MINOR PROJECT REPORT

TOPIC: IMPACT OF ORGANIZED RETAIL ON

THE UNORGANIZED RETAIL SECTOR
NAME: ARCHI AGARWAL.
CLASS: MFM- 1st Semester.
Roll No: 5.
BATCH: 2010-12.
SUBJECT: RESEARCH
METHODOLOGY.
MENTOR: Mr. TONI SHARMA

CONTENT:

1. Introduction
2. Organized Vs unorganized.
3. Introduction to Indian retail industry.
4. Indian consumer market.
5. Evolution of Indian retail.
6. Organised retail formats.
7. Indian scenario: Snapshots.
8. Prime reasons for boom in the retail sector.
9. 10 key issues that need immediate attention.
10. Top 10 players.
11. Impact of organized retail on unorganized retail.
12. Organised Retail: India Vs China
13. Bibliography
14. The next step
15. Bibliography

SCOPE OF THE PROJECT

To study the current Indian retail scenario.

To study about the organized and unorganized retail sectors in India.
To study the growth of organized retailing in India.
To trace the pattern of evolution of organized retail in India/world.
To study the effect of organized retailing on the unorganized retail sector.
To trace this effect by taking into account a Tier II city (Lucknow).

OBJECTIVE

To formulate a plan of action for the small retailers, of Tier III cities (like Patna)
to combat the challenges posed by the advent of organized retail.

The possible steps that can be taken by the small retailers to survive the
anticipated change.
 DECLARATION

I, ARCHI AGARWAL hereby declare that the project entitled “IMPACT OF

ORGANIZED RETAIL ON THE UNORGANIZED RETAIL SECTOR”
submitted towards, partial fulfillment of the program MASTER OF
FASHIONMANAGEMENT, is my original work and no part of the project
has been copied from any other report or carried by someone else or has
been submitted for any other degree/award.

However, my material taken from any other published sources has been

suitably referred and acknowledged at various places.

 FOREWORD

The project is aimed at studying the Indian retail scenario. It covers the
various aspects of the organized and unorganized retail sector in India. It
also aims at analyzing the evolution of the Indian retail market and the
impact of the advent of organized retailing on the traditional unorganized
retail sector of India.

This project also intends to formulate a pre-emptive action plan for the
small unorganized retailers of Patna to combat the very inevitable advent of
the organized retail in the city.

RESEARCH METHODOLOGY:
1. INTRODUCTION

RETAILING:
Retail 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. Shopping streets may be for pedestrians only. Sometimes a shopping
street has a partial or full roof to protect customers from precipitation. Online retailing,
a type of electronic commerce used for business-to-consumer (B2C) transactions and
mail order, are forms of non-shop retailing.

Shopping generally refers to the act of buying products. Sometimes this is done to
obtain necessities such as food and clothing; sometimes it is done as a recreational
activity. Recreational shopping often involves window shopping (just looking, not
buying) and browsing and does not always result in a purchase.
2. UNORGANISED VERSUS ORGANISED RETAIL:

In a sharp contrast to the retail sector in developed economies, retailing in India -

though large in terms of size - is highly fragmented and unorganized. With close to 12
million retail outlets the country has one of the highest retail densities worldwide.

Unorganized retail: Retailers include street vendors, supermarkets, department

stores, restaurants, hotels and even two-wheeler and car showrooms.

Counter stores, kiosks, street markets and vendors, where the ownership and
management rest with one person are classified as traditional or unorganized
retail outlets.

These formats typically require employees with low skills and account for around two-
thirds of the sector's output. These are highly competitive outlets, with minimal rental
costs (unregistered kiosks or traditional property), cheap labour (work is shared by
family members) and negligible overheads and taxes.

