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India's retail sector is going to transform and with a three-year compounded annual
growth rate of 46.64 per cent, retail sector is the fastest growing sector in the Indian
economy. Traditional markets are transforming themselves in new formats such as
departmental stores, hypermarkets, supermarkets and specialty stores. Western-style
malls have begun appearing in metros and near metro cities, introducing the Indian
consumer to a new shopping experience.
KSA-Technopak, a retail consulting and research agency, predicts that by 2010, organized
retailing in India will cross the US$ 21.5-billion mark from the current size of US$ 7.5
billion.
The Indian retail market is of enormous size about US$ 350 billion. But organized retail
is not so huge and it is at only US$ 8 billion. However, the opportunity for growth is huge
—by 2010, organized retail is expected to grow to US$ 22 billion. With the growth of
organized retailing estimated at 40 per cent over the next few years, Indian retailing is
clearly at a tipping point.
This report attempts to analyse the areas where retail sector is growing and will grow,
what will be the target market segment for the retailers and how will they try to serve this
segment.
Overview
The Indian Retail growth can be attributed to the several factors including
Investment Opportunities
* Potential for Investment: The total estimated Investment Opportunity in the retail sector
is around US$ 5-6 Billion in the Next five years.
* Location: with modern retail formats having made their foray into the top cities namely
Hyderabad, Coimbatore, Ahmedabad, Mumbai, Pune, Chennai, Bangalore, Delhi, Nagpur
there exists tremendous potential in two tier towns over the next 5 years.
* Sectors with High Growth Potential: Certain segments that promise a high growth are o
Food and Grocery (91 per cent)o Clothing (55 per cent)o Furniture and Fixtures (27 per
cent)o Pharmacy (27 per cent) o Durables, Footwear & Leather, Watch & Jewellery (18
per cent).
* Fastest Growing Formats: Some of the formats that offer good growth potential are: o
Specialty and Super Market (45 per cent) o Hyper Market (36 per cent)o Discount stores
(27 per cent)o Department Stores (18 per cent)o Convenience Stores and E-Retailing (9
per cent)
* Supply Chain Infrastructure: Supply chain infrastructure in terms of cold chain and
Logistics.
* Rural Retail: Retail sector offers opportunities for exploration and investment in rural
areas, with Corporates and Entrepreneurs having made a foray in the past. India's largely
rural population has caught the eye of retailers looking for new areas of growth . ITC
launched the country's first rural mall 'Chaupal Sagar', offering a diverse product ranges
from FMCG to electronics appliance to automobiles, attempting to provide farmers a
one-stop destination for all of their needs. There has been yet another initiative by the
DCM Sriram Group called the 'Hariyali Bazaar', that has initially started off by providing
farm related inputs and services but plans to introduce the complete shopping basket in
due course. Other corporate bodies include Escorts and Tata Chemicals (with Tata Kisan
Sansar) setting up agri-stores to provide products/services targeted at the farmer in order
to tap the vast rural market.
* Wholesale Trading: wholesale trading also holds huge potential for growth. German
giant Metro AG and South African Shoprite Holdings have already made headway in this
segment by setting up stores selling merchandise on a wholesale basis in Bangalore and
Mumbai respectively. These new-format cash-and-carry stores attract large volumes from
a sizeable number of retailers who do not have to maintain relationships with multiple
suppliers for all their needs.
* Cheap Consumer Credit
Format
Description
The Value Proposition
Branded Stores
Exclusive showrooms either owned or franchised out by a manufacturer.
Complete range available for a given brand, certified product quality
Specialty Stores
Focus on a specific consumer need, carry most of the brands available
Greater choice to the consumer, comparison between brands is possible
Department Stores
Large stores having a wide variety of products, organized into different departments such
as clothing, house wares, furniture, appliances, toys, etc.
One stop shop catering to varied/ consumer needs.
Supermarkets
Extremely large self-service retail outlets
One stop shop catering to varied consumer needs
Discount Stores
Stores offering discounts on the retail price through selling high volumes and reaping
economies of scale
Low Prices
Hyper- mart
Larger than a supermarket, sometimes with a warehouse appearance, generally located in
quieter parts of the city
Low prices, vast choice available including services such as cafeterias.
Convenience stores
Small self-service formats located in crowded urban areas.
Convenient location and extended operating hours.
Shopping Malls
An enclosure having different formats of in-store retailers, all under one roof.
