INDIA

Submitted By: Submitted To:


Mr.Asif Zameer
Iftekhar Ahmed- 17
Mohd Shiraz - 44

Ex MBA – Sem III (Session- 2017-2019)

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Summary
This project report is prepared for the fulfilment of assignment of Planning & Managing
Retail Business. This report is prepared for an FOOD & GROCERY RETAIL IN INDIA.

Executive Summary:
India is the world’s second most populous country with a population of 1.3 billion of
which 62.3 percent is below the age of 35. India’s GDP is expected to grow 7.8 percent
in Indian Fiscal Year 2018-2019 and already exceeds $2.4 trillion. The economy is on
track to become the world’s third-largest economy by 2025. Food processors,
importers, wholesalers, retailers, food service operators are all part of a developing
agribusiness sector. Apart from being a large food producer, India’s bulk, intermediate,
consumer oriented, and agricultural related imports grew from $22.2 billion in 2013 to
$30.2 billion in 2017 and exports went from $44.5 billion to $39.4 billion during the
same period

Food Retail Industry: India’s food and grocery (F&G) retail business is estimated at
U.S. $380 billion. The F&G retail sector is dominated by traditional trade formats like
neighborhood shops or kirana stores, which hold about 98 percent of the total market
share. The market share held by modern trade formats like supermarkets and
hypermarkets is expected to double from two to four percent by 2020 as stores fulfil
the evolving needs of consumers.

Food Retail Sector Key Updates: IFY 2017-2018 has seen significant changes in the
retail and e-retail space in India through the acquisition and takeover of several smaller
formats of retail chains by larger domestic and international players in the food retail
segment. The acquisition of Bengaluru-headquartered eretailer Flipkart by Walmart for
U.S. $16 billion stood out as the biggest acquisition by a foreign retailer in India.

India Food Retail Sector and Unique Distribution Structural Pattern: India’s food
and grocery (F&G) retail business is estimated at U.S. $380 billion and the modern
food retail sector is valued at two percent of the total market. Modern trade formats
like supermarkets and hypermarkets are reportedly growing at 15 percent per annum
and could double in size by 2020. A Euromonitor report on India’s food retail industry
projects steady upward growth of hypermarkets and supermarkets by 40 percent and
21.8 percent, respectively.

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Kirana Shops and the Emergence of Modern Retail, Internet Retailing, and Cash
and Carry Formats: India’s retail sector is dominated by thousands of small
neighborhood grocery shops (i.e., kirana stores) that account for 98 percent of food
sales. These neighborhood shops are located across the country and offer
convenience, proximity, ability to extend credit to consumers, and have a relatively
low-cost infrastructure. The route to accessing these kirana shops is often through
national level importers and distributors as well as by some, less formal, distribution
means. The emergence of larger chains and stores began around 2005 and the sector
has since grown to over 4,900 supermarkets and 500 hypermarkets across India.
While many retailers are expanding and opening new stores, profitability continues to
be an issue for many as factors such as high real estate costs, high capital borrowing
costs, high debt levels, training levels of staff, and a costly supply chain add
significantly to operating costs. Several internet grocery retailers have launched over
the past few years and India’s first e-retailer dedicated to imported foods recently
opened. Organized retailers often use vetted importers and distributors

Key Challenges in Food Retailing Demand Side

Penchant for fresh/home-made and value consciousness The Indian consumer,


unlike his western counterpart, has a penchant for freshly cooked food over packaged
food. This is a result of dietary patterns, poor electricity supply, low penetration of
refrigerators and a family structure where one of the primary roles of the housewife is
feeding the family. The Indian consumer is extremely value conscious. A TSMG study
indicates that packaged food players need to drive down prices by almost 35-40% to
be comparable on cost with home made food.

Diversity of tastes and preferences Multiple cultures, languages and religions have
a huge bearing on the tastes and preferences of the Indian consumer. This will pose
a challenge for players aspiring to develop a pan Indian presence.

Willingness to travel Given the current density of retail outlets in India, retailers will
have to motivate the consumer to trade convenience with price, range and ambience.
Supply Side

Sourcing base and efficiency The fragmented agri supply base coupled with an
inadequate legal framework make it difficult for retailers and food processors to
procure quality produce at competitive costs directly from farmers. The small size of
the food processing industry further limits the supply options

. Real estate availability and cost Rentals account for 7-7.5% of the total costs for
organized retail in India against global benchmarks of less than 3%. Real estate
availability and costs will continue to remain a challenge in the retail industry with
factors like adequate parking, ambience and proximity being the key drivers of
footfalls.

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Manpower availability As organized retail expands, there is expected to be a dearth
of skilled manpower. The lack of institutions and courses for different aspects of retail
management will have an impact on the overall supply of quality manpower

Emerging trends in food retailing

Big becoming bigger Globally, retailers have realized that size drives profitability,
not just through economies of scale in operations but also through higher bargaining
power leading to better margins. While many players are entering the retail space in
India currently, the growth stage will be characterized by rapid expansion and
consolidation among these players.

Rise of organic foods and health and wellness segment Consumer attitudes and
preferences are undergoing a shift owing to factors like increased disposable incomes,
changes in lifestyle patterns, shift in age structure, increased number of working
women and multi cultural exposure. These would lead to increasing health
consciousness in the future. Organic foods and wellness products would be emerging
opportunities in the years to come.

Increasing focus on private labels As competition in the organized retail market


increases, discounts and promotions are expected to play a critical part in generating
footfalls. To counter the impact on profitability, organized players will find it more
attractive to promote private labels or store brands given their higher margins. The
consumer too would benefit from lower prices. Scope for innovation in food retail As
the organized food retail market matures in India, there would be an increased need
for players to differentiate through innovation. Innovations would largely come under
two heads: Innovation on Retail format - Players can innovate on formats in different
ways : o by targeting specific customer segments and serving their needs better e.g.
working women, single office goers, etc o by changing the product mix e.g. entirely
private label stores, exclusively fresh produce stores o by offering new forms of
convenience and wider range to the customer e.g. teleretail and internet retail
Technological Innovations - Employing cutting edge technology in retail could prove
to be the source of competitive advantage for retailers. o Self-scan checkouts have
the potential of both reducing check-out time manpower cost for the retailer o Using
RFID tags can help track and reduce in-store inventory management costs and give
retailers better insights into customer in-store movement patterns Web-enabled POS
systems, e-SCM systems, e-Procurement systems and warehouse management
systems will enable food retailers in integrating the entire agri value chain leading to
efficient procurement and supply chain management. Use of cutting edge analytics
can bring insights into customer buying behaviour with implications on store layout,
pricing and promotions.

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Reliance Fresh
The new retail initiative from the stables of the corporate behemoth Reliance Industries
Limited (RIL) has now an established presence in the retail market of India. It has
entered into the retail market with its first foray as Reliance Fresh. Reliance Fresh is
an effort of organized retail in the perishables segment with its stock including food
and vegetables. Mukesh Ambani who was heading RIL was quite optimistic about the
venture as its initial success would decide his future course of action related to the
expansion plans of his retail venture. Reliance Fresh has adopted a business model
of operating through small and medium size stores. These stores would be of 2,000-
5,000 sq ft in comparison to a supermarket which needs 8,000-10,000 sq ft. In the
current business model it has positioned itself as a food and grocery convenience
store. The strengths of the model are providing affordability and a clean and hygienic
shopping environment to the customers. Reliance Fresh aims to be a channel for not
only consumer sales but also positions itself as a distribution channel for other small
outlets in various parts of the city. It aims to build an integrated supply chain to deliver
and operate its claimed ‘Farm to Fork model’. Reliance has been racing to set up deals
with state governments to establish rural hubs to buy fruit, vegetables, pulses and
dairy goods from farmers as it moves to build a 'state-of-the-art supply chain spanning
the entire country'. The competition in the food and agriculture retail sector is getting
hot with the advent of new players which include both home grown companies and
MNCs. This case gives an exposure to the students about the developments taking
place in the retailing in India. The case provides an opportunity to discuss issues like
prevailing competition in Indian retail sector, drawing parallel between the various
retail models, their supply chains, the significance of vertical co-ordination of supply
chain, the appropriateness of retail format of Reliance Fresh and possible future
strategy.

SUPPLY CHAIN MANAGEMENT


Approaching farmers directly , there by reducing procurement wastage. Better returns
to Indian farmers and manufacturers Greater value for the Indian consumers
4P’S OF MARKETING

PRODUCT- Vegetables and fruits House hold items Food and beverages – All
premiere brand + Private label Groceries – only private label Dairy products Non veg
food items Ready to eat items

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PRICE- Low cost model Discount pricing Value pricing Low margin , high sales volume
Factors for low pricing Bulk purchasing Central warehousing Transportation
PLACE - Low cost locations Targets semi urban population Designed to look crowded
All cities in India has at least one outlet

PROMOTION Discount scheme days – Saturday and Sunday Reliance fresh


membership card – Reliance One Through media especially newspapers. Package
carry bag Directories Bill boards Audio materials Point of purchase displays

SALES PROMOTION
 Premiums and gifts Sampling Rebate
 EVENTS / EXPERIENCE Social event Store tour
 PUBLIC RELATION AND PUBLICITY Camps Publications

PUSH V/S PULL STRATEGIES


PUSH STRATEGY Point of sale displays. Special Displays. Dealers Premium,
Gifts. Advertising materials. Catalogs and brochure. Events. Sampling.

PULL STRATEGY Coupons Samples Premium and gifts Refunds/Rebates


POP advertisement.

BRAND IDENTITY Design Logo symbol Brand name

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COMPETITORS
DIRECT COMPETITORS
 LM 365
 Godrej
 Aadhar
 Adani Agri Fresh
 Trinethra
 Subhiksha
 ITC Choupal
 Fresh Bharti Retail
 Hariyali Kisaan Bazaar

INDIRECT COMPETITOR

 Push cart vendors


 Mother dairy
 Local vendors

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SWOT ANALYSIS

STRENGTH WEAKNESS
 Under the Reliance Family  No Credit facilty

 Ambience  No differential pricing in case


of vegetable
 Low Prices
 Lack of skilled human
 Better supply chain efficiency resources for store operations

OPPORTUNITIES THREATS

 Retailing concept is into growth  Different Climatic conditions


stage across the country

 Farmer are happy so no  High transportation cost due to


problem in expansion plan high petrol prices

 Opportunity to capture to  Government Policies


market .

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STRENGTH
Experienced Management team Strong IT and Backend operations Horizontal
Integration Backward Integration Good financial position Brand Equity
WEAKNESS
Losses due to Joint ventures Presence at Prime Locations Multi-Format Presence
OPPORTUNITIES
Growing retail market Increasing buying power of Indian consumers Many Untapped
Markets in India
THREATS
Increase in the operating costs Low Price Competition Government restriction
Increasing competition

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SEGMENTATION, TARGETING AND POSITIONING OF RELIANCE FRESH

Market Segmentation:
Market segmentation is the process of dividing the market into different segments
according to the tastes and preference of the consumers.
There mainly 4 important bases of market segmentation they are:
Psychographic segmentation
Behavioral segmentation
Geographic segmentation
Demographic segmentation
Psychographic segmentation
 Here the buyers can be divided into groups on the basis of the life style or
personality orvalues

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Behavioral segmentation:
 Here the buyers can be divided into different groups on the basis of their
knowledge of,attitude towards, use of, or response to a product

Geographical segmentation
 :Here the markets are divided into different geographical units as such nations,
states,territories etc,
Demographic segmentation:
The market is divided into segments based on the variables such as age, family
size,sex, religion, race, generation and social groups Reliance fresh should
segment the customer on the following basis: They should identify their strengths,
from talking to your customers. Focus on these strengths ± instead of diversifying
into new markets when the existing one matures They should identify what their
customers different needs, wants and motivations are and how the market
segments itself. They should not try to please everyone ± decide which segments
to please make your own (and which to ignore), then differentiate to target that
market. They should not over-value data. Descriptive data is useful to target
Needs- based segments, but it does not equal good Segmentation on its own.
They should try to identify needs and wants of their customers may not know they
have. This will help them to innovate in the future. Customers want value not
cheapness. Latent need often masquerades as demand for the cheapest price.

Target Markets:
Although retailers normally aim at the mass market, a growing numberare engaging
in marketing research and market segmentation, because they are findingit
increasingly difficult to satisfy everyone. Through a careful definition of target
markets,retailers can use their resources and capabilities to position themselves more
effectivel and achieve differential advantage. The tremendous growth in number of
speciality stores in recent years is largely due to their ability to define precisely the
type of customers, they want to serve. In order to generate revenue reliance fresh
should target house makers since they are the one purchase the goods for the house
so they will be the frequent visitor also Older shoppers and Generation X consumers
hold the key to survival for stores like reliance fresh and independent outlets, says a
research A new survey points out the two groups are natural markets for small
operations to target in order to survive an increasingly competitive industry y In order
to survive the price competition from the mega giants in the retail business, Reliance
fresh must stress target marketing and customer service. Reliance fresh should target
older shoppers and Generation X consumers because these people are looking for

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particular conveniences when they shop. Generation X consumers and house makers
are a key market because they seek many of the same conveniences, plus take-home
food and 24-hour service In stressing customer service, Reliance fresh should
position themselves in the communities and neighborhoods as the customer service
leader in the market Stores should continuously track the customer service
perception.

Positioning:

Merchandise Management: The objective here is to identify the merchandise that


customers want, and make it available at the right price, in the right place at the right
time. Merchandise Management includes
(i) merchandise planning
(ii) merchandise purchase, and
(iii) merchandise control.
Merchandise planning deals with decisions relating to the breadth and depth of the
mix, needed to satisfy target customers to achieve the retailers return on investment.
This involves sales forecasting, inventory requirements, decisions regarding gross
margins and mark ups etc.

Store Image:
A store image is the mental picture, or personality of the store, a retailer likes to project
to customers. Image is affected by advertising, services; store layout, personnel, as
well as the quality, depth and breadth of merchandise. Customers tend to shop in
stores that fit their images of themselves. Store Personnel: Sales personnel at a retail
store can help build customer loyalty and store image. A major complaint in many
lanes of retailing is the poor attitude of a salesperson. There is a growing trend now,
to provide training to, these sales clerks to convert them from order takers to effective
sales associates
Store Design:
A stores exterior and interior design affect its image and profit potential. The exterior
should be attractive and inviting and should blend with the stores general
surroundings.. Merchandise display is equally important. An effective layout guides
the customer though the various sections in the store and facilitates purchase.
Promotion: retail promotion includes all communication from retailers to consumers
and between sales people and customers. The objective is to build the stores image,
promote customer traffic, and sell specific products. It includes both, personal and non

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personal promotion. The media used are TV, Radio, Newspapers, Outdoor displays
and direct mail, other forms of promotion include, displays, special sales, give always
and contests etc.

Credits & Collections:


Retailers are generally wary of providing credit, because of additional costs-financing
accounts receivables, processing forms and bad debts etc. But many customers prefer
some form of credit while purchasing.

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CONCLUSION:

Undoubtedly, the retail sector is one of the key sectors in the Indian economy. The
major contributive part of retailing in the Indian economy would ensure the prosperity
of the nation in terms of employment creation and deployment of resource. However,
the spread of organized retailing among various countries varies depending upon the
socioeconomic factors related to the country. With the changing demographic features
and improvement in quality of life of urban India, the Indian retail sector is witnessing
a tremendous growth. This study is mainly focused on the factors which generally
influence the consumer whilst their purchase at the organized retail sector. Apparently,
the retail consumer attitudinal dimension forces them to have diversified patterns at
various buying spots. The situation makes the Reliance Fresh more vigilant about
adopting consumer-friendly marketing strategies in terms of selling the best quality
products and services continuously to the consumers. It seemed from the study that
the customers are quite satisfied with Reliance Fresh. Reliance Fresh is a major
shopping mall for today‟s customers. It is a place where customers find variety of
products at a reasonable price. Reliance Fresh has a good reputation of itself in the
market. It has positioned itself in the market as a discounted store. It holds a huge
customer base. The majority of customers belong to middle class family. The youth
generation also likes shopping and moving around Reliance Fresh. Volume sales
always take place in Reliance Fresh. Impulse buying behavior of customers comes in
to play most of the times at store. 75 Page So that Company can enhance its business
or increase its sales by doing these things; provide better customer service than its
competitors, increase the variety of merchandise with deep assortment, arrangement
of product should be in proper way that creates good store image, provide membership
card to the customers. Company should also include more categories in the food
section of the store, provide parking space and employ knowledgeable sales staff.

The Indian food & grocery retail market has a long way to go and has a very positive
outlook, driven by increasing demand and changing food habits. The fretfulness that
kirana stores had about organized retailers wiping them out is already gone and all
market participants see co-existence and growth as the way forward. However, the
sector needs largescale interventions and investments to make the supply chain more
efficient and distortion free. These investments could be made both by the organized
retailers as well as other third parties, provided the government creates an ecosystem
conducive to investment and clears up the hurdles for FDI in multiple brand retail. The
beneficiaries of this investment will not just be the retailers and the consumers, but
also the government which has the responsibility of food security and feeding a billion
and a quarter mouths.

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REFERENCES:

Internet Web Page:- A brief report on Retail Sector in India August 2012. A T Kearney
(2010). Global Retail Development Index (GRDI) 2010. Equtitymaster.com
http://www.dnb.co.in/IndianRetailIndustry/overview.asp
http://www.equestindia.com/eq/article_3.asp
http://www.imap.com/imap/media/article_documents/IMAP_Global_Re
tail_Industry_Report__BEDF5F30C7201.pdf
http://www.integraluniversity.ac.in/12052010/Kalyansundaram.pdf
http://www.plunkettresearch.com/retailing-stores-marketresearch/industry-and-
business-data

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