Organized retail: Indian consumer purchasing is largely through the unorganized

sector or through the kirana stores. Organized retail constitutes a small percentage of
the Indian retail market. However, with urbanization and increasing value-
consciousness among consumers, the organized retail format is beginning to take root.
The organized retail format promises consumers better quality and better shelf-life for
products due to their excellent storage facilities and anti-tampering checks. An
important factor attracting consumers towards formal retailing mechanisms such as
hypermarkets and departmental stores is the shopping experience. These shopping
outlets allow consumers to explore their choices and touch and feel products in the
comfort of a glitzy and energetic environment, something a kirana or mom and pop
stores have never been able to offer.
3. INTRODUCTION INDIAN RETAIL INDUSTRY:
The Indian consumer of today who wants the right price, ambience and good quality all
under one roof. The lifestyle and mindset-change of the Indian customer has led to a
spur in the retail industry with the total private consumption in 2006 clocking
Rs.20,000 billion according to the Indian Retail Report 2007. Cities like Mumbai,
Bangalore, New Delhi, Hyderabad, and Pune have around 50 malls, which is expected to
touch 250 by 2010 (KPMG report).

The Indian retail industry is valued at $270 billion, with organised retail cornering 4.5
%. The organized pie is expected to see a growth at a CAGR of 37 % (India Retail Report

2007).

Source: Indian retail report.

Malls are springing up in every city and are fast becoming sought-after entertainment
hotspots, with shopping as the by-product. From a situation where there were no malls
about a decade ago, the country had over 300 malls translating to over 100
million sq.ft. available mall space by the end of 2007.

The BMI India Retail Report for the third-quarter of 2010, forecasts that the total retail
sales will grow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014. With the
expanding middle and upper class consumer base, there will also be opportunities in
India's tier II and III cities.

The Indian Government’s initiatives to aid growth in the retail sector are showing very
visible results. Investment in world-class infrastructure is expected to be close to USD
150 bn.

• The hitherto restricted retail real estate sector was opened up for Foreign Direct
Investment in 2005. As a result, malls of international scale and quality
are expected to come up;

• Mall growth is being seen as a clear indicator of the economic prosperity

in India. Significantly, the number of malls in the country has increased at a fast
pace. And they are doing brisk business. A trip to the local mall (there will be one
in every locality soon!) will bear this out;

• From almost no malls existing in the country over a decade ago, there were 96
operational malls in August 2005;

• Here’s more good news. This phenomenon is not restricted to major cities of
the country alone. It has percolated to the “Tier II” and “Tier III’ cities as well.
The contribution of Tier II cities in organized retail sales is expected to be about
20 – 25%.

• Mumbai, Bangalore, Hyderabad, Pune and New Delhi are expected to have nearly
75% of the retail space in the country

• Niche, speciality malls, discount malls, highway malls are the new
trends

4. THE INDIAN CONSUMER MARKET:

Global corporations view India as one of the key markets from where future growth will
emerge. The growth in India’s consumer market will be primarily driven by a favorable
population composition and rising disposable incomes. A recent study by the
McKinsey Global Institute (MGI) suggests that if India continues to grow at the
current pace, average household incomes will triple over the next two decades and
it will become the world’s 5th-largest consumer economy by 2025, up from
12th now.

India’s consumer market till now was broadly defined as a pyramid; a very small
affluent class with an appetite for luxury and high-end goods and services at the top, a
middles-class at the center and a huge economically disadvantaged class at the bottom.
This pyramid structure of the Indian market is slowly collapsing and being replaced by a
diamond – a relatively large affluent class at the top, a huge middle class at the center
and a small economically disadvantaged class at the lower end. The diamond represents
increasing volume and value across all classes of Indian consumer market.
There are 5 types of consumer groups based on what they consume and
created a framework:

• The affluent: the rich who have most of the luxury goods like cars, laptops air
conditioners and generally are consumers of premium products.
• The consuming class: consumers who have 70% of the utility durables like 2
wheelers, refrigerators, washing machines and bulk of regular FMCGs.
• The climbers: consumers who have at least one major durable in their homes-
either a mixer or sewing machine or perhaps a television set. They are the main
consumers of consumer goods.
• The aspirants: the consumers who are just entering consumption and have
the very basics. Goods like a watch, a bicycle, a radio or a table fan.
• The destitute: consumers who consume practically nothing, living as they do
from hand-to-mouth.