Variety of shops available to each other. Indian Retail- expanding the number of formats
In modern retailing, a key strategic choice is the format. Innovation in formats can
provide an edge to retailers. Organized retailers in India are trying a variety of formats,
ranging from discount stores to supermarkets to hypermarkets to specialty chains.
Retailer
Original formats
Later Formats
RPG Retail
Supermarket (Foodworld)
Hypermarket (Spencer's)Specialty Store (Health and Glow)
Piramal's
Department Store (Piramyd Megastore)
Discount Store (TruMart)
Pantaloon Retail
Small format outlets (Shoppe) Department Store (Pantaloon)
Supermarket (Food Bazaar) Hypermarket (Big Bazaar) Mall (Central)
K Raheja Group
Department Store (shopper's stop)Specialty Store (Crossword)
Supermarket (TBA) Hypermarket (TBA)
Tata/ Trent
Department Store (Westside)
Hypermarket (Star India Bazaar)
Landmark Group
Department Store (Lifestyle)
Hypermarket (TBA)
Others
Discount Store (Subhiksha, Margin Free, Apna Bazaar), Supermarket (Nilgiri's),
Specialty Electronics Road Ahead; Plans of Large Retailers * Reliance Retail: investing
Rs. 30,000 crore ($6.67 billion) in setting up multiple retail formats with expected sales
of Rs. 90,000 crore plus ($20 billion) by 2009-10. * Pantaloon Retail: Will occupy 10 mn
sq.ft retail space and achieve Rs.9,000 crore-plus ($2 bn) sales by 2008.* RPG: Planning
IPO will have 450-plus Music World, 50-plus Spencer's Hyper covering 4 mn sq.ft by
2010. * LIFESTYLE: Investing Rs.400 crore-plus ($90 mn) in next five years on Max
Hypermarkets & value retail stores, home and lifestyle centres. * Raheja's: Operates
Shoppers' Stop, Crossword, Inorbit Mall, and 'Home Stop' formats. Will operate 55
"Hypercity" hypermarkets with US$100 million sales across India by 2015.* Piramyd
Retail: Aiming to occupy 1.75 million sq.ft retail space through 150 stores in next five
years.* TATA (Trent Ltd.): Trent to open 27 more stores across its retail formats adding 1
mn sq.ft of space in the next 12 DLF malls. Titan industries to add 50-plus Titan and
Tanishq stores in 2006.
Robust GDP growth, stronger currency reserves and ever-improving market and
operating environments are propelling the Indian market through a period of stellar
growth - and the retail community is responding with newer formats and innovative
products. The economy of India has shown a remarkable increase driven by overall
political and social stability.
The decade-old economic reforms have engendered a new, shop-till-you-drop breed of
middle class Indians who, having tasted the shopping experience of big cities overseas,
have fuelled a demand that was inevitable -- the rise of the shopping malls. Centrally air-
conditioned malls with piped music, high-speed lifts and escalators, underground parking
space, a multiplex movie theater, multi-cuisine restaurants and a host of national and
international brands, these malls generates approximately 25,000 footfalls each, per day,
with figures doubling on weekends.
Sobha Group has set its eyes on launching the largest retail mall in the country. Retail Biz
tracks this unprecedented move that is ready to add a new chapter in the history of Indian
retailing.It is estimated that there are 450 malls in various stages of development across
India, 60 in the greater Delhi area alone. This trend has attracted several major global
retail players to India. International style shopping has finally come to India - and with a
splash.
Productivity in retail industry in India
Below given is the retail trade figures in India for the corresponding years :
The trends that are driving the growth of retail sector in India are:
India
Organised %
Retail
Retail Segments Retail Organised
Value
(Rs.Crore) in 2006
(Rs.Crore)
Clothing, Textiles &
113,500 21,400 18.9
Fashion Accessories
Jewellery 60,200 1,680 2.8
Watches 3,950 1,800 45.6
Footwear 13,750 5,200 37.8
Health & Beauty care
3,800 400 10.6
services
Pharmaceuticals 42,200 1,100 2.6
Consumer Durables, 48,100 5,000 10.4
Home
Appliances/equipments
Mobile handsets.
