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Indian Retail Industry is standing at its point of inflexion, waiting for the boom to take place.
The inception of the  
 dates back to times where retail stores were found in the
village fairs , Melas or in the weekly markets. These stores were highly unorganized. The
maturity of the retail sector took place with the establishment of retail stores in the locality
for convenience. With the government intervention the retail industry in India took a new
shape. Outlets for Public Distribution System, Cooperative stores and Khadi stores were set
up. These retail Stores demanded low investments for its establishment.

The  
 in India gathered a new dimension with the setting up of the different
International Brand Outlets, Hyper or Super markets, shopping malls and departmental stores.

    
  


The untapped scope of retailing has attracted superstores like Wal-Mart into India, leaving
behind the kiranas that served us for years. Such companies are basically IT based. The other
important participants in the Indian Retail sector are Bata, Big Bazaar, Pantaloons, Archies,
Cafe Coffee Day, landmark, Khadims, Crossword, to name a few.

  

 

Future of organized retail in India looks bright. According to recent researches it is projected
to grow at a rate of about 37% in 2007 and at a rate of 42% in 2008. It will capture a share of
10% of the total retailing by the end of 2010.

According to the Union Minister of Commerce & Industry, Shri Kamal Nath, the organized
retail sector is expected to grow to a value of Rs. 2,00,000 crore (US$45 billion) and may
generate 10 to15 million jobs in next 5 years. This can happen in two forms- 2.5 million of
these people may be associated directly with retailing and the rest 10 million people may be
gainfully employed in related sectors that will be pulled up through the strong forward and
backward linkage effects.

However to compete in this sector one needs to have up-to-date market information for
planing and decision making. The second most important requirement is to manage costs
widely in order to earn at least normal profits in face of stiff competition.
The origins of retailing in India can be traced back to the emergence of 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 & Village Industries Commission. 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. The evolution of the sector includes the continuous improvement in the supply
chain management, distribution channels, technology, back-end operations, etc. this would
finally lead to more of consolidation, mergers and acquisitions and huge investments.

Phases in the evolution of retail sector

Weekly Markets, Village and Rural Melas

 Source of entertainment and commercial exchange

Convenience stores, Mom-and-pop / Kirana shops

 Neighborhood stores/convenience
 Traditional and pervasive reach

PDS outlets, Khadi stores, Cooperatives

 Government supported
 Availability/low costs/distribution

Exclusive brand outlets, hypermarkets and supermarkets, department stores and shopping
malls
 Shopping experience/ efficiency
 Modern formats/ international

Percentage of Organised Retail across the world

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.

Growth of Indian Retail

According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India
retail industry is the most promising emerging market for investment. 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%. It is also expected to reach 22% by 2010.

According to a report by Northbride Capita, the India retail industry is expected to grow to
US$ 700 billion by 2010. By the same time, the organized sector will be 20% of the total
market share. It can be mentioned here that, the share of organized sector in 2007 was 7.5%
of the total retail market.
Major Retailers in India

Pantaloon :

Pantaloon is one of the biggest retailers in India with more than 450 stores across the country.
Headquartered in Mumbai, it has more than 5 million sq. ft retail space located across the
country. It's growing at an enviable pace and is expected to reach 30 million sq. ft by the year
2010. In 2001, Pantaloon launched country's first hypermarket µBig Bazaar¶. It has the
following 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: Star, Sitara
? E-tailing: Futurebazaar.com
? Entertainment: Bowling Co.

Tata Group

Tata group is another major player in Indian retail industry with its subsidiary Trent, which
operates Westside and Star India Bazaar. Established in 1998, it also acquired the largest
book and music retailer in India µLandmark¶ in 2005. Trent owns over 4 lakh sq. ft retail
space across the country.

RPG Group

RPG Group is one of the earlier entrants in the Indian retail market, when it came into food &
grocery retailing in 1996 with its retail Foodworld stores. Later it also opened the pharmacy
and beauty care outlets µHealth & Glow¶.

Reliance

Reliance is one of the biggest players in Indian retail industry. More than 300 Reliance Fresh
stores and Reliance Mart are quite popular in the Indian retail market. It's expecting its sales
to reach Rs. 90,000 crores by 2010.

AV Birla Group

AV Birla Group has a strong presence in Indian apparel retailing. The brands like Louis
Phillipe, Allen Solly, Van Heusen, Peter England are quite popular. It's also investing in other
segments of retail. It will invest Rs. 8000-9000 crores by 2010.

Retail formats in India

Hypermarts/supermarkets: large self-servicing outlets offering products from a variety of

categories.
 ? Mom-and-pop stores: they are family owned business catering to small sections; they
are individually handled retail outlets and have a personal touch.
? Departmental stores: are general retail merchandisers offering quality products and
services.
? Convenience stores: are located in residential areas with slightly higher prices goods
due to the convenience offered.
? Shopping malls: the biggest form of retail in India, malls offers customers a mix of all
types of products and services including entertainment and food under a single roof.
? E-trailers: are retailers providing online buying and selling of products and services.
? Discount stores: these are factory outlets that give discount on the MRP.
? Vending: it is a relatively new entry, in the retail sector. Here beverages, snacks and
other small items can be bought via vending machine.
? Category killers: small specialty stores that offer a variety of categories. They are
known as category killers as they focus on specific categories, such as electronics and
sporting goods. This is also known as Multi Brand Outlets or MBO's.
? Specialty stores: are retail chains dealing in specific categories and provide deep
assortment. Mumbai's Crossword Book Store and RPG's Music World are a couple of
examples.

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

The Future

The retail industry in India is currently growing at a great pace and is expected to go up to
US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year
2018 at a CAGR of 10%. As the country has got a high growth rates, the consumer spending
has also gone up and is also expected to go up further in the future. In the last four year, the
consumer spending in India climbed up to 75%. As a result, the India retail industry is
expected to grow further in the future days. By the year 2013, the organized sector is also
expected to grow at a CAGR of 40%.

?
?

As we understand, retailing involves all activities directly related to the sale of goods and
services to the ultimate consumer for personal, non-business use. Simple retailing is maturing
into a more microscopic and systematized process.

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. The era of government support saw
indigenous franchise model of store chains run by Khadi & Village Industries Commission.
The KVIC has a countrywide chain of 7000 plus stores in India. 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 following formats-

˜ The largest form of organized retiling 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.

   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.

˜
 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.

 ˜  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.

=

  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.


   
  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.

=  
 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.

c 
 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.

 
 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.




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