MGI study prediction on the effect of economic growth on different classes:

• Middle class, defined as households with disposable incomes from Rs 200,000 to
1,000,000 a year comprises about 50 million people, roughly 5% of the population at
present. By 2025 the size of middle class will increase to about 583 million people, or
41% of the population.
• Extreme rural poverty has declined from 94% in 1985 to 61% in 2005 and is
projected to drop to 26% by 2025.
• Affluent class, defined as earnings above Rs 1,000,000 a year will increase from
0.2% of the population at present to 2% of the population by 2025. Affluent class’s share
of national private consumption will increase from 7% at present to 20% in 2025.
The Indian consumer has evolved and changed over a period of time. This change was
brought about by several factors. The Indian consumer’s mindset and attitude has
experienced following changes:

He has become:

From Towards

• Genteel poverty • Learning to earn more

• Contentment & stability • Striving to keep up with others

 • Hindu rate of growth • If China, Korea, even Indonesia can, why can’t
we?

• Swadeshi • International (e.g. striving to make ‘world class’

goods, which can be exported)

• Self reliance (no matter • Efficiency (if it’s cheaper to buy, don’t make it)
what the price to be paid)

• Isolation/aloofness • Exposure to interaction with the rest of the

world

• Ideology/emotion • Pragmatism/rationality

• Soft options/doing the • Biting the bullet (doing what has to be done)
popular thing

• Obeying authority (e.g. • Freedom of choice (e.g. a free market economy)

govt dictates)

• Punishment/guilt/control • Motivation/positive incentivisation (e.g. stimulating

(e.g. curbing consumption, demand by cutting duties & lowering interest rates)
through massive taxes on
‘luxury goods’)

• Aiming for the lowest • Aiming for the highest factor (e.g. take India to the
common denominator (e.g. 21st century)
garibi hatao)

• Scepticism about technology • Seeking & embracing technology (we can lead the
world)

SOURCE: We are like that only: Rama Bijapurkar

5. EVOLUTION OF INDIAN RETAIL:

The origin of retailing in India can be traced back to the emergence of the kirana stores
and mom and pop stores. These stores used to cater to the local people. Eventually the
government supported the rural retail and many indigenous franchise stores came up
with the help of Khadi and Village Industries Commission. The KVIC has a countrywide
chain of 7000 plus stores in India. The economy began to open up in the 1980s,
resulting in the change of retailing.

The first few companies to come up with retail chains were in textile sector, for example-
Bombay dyeing, S Kumar’s, Raymonds etc. Later Titan launched retail showrooms in
the organized retail sector. With the passage of time, new entrants moved on from
manufacturing to pure retailing.

Retail outlets such as Foodworld in FMCG, Planet M and Musicworld in music,

Crossword in books entered the market before 1995. Shopping malls emerged in the
urban areas giving a world class experience to the customers. Eventually hypermarkets
and supermarkets emerged.
Evolution:

The era of rural retail industry could be categorized into two formats: weekly markets
and village fairs. Primarily weekly formats catered to the daily necessities of villagers.
Village fairs were larger in size with a wide variety of goods sold from food, clothing,
cosmetics and small consumer durables. The traditional era saw the emergence of the
neighborhood 'Kirana' store to cater to convenience of the Indian consumers. This
period also witnessed the emergence of shopping centers with car parking facility. The
Modern era has a host of small and large formats with exclusive outlets
showcasing a complete range of products. The department stores and shopping
malls targeting to provide a complete destination experience for all segments of the
society. The hyper and super markets are consistently trying to provide the
customer with the 3 V's. (Value, Variety and Volume)

Over the last three years, this sector has witnessed an exorbitant growth due to the
establishment of numerous international quality formats to suit the Indian purchase
behavior, the improvement in retail processes, the development of retail specific
properties and the emergence of both, domestic and international organizations.