21,650 1,740 8.0
Accessories & Services
Furnishings, Utensils,
Furniture-Home & 40,650 3,700 9.1
Office
Food & Grocery 743,900 5,800 0.8
Catering Services (F &
57,000 3,940 6.9
B)
Books, Music & Gifts 13,300 1,680 12.6
Entertainment 38,000 1,560 4.1
US$ 270 US$ 12.4
Billion Billion
Markets
Investment
Employment
Wealth
Global labor productivity growth was 1.8% for the 1995-2002 period, up from only 1% in
the first half of the 1990s. But the rest of the world’s productivity level relative to the
U.S. is just 21%. This translates into per capita income amounting to only just 19% of the
U.S. level.
Asia leads the world in labor productivity growth at 3.4% between 1990 and 2002. East
Asia has rebounded strongly from its 1997-1998 crisis, registering solid 3.6%
productivity growth since 1998. China continues to be a worldwide leader in labor
productivity growth, at 6.5% annually. India leads South Asia with 3.4% productivity
growth between 1995 and 2002. Japan experienced a significant acceleration in per hour
labor productivity growth in 2003, increasing from 1.8% in 2002 to 2.9% in 2003. In
addition, its labor-input growth was positive for the first time in 3 years.
Even Africa has returned to positive productivity growth, with improvements in almost
all countries since 1995. But it still lags significantly behind most regions at 0.9%.
Productivity growth in the Middle East has also been very slow – just 0.8% between 1995
and 2002.
“Gains in East Asia and the Pacific, which account for 42% of world employment, and
South Asia, with 18% of world employment, are critical to future productivity advances,”
says Robert McGuckin, Director of Economic Research at The Conference Board and co-
author of the report with Bart van Ark, Consulting Director for The Conference Board’s
International Economic Research.
Critical areas to watch for significant improvement in living standards are China, which
has 28% of all the world’s jobs, and India (15%).
Both China and India have shown very strong productivity growth, with China’s at over
6%, driven by massive restructuring and privatization. India’s productivity is growing at
3.5%, spurred by reforms that have opened up competition and increased foreign
investment. The gains in productivity were mirrored in the 10 new European Union
members that have also been privatizing inefficient government enterprises at a rapid
rate.
“China and India will have to continue the reform process, since their productivity levels
are only 14% and 9% of the U.S. productivity levels,” concludes McGuckin. “Per capita
incomes aren’t likely to rise without stronger productivity growth in these areas.”
Technology and innovation seem to be the only saviours for the highly competitive
Indian retail industry as it now faces up to global competition. By Varun Aggarwal
The Indian organised retail segment is seeing companies like Globus, Pantaloon and
Reliance gearing up to fend off the challenge of foreign players who are poised to enter
the Indian market. However, it is not going to be that easy for Indian retailers to handle
the competition. Indian companies need a sound infrastructure something that foreign
companies already possess. Today, a shopper needs much more than just a wide range of
products. He needs convenience and quick cash-out all at a competitive price.
Technology plays an important role in overcoming such hurdles. Cost savings through
technology can help garner a competitive price for a retail vendor.
Instead of a PC or cash register, a growing number of Point of Sale (POS) solutions take
advantage of a colour touch screen at the sales counter. Many POS systems connect to in-
store computers that, in turn, link to computers at the company’s headquarters. With well-
designed software, touch screens can provide a simple, easy-to-use mechanism for
cashiers to handle just about any transaction—reducing training time while improving
productivity and customer service. Touch screens are popular in the hospitality and
convenience store industries and are rapidly gaining acceptance in other retail markets.
Some businesses choose to combine other options with a touch screen POS. For example,
full motion video and integrated stereo speakers (or optional headphones) provide a
multi-media platform that allows these workstations to do double duty as Web- or
computer-based training during non-business hours. Add a swivel base and your
associates will be able to use a workstation to review services or products with
customers.
Bar code scanners enable you to collect detailed data regarding products that your
customers purchase—information that is useful for inventory management,
merchandising and marketing decisions. Successful retailers use this information in data
warehousing applications to fine-tune store assortments and help assure that consumers
find the products that they want on the shelves, when they shop.
A quality scanner that reads bar codes on the first try will speed checkout and lead to
cashiers who are more comfortable and less frustrated. A pleasant cashier will transfer
this positive energy to customers.
On the customer side of the counter, most POS workstations are available with a choice
of customer displays, ranging from simple one- or two-line read-outs to full colour
screens that display Web-based colour graphics. The latter devices allow your customers
to learn more about your store, merchandise, or special promotions while they view
details of their transaction.