Retailing sector is the second largest employer in the country with almost over 12
million retail outlets in India and only 4% of them being larger than 500 square feet in
size. Although retailing in India is fairly fragmented, organized retailing is gaining
momentum rapidly growing at almost 25-30% per annum and is forecasted to touch a
figure of Rs I,50,000 crore by 2010. The economy is projected to grow at 8.1% in 2005-
2006 having grown at a steady pace of around 6% over the last 10 years.

Organized retailers are the contemporary formats by which shoppers have the edge of a
world class shopping experience. Fine examples of these formats are Pantaloon,
Shoppers Stop and Trent. Organized retail may broadly be classified into the different
formats.
6. ORGANISED RETAIL FORMATS:
Malls-The largest form of organized retailing today. Malls are located mainly in metro
cities, in proximity to urban outskirts, this format ranges from approximately 60,000 sq
ft to 7, 00,000 sq ft and above. They lend an ideal shopping experience with an
amalgamation of product, service and entertainment, all under a common roof.

Hypermarkets They are typically large, starting from 40,000sq. ft plus are usually
located outside the city limits. This format comprises of a multiple division layout, and
usually has an" industrial- look" interior. Hypermarkets generally provide daily
necessities and grocery like items. Pricing is competitive and they also offer volume
discounts.

MBO's Multi Brand outlets, also known as Category Killers, offer several brands across
a single product category. These usually do well in busy market places and Metros.

Super Markets Large self service outlets, catering to varied shopper needs are termed
as Super markets. These are located in or near residential high streets. These stores
today contribute to 30% of all food & grocery organized retail sales. Super Markets can
further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and
large supermarkets ranging from a size of 3,500 sq ft to 5,000 sq ft. having a strong
focus on food & grocery and personal sales.

Discount Stores As the name suggests, discount stores or factory outlets, offer
discounts on the MRP through selling in bulk reaching economies of scale or excess
stock left over at the season. The product category can range from a variety of
perishable/ non perishable goods.

Convenience Stores These are relatively small stores 400-2,000 sq. feet located near
residential areas. They stock a limited range of high-turnover convenience products and
are usually open for extended periods during the day, seven days a week. Prices are
slightly higher due to the convenience premium.

Departmental Store Large stores ranging from 20000-50000 sq. ft, catering to a
variety of consumer needs. Further classified into localized departments such as
clothing, toys, home, groceries, etc.

Exclusive Store Ranging from a size of 500 sq ft to 5,000 sq ft. & above, this format is
owned/ managed by the Company or through its franchise. These can offer single brand
as well as multiple bands.

Specialty Store These formats focus on a specific product category, Medium sized
layout in strategic location. Specialty stores provide a large variety base for the
consumers to choose from.

Despite the presence of the basic ingredients required for growth of the retail industry in
India, it still faces substantial hurdles that will retard and inhibit its growth in the
future. One of the key impediments is the lack of FDI. This has largely resulted in
limited capital investments in supply chain infrastructure, which is a key for
development and growth of retailing and has also constrained access to world-class
retail practices. Lack of proper infrastructure and relatively high cost of real estate are
the other impediments to the growth of retailing. While the industry and the
government are trying to remove many of these hurdles, some of the roadblocks will
remain and will continue to affect the smooth growth of this industry.
7. INDIAN SCENARIO: SNAPSHOTS
➢ There are 12 million mom n pop stores (kirana stores) in India, with 500 million
shoppers around the country.
➢ The rising incomes have lead to more consumers switching from local
markets/stores to MALLS.
➢ As per Economic Survey of India and Technopak analysis, Mar’2008: Organised
retail in India accounted to USD 400 billion in 2008. It is projected to be
USD 615 billion by 2013 and USD 860 billion by 2018.
➢ Organised retail is 5% share of total retail in India as oppose to 20% for China
and 85% for USA. But, India is growing fastest at the rate of 30-35% a year
➢ India is likely to become world’s 5th largest market by 2025. Around 290 million
people have moved up from Below Poverty Line to middle class which has
swelled to 600 million.
➢ Rising incomes have lead to more discretionary ‘lifestyle’ purchases and thus
creating numerous retail opportunities.
➢ Rural India accounts to 70% population of the country. There are around 800
million people in 620,000 villages of India.
➢ Urban India, i.e. 30% population of the country, accounts to 350 million people
in 5000 cities and towns of India.

➢ Organized retail market in India is expected to reach US$ 50 Billion mark by

2011.

➢ Number of shopping malls is expected to increase at a CAGR of more than 18.9%

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%.

➢ Organized retailing of mobile handset and accessories is expected to reach close

to Rs. 5000 Crore by 2010.

➢ Driven by the expanding retail market, third party logistic market is forecasted
to reach US$ 20 Billion by 2011.
 ➢ Apparel, along with food and grocery, will lead the organized retailing in India.

8. THE PRIME REASONS THAT FUELLED THIS BOOM:

It has been a decade-and-a-half since India embarked on an ambitious economic

liberalization program. Over the last five years, many of its benefits have manifested
themselves and one of the areas where growth is clearly reflected is retailing. A recent
study by the McKinsey Global Institute (MGI) brings out the following factors that
triggered the exponential growth in the sector. These factors have transformed
savings-oriented and conservative Indian consumers into confident, aware
and conscious ‘buyers’.

➢ Disintegration of traditional Indian joint family:

Besides, the gradual disintegration of the traditional Indian joint family system
has led to nuclearisation of families, which in turn has led to enhanced demand
and increased disposable income.

➢ Increased population of working women:

An increasing population of working women and new job opportunities in

emerging service sectors such as IT-enabled services, retail, food services,
entertainment and financial services.

➢ Declining interest rates:

With declining interest rates, the aversion of domestic consumers to taking loans
is also fast disappearing. Consumers can now afford to take loans for big
purchases like cars, computers, home appliances etc.
➢ Increased media penetration:
Growing media penetration is leading to a convergence of aspirations of various
classes of consumers, bridging the rural-urban divide.

➢ Age dynamics of the country:

India has a young population, 54% of Indians are under 25 years of age.
The country is believed to have an average age of 24 years for its population as
against 36 years for the USA and 30 years for China. A rising productive
population fuels growth and drives personal consumption. A young, economically
empowered population not only translates into increasing consumer demand but
also into a more value-conscious demand.

➢ Growing disposable income:

India is growing at an average annual rate of 7.6% for the past five years and it is
expected to continue growing at an equal if not faster rate. The rapid economic
growth is increasing and enhancing employment and business opportunities and
in turn increasing disposable incomes.

➢ Urbanization:
As the benefits, an increasing number of people are moving up from the
economically weaker class to join the middle class. A large number of rural
population is thus, migrating to the cities, indicating or indirectly leading to
improvement in the standard of living of these people.

➢ Aspiration for a better life:

As millions of economically deprived households move into the lower strata of

the middle class segment, they will begin to be able to afford and demand
products and services beyond food and clothing.
➢ Value and innovation:

The new Indian consumer is discerning when buying a product. In fact, due to a
rise in income, increased awareness about products and proliferation of choices,
he has become pickier with his purchases. Product, positioning and packaging
innovation is the key for companies to attract this new consumer.

➢ The brand conscious consumer:

The Indian consumer market, which is primarily dominated by young generation,

is becoming increasingly sophisticated and brand conscious. A typical upper
middle class young consumer is beginning to look beyond the utility aspect of a
product to seek intangibles like brand and lifestyle statement associated with the
product. This modern consumer wants his purchases to reflect his lifestyle or at
least the one he aspires for.
9. KEY ISSUES THAT NEED IMMEDIATE ATTENTION:

MARKET SIZE:

The retail market in India is estimated at Rs.5,88,000 crore. Of this the unorganized
market is worth Rs.5,83,000 crore and the organized market is Rs.5,000 crore.

OPPORTUNITY:
Over 8% of India's population is engaged in retailing. According to ASSOCHAM, the
total retail market is expected to grow by 20% annually and is one of the fastest growing
sectors in India.

PROBLEMS:

1. The organized retail industry in India is faced with stiff competition from the
unorganized sector.

2. There is a shortage of quality real estate and infrastructure requirements in

our country.

3. Opposition to Foreign Direct Investment from small traders affects retail

industry.

4. Very high stamp duties on transfer of property affects the industry.

5. Shortage of retail space in central and downtown locations also hinders the
growth of retail industry.

6. Presence of strong Pro-tenancy laws makes it difficult to evict tenants and this is
posing problems.

7. Land-use conversion is time consuming and becoming complex.

8. For settling property disputes, it consumes lot of time.

9. Rigid building laws makes procurement of retail space difficult.

 10. Non residents are not allowed to own property except they are of Indian origin.

11. Prohibition of Foreign investment in real estate business.

12. Customs duties are levied on import of goods in India.

10. TOP 10 PLAYERS IN INDIAN RETAIL MARKET:

1. Pantaloon Retail:

It is headquartered in Mumbai with 450 stores across the country employing more than
18,000 people. It can boast of launching the first hypermarket Big Bazaar in India in 2001.
An all-India retail space of 5 million sq. ft. which is expected to reach 30 mn by 2010. It is
not only the largest retailer in India with a turnover of over Rs. 20 billion but is present
across most retail segments - Food & grocery (Big bazaar, Food bazaar), Home solutions
(Hometown, furniture bazaar, collection-i), consumer electronics (e-zone), shoes (shoe
factory), Books: music & gifts (Depot), Health & Beauty care services (Star, Sitara and
Health village in the pipeline), e-tailing (Futurbazaar.com), entertainment (Bowling co.)

One of their recent innovations include e-commerce’ hybrid format of ’small’ shops , the
area for these stores will be 150 sq. ft. fitted with 40 digital screens. Customers will be
encouraged to browse through the entire range of products on digital screen. They will be
able to place the order, the delivery of which will be arranged by the shop to their homes
within a few hours

2. K Raheja Group

They forayed into retail with Shopper’s Stop, India’s first departmental store in 2001. It is
the only retailer from India to become a member of the prestigious Intercontinental Group
of Departmental Stores (IGDS). They have signed a 50:50 joint venture with the Nuance
Group for Airport Retailing. Shoppers Stop has 7, 52, 00 sq ft of retail space with a turnover
of Rs 6.75 billion.

The first Hypercity opened in Mumbai in 2006 with an area of 1, 20,000 sq. ft. clocking
gross sales of Rs. 1 bn in its first year.

Crossword brand of book stores, Homes stop a store for home solutions, Mothercare a
concept stocking merchandise related to childcare are also owned by them. Recently,
Raheja’s have signed an MoU with the Home Retail Group of UK to enter into a franchise
arrangement for the Argos formats of catalogue & internet retailing.

The group has announced plans to establish a network of 55 hypermarkets across India
with sales expected to cross the US$100 million mark by 2010.

3. Tata group:

Established in 1998, Trent - one of the subsidiaries of Tata Group - operates Westside, a
lifestyle retail chain and Star India Bazaar - a hypermarket with a large assortment of
products at the lowest prices. In 2005, it acquired Landmark, India's largest book and
music retailer. Trent has more than 4 lakh sq. ft. space across the country. Westside
registered a turnover of Rs 3.58 mn in 2006.

Tata’s has also formed a subsidiary named Infiniti retail which consists of Croma, a
consumer electronics chain. It is a 15000-17000 sq. ft. format with 8 stores as of September
2007.

Another subsidiary, Titan Industries, owns brands like “Titan”, the watch of India has 200
exclusive outlets the country and Tanishq, the jewellery brand, has 87 exclusive outlets.
Their combined turnover is Rs 6.55 billion.

Trent plans to open 27 more stores across its retail formats adding 1.5 mn sq ft of space in
the next 12 DLF malls.

4. RPG group:

One of the first entrants into organised food & grocery retail with Foodworld stores in 1996
and then formed an alliance with Dairy farm International and launched health & glow
(pharmacy & beauty care) outlets. Now the alliance has dissolved and RPG has Spencer’s
Hyper, Super, Daily and Express formats and Music World stores across the country.

RPG has 6 lakh sq. ft. of retail space and has registered a turnover of Rs 4.5 billion in 2006.

It is planning to venture into books retail, with the launch of its own bookstores “Books and
Beyond” by the end of 2007. An IPO is also in the offering, with expansion to 450+
MusicWorld, 50+ Spencer's hyper outlets covering 4 million sq. ft. by 2010.

5. Landmark group:

were launched in 1998 in India. Lifestyle is spread across six cities, covering 4.6 lakh sq. ft.
with a turnover of Rs 3.5 billion in 2005. A new division named Lifestyle International has
emerged for their international brands business comprising Bossino, Kappa and Springfield
in their portfolio.

Their retail mix includes Home solutions (Home centre), fashion (lifestyle, landmark
International), value retailing (max retail), hypermarkets & supermarkets (Max), kids
entertainment (Funcity).

They plan to invest Rs. 300 crores in the next two years to expand on Max chain, and Rs
100 crores on Citymax 3 star hotel chain. They have already instituted a separate company
christened Citymax Hotels (India).

6. Piramal Group

In September 1999, Piramal Enterprises announced their arrival into retail with the launch
of three retail concepts: India's first true shopping mall of international standards, called
Crossroads; a lifestyle department store named Piramyd Megastore; and a family
entertainment centre known as Jammin. Piramyd Megastore and Jammin were anchor
tenants for Crossroads (recently sold to Pantaloon for Rs 4 billion). In 2001, the group
entered the business of food & grocery retail with the launch of TruMart supermarkets in
Pune.

They have around 18 TruMart stores covering 1.90 lakh sq. ft. registering a turnover of Rs
37.6 mn in 2005. Piraymd Megatsore’s contributes more than 70 % to their retail mix with
a turnover of Rs 112.8 mn. They plan to open 150 stores covering 75 mn sq ft of retail space
in the next 5 years.

7. Subhiksha

Subhiksha is a Chennai-based, decade old, no frills, food, grocery, pharma and telecom,
discount retail chain.

ICICI Venture Capital holds 24% in the equity capital of Subhiksha.

It has more than 500 stores across the country covering a retail space of more than 1
million sq ft with a registered turnover of Rs 3.34 bn in 2006.

8. Bharti-Walmart

➢ Their plans include US$ 7 bn investment in creating retail network in the country
including 100 hypermarkets and several hundred small stores.
➢ They have signed a 50:50 percent joint venture agreement with Walmart.
➢ Wal-Mart will do the cash & carry while Bharti will do the front-end.

9. Reliance

➢ India’s most ambitious retail plans are by reliance,

➢ with investments to the tune of Rs. 30,000 cr ($ 6.67 bn) to set up multiple formats
➢ with expected sales of Rs 90,000 crores ($20 bn) by 2009-10.
➢ There are already more than 300 Reliance Fresh stores and
➢ the first Reliance Mart Hypermart has opened in Ahmedabad.
➢ The next ones are slated to open at Jamnagar, followed by marts in Delhi / NCR,
Hyderabad, Vijaywada, Pune and Ludhiana.
10. AV Birla Group

They have a strong presence in apparel retailing through Madura garments which is
subsidiary of Aditya Birla Nuvo Ltd. They own brands like Louis Phillipe, Van Heusen,
Allen Solly, Peter England, Trouser town.

Source: Chillibreeze
11. IMPACT OF ORGANISED RETAIL:

Impact on Unorganized Retailers

• Unorganized retailers in the vicinity of organized retailers experienced a decline in

their volume of business and profit in the initial years after the entry of large organized
retailers.

• The adverse impact on sales and profit weakens over time.

• There was no evidence of a decline in overall employment in the unorganized sector as

a result of the entry of organized retailers.

• There is some decline in employment in the North and West regions which, however,
also weakens over time.

• The rate of closure of unorganized retail shops in gross terms is found to be 4.2 per
cent per annum which is much lower than the international rate of closure of small
businesses.

• The rate of closure on account of competition from organized retail is lower still at 1 .7
per cent per annum.

• There is competitive response from traditional retailers through improved business

practices and technology upgradation.

• A majority of unorganized retailers is keen to stay in the business and compete, while
also wanting the next generation to continue likewise.

• Small retailers have been extending more credit to attract and retain customers.
• However, only 12 per cent of unorganized retailers have access to institutional credit
and 37 per cent felt the need for better access to commercial bank credit.

• Most unorganized retailers are committed to remaining independent and barely 10 per
cent preferred to become franchisees of organized retailers.

Impact on Consumers

• Consumers have definitely gained from organized retail on multiple counts.

• Overall consumer spending has increased with the entry of the organized retail.

• While all income groups saved through organized retail purchases, the survey revealed
that lower income consumers saved more. Thus, organized retail is relatively more
beneficial to the less well-off consumers.

• Proximity is a major comparative advantage of unorganized outlets.

• Unorganized retailers have significant competitive strengths that include consumer

goodwill, credit sales, amenability to bargaining, ability to sell loose items, convenient
timings, and home delivery.

Impact on Intermediaries

• The study did not find any evidence so far of adverse impact of organized retail on
intermediaries.

• There is, however, some adverse impact on turnover and profit of

intermediaries dealing in products such as, fruit, vegetables, and apparel.

• Over two-thirds of the intermediaries plan to expand their businesses in response to

increased business opportunities opened by the expansion of retail.
• Only 22 per cent do not want the next generation to enter the same business.

Impact on Farmers

• Farmers benefit significantly from the option of direct sales to organized retailers.

• Average price realization for cauliflower farmers selling directly to organized retail is
about 25 per cent higher than their proceeds from sale to regulated government mandi.

• Profit realization for farmers selling directly to organized retailers is about 60 per cent
higher than that received from selling in the mandi

• The difference is even larger when the amount charged by the commission agent
(usually 10 per cent of sale price) in the mandi is taken into account.

Impact on Manufacturers

• Large manufacturers have started feeling the competitive impact of organized retail
through price and payment pressures.

• Manufacturers have responded through building and reinforcing their brand strength,
increasing their own retail presence, ‘adopting’ small retailers, and setting up dedicated
teams to deal with modern retailers.
12. PERCENTAGE OF ORGANIZED RETAIL ACROSS
THE WORLD:
 13. ORGANISED RETAIL : INDIA Vs CHINA

• Indian and Chinese markets are comparable in many aspects.

• Both countries are not homogeneous. They are composed of many markets
within a single country with significantly varying cultures and customer
preference across regions.
• There is a significant rural population in both countries with much lower
purchasing power as compared to their urban counterparts.
• Both countries are very large geographically thereby adding the distribution and
logistics dimension to trade.
• Lastly, consumers in both countries are highly value conscious.

Between 1996 and 2003, the organized retail market in China more than doubled. The
Indian retail market today is estimated at the same inflection point as China in the mid-
1990s. Considering similar per capita GDP and economic growth, the Indian organized
retail market has exponential growth potential over the next decade.
 14. THE NEXT STEP:

The project report further aims to trace an evolution path of the organized
retailing and develop a plan of action for the unorganized retailers of Patna
to combat the advent of organized retailing in the city.

This will include the primary research to be conducted in Lucknow, a Tier II

city, which has already faced the effects of organized retailing in the city
and can provide useful information regarding the ways to combat this
unavoidable change and thus form a basis for the formulation of an action
plan for small retailers to survive this transformation.
 15. BIBLIOGRAPHY

Retailing in the twenty first century: Diamond Litt

India’s store wars”: Geoff Hiscock

We are like that only: Rama Bijapurkar

www.chillibreeze.com

www.mckinsey.com

www.ncaer.org