Electronic payment peripherals enable you to readily and efficiently handle credit and
debit card transactions. Among these are terminals that not only process electronic
payment but also capture signatures electronically. A signature capture terminal
incorporates a credit/debit card reader, provides means to enter a PIN number, and
includes a display for other customer input (e.g. for market surveys) and graphics-based
advertising.
Retail POS printers, especially thermal printers, deliver fast, quiet printing of receipts and
paper forms at the point of service. A quality thermal printer can have a positive impact
on store productivity through intelligent design and operator-friendly features. Because of
their speed, thermal printers can produce a record of most transactions in a fraction of a
second. This makes it possible to add information and graphics, such as a company’s
logo, to the customer receipt, or to print multiple receipts for credit authorisation or for
coupons, rebate offers or gift receipts, without adding to the transaction time.
With standalone networking systems, retailers run the risk of not getting information
quickly enough. Problems such lack of visibility into inventory, weaker relationships with
partners, poor forecasting, lost sales opportunities, or inconsistent customer service can
materialise. Globus understood this and implemented VPN. According to Meheriar Patel,
DGM & Head IT, Globus stores Pvt Limited, “We are using LAN and WAN setup
connected by MPLS, VPN. All our stores are connected through RF VPN.”
Many retailers have set up data centres. Raymond has a data centre at Thane at its HO.
According to Anil Arora, Sr. Manager, IT, Raymond Limited, “The stores are not
interconnected but they are connected through a bulletin board which is a collaboration
Web site, where the stores exchange information.” The company also has a DR site to
ensure business continuity. This site is also located at the HO.
In the retail industry, RFID assists in inventory control. All stocked items in a retail outlet
sport an inexpensive read-only tag that stores the product code and its description,
including the manufacturer, brand, batch number, expiry date and price. The shelves, exit
gates and warehouses are fitted with a small antenna that senses the RFID tag and reads
the information on it to update the inventory system in real-time. The benefits of such a
system are that it provides for total asset visibility, full inventory history with tracking
and reduced inventory-stocking levels that facilitate just-in-time deliveries. It also
ensures better process control for products in the facility, reduced shelf space and lead-
time that shorten across docking time, higher-level security, fewer errors and better
visibility of goods.
In warehouses and container depots, pallets and containers are marked with read-write
RFID chips that contain details of origin, destination and other material details. Entry and
exit gates, vehicles and cranes are fitted with an antenna that senses the RFID tags and
records and updates the system to check for any deviation in the schedule. With precise
tracking of the location of pallets and containers within the warehouse, it is easy to
pinpoint unscheduled movements. The system also considerably helps reduce costs and
time for check in and check out.
While Globus has already begun testing RFID, Madura Garments has implemented the
technology at its newly opened retail store, Planet Fashion in Bangalore. RFID tags help
automate dispatches from one factory and inventory at the warehouse. Pantaloon Retail
(India) has piloted an RFID project at one its warehouses in Tarapur using a thousand
RFID tags. The company is starting by implementing the technology at its warehouse. It
has selected a few lines of apparel, primarily shirts and trousers, for the RFID pilot. The
RFID application developed by Wipro Infotech fits to the overall solution in line with
Pantaloon’s business processes and IT landscape (from the factory outward to the
warehouse inward and from the warehouse outward) in order to capture real-time data.
The application integrates with Oracle database 10g and middleware along with an
implementation of the RFID hardware. It integrates with the existing IT infrastructure,
the in-house developed Retail Enterprise Manager. The primary objectives are a smoother
product lifecycle and item-level tagging for identification. The pilot was also an
opportunity to do a feasibility study regarding additional uses for RFID.
Other technologies
The I-Scan hardware supports applications such as inventory scanning, price check, self-
check, self-check-out PoS and warehousing receiving.
IP surveillance is picking up steam. With IP cameras going for as low as Rs 7,000, the
technology is ripe for deployment. CIOs can use it to monitor remote locations over a
LAN or the Internet. R Mall uses D-Link’s IP surveillance cameras. D-Link has two more
advanced IP based Video Surveillance Cameras from their SecuriCam range, the DCS-
6620 and DCS-6620G (Wireless) with 10X Optical Zoom. The cameras feature dual
Codec support, a 10X optical zoom lens, built-in microphone and low-light sensitivity for
nighttime surveillance.
Conclusion: