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CERTIFICATE This is to certify that the project report entitled ORGANISED AND UNORGANISED RETAIL MARKETING is an authentic report prepared fulfillment of the by in partial
requirements for the award of degree of bachelor of commerce under my guidance and supervision.
DECLARATION
We here by declare that the project report entitled ORGANISED AND UNORGANISED RETAIL MARKETING is an authentic and original work done by us under the guidance and supervision of lecturer P.ABDUL AZEEZ, in partial fulfillment of the requirements for the award of degree of Bachelor of Commerce (B.Com) of university of Calicut. We further declare that, project report or any part there of has not been submitted for the award of any degree, diploma, title
recognition before.
GROUP MEMBERS
ROLL NO 1 3 4 5 7 8 61 NAME DULKIFIL JUNAID HUSSAIN SHABEEB SHAMI SALIH SADAT SIGN
ACKNOWLEDGEMENT
be
complete
without
gratitude to all those who helped me to bring out this report. I specially convey my sincerity and indebtedness of the following resource persons.P.ABDUL commerce department AZEEZ, lecturer of
for his continued support, guidance and supervision during the years of my B.Com course to rest of my professors for their unflinching piece of advice through out the course program.
Above all I am grateful to the almighty for his blessings all along.
Contents
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1 2 3 4 5 6
INTRODUCTION
TOPIC
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POPULAR ORGANISED RETAIL FORMATS REASONS FOR RETAIL BOOM IN INDIA ORGANISED v/s UNORGANISED
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Introduction
Retail is currently the booming sector of the Indian economy. This trend is expected to continue uninterrupted for at least the next two-three decades,attracting huge attention from all quarters of the economy -entrepreneurs, business heads, investors as well as real estate owners and builders-. Retail sector is also expected to create huge employment as it will expand across the country at a massive scale. The reasons for this expansion of retail is evidently related to the liberalization and opening up of the Indian economy which had immense effects on the consumer demand, tastes and preferences as well as the buying capacities of the Indians (specially the growing middle class) over the past few years. Slowly and steadily
retail has witnessed considerable growth while a new form of organized retail sector has emerged within the retail industry. Stated simply, it refers to the organized retail chains managed by big corporate houses such as the Pantaloons group, K. Raheja group, the Piramals and so on. These are modeled on American forms of organized retail chains such as Wal-Mart, one of the largest in the world.
1. To study about the organized and unorganized retail marketing in India 2. To make an detailed idea about the retail market structure prevailing in India 3. To analyse the characteristics of both in relevance with Indian marketing system 4. To have a clear idea about the new entrances to Indian retail market, mainly to organised sector.
The Indian retail market, which is the fifth largest retail destination globally, was ranked second after Vietnam as the most attractive emerging market for investment in the retail sector by AT Kearney's seventh annual Global Retail Development Index (GRDI), in 2008. The share of retail trade in the country's gross domestic product (GDP) was between 810 per cent in 2007. It is currently around 12 per cent, and is likely to reach 22 per cent by 2010. A report by global consultancy firm, AT Kearney said "The consumer spending in India has increased by an impressive 75 per cent in the last four years and will quadruple in the next 20 years." Moreover, India recently topped the Nielsen Global Consumer Confidence study, conducted by Nielsen, a market research company. The biannual report revealed that Indians are "the most optimistic lot
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globally who think that their country will be out of the economic recession in the next twelve months." According to the recent report by McKinsey & Company titled 'The Great Indian Bazaar, Organized Retail Comes of Age in India', India's overall retail sector is likely to grow to US$ 450 billion by 2015. Another McKinsey report 'The rise of Indian Consumer Market', estimates that the Indian consumer market is likely to grow four times by 2025. Retailing, one of the largest sectors in the global economy, is going through a transition phase not only in India but the world over. For a long time, the corner grocery store was the only choice available to the consumer, especially in the urban areas. This is slowly giving way to international formats of retailing. The traditional food and grocery segment has seen the emergence of supermarkets/grocery chains (Food World, Nilgiris, Apna Bazaar), convenience stores (ConveniO, HP Speedmart) and fast-food chains (McDonalds, Dominos). It is the non-food segment, however that foray has been made into a variety of new sectors. These include lifestyle/fashion segments (Shoppers' Stop, Globus, LifeStyle, Westside), apparel/accessories (Pantaloon, Levis, Reebok), books/music/gifts (Archies, Music World, Crosswords, Landmark), appliances and consumer durables (Viveks, Jainsons, Vasant & Co.), drugs and pharmacy (Health and Glow, Apollo). Organized retailing in India has penetrated maximum in case of shoes(22%) and apparel (12%) followed by books and music (entertainment products) (9%)and jewelry and accessories (8%). However, food and grocery and pharmaceutical products are still largely over represented by traditional unorganized sector retail formats (1%).
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Hypermarkets/Supermarkets: Large self service outlets, having a strong focus on food & grocery and personal sales are termed as Supermarkets. Super Markets can further be classified into mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq. ft. These stores
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today contribute to 30% of all food & grocery organized retail sales. Examples are Foodland Fresh, Haiko, Shoprite etc.
Convenience Stores: These are relatively small stores (400-2,000 sq. feet) usually 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.
MBOs: 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 metropolitan cities.
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There has been a remarkable change in consumer taste and preferences over a last few years since the opening up of the market, entry of foreign brands and their products. With increasing disposable income and exposure to global products and the media the preference for the relatively expensive but quality-guaranteed branded products has increased. Urban population today in increasingly becoming fashion conscious and hence brand names are more important to them more than the utility aspect of the products.
Exposure to the internet and privatization of the television channels also contributed immensely to shifts in consumer demands leading to the need for more sophisticated retail chains to cater to their varied and specialized demands. The huge proportion of young population in India implies a demographic dividend for the retail sector since this portion of the population is more brand conscious and ready for spending more on consumer goods.
The traditional grocers, by introducing self-service formats as well as value-added services such as credit and home delivery, have tried to redefine themselves. However, the boom in retailing has been confined primarily to the urban markets in the country. Even there, large chunks are yet to feel the impact of organised retailing. There are two primary reasons for this. First, the modern retailer is yet to feel the saturation' effect in the urban market and has, therefore, probably not
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looked at the other markets as seriously. Second, the modern retailing trend, despite its cost-effectiveness, has come to be identified with lifestyles.
In order to appeal to all classes of the society, retail stores would have to identify with different lifestyles. In a sense, this trend is already visible with the emergence of stores with an essentially `value for money' image. The attractiveness of the other stores actually appeals to the existing affluent class as well as those who aspire for to be part of this class. Hence, one can assume that the retailing revolution is emerging along the lines of the economic evolution of society.
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The choice of Chennai as the `retail capital' has surprised many, but a variety of factors acted in its favour. Chennai, in spite of being a rapidly growing metropolis offers reasonable real estate prices, one of the most critical elements for the industry. Chennai has been witnessing a high industrial growth and increasing presence of the MNCs, both in the IT sector as well as outside it. The industrial boom has led to the emergence of new residential areas with aggregation of professionals as well as a rapid increase in the number of `double-income' households and growth of the nouveau riche/upper middle class with increased purchasing power. This has been combined with the increasing need for touch and feels shopping (especially for the large migrant population). All the factors have acted favourably in nurturing the industry.
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The unorganised sector played a large role in the story of India's structural adjustment. Recent National Sample Survey (NSS) studies redress that gap greatly. The organised sector: Employment in the organised sector industry grew from 8.3 million in 1991 to 10.2 million in 1996, or at over 4 per cent annually. There is no previous episode of such high growth rates sustained for five years. It is also clear that the rate of growth of average real wages slowed down greatly in the 1990s, and the rate of growth of real productivity (value-added per worker) increased. The unorganised sector: There are interesting similarities and contrasts between the patterns of growth in the organised and unorganised sectors over the 1990s. The major point of similarity is that both experienced growth in productivity and stagnation in real wages in much of this decade, perhaps suggesting a kind of convergence in labour market institutions. On the other hand, there is a significant contrast in employment growth. In 198995, while employment in the organised sector grew from 8.3 million to 9.4 million, in the unorganised sector, it declined from 35 million to 33.4 million. This decline was an average over rapid growth in sectors such as garments and leather products, and fall in traditional consumer goods such as handlooms and earthenware.
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Malaysia. Modern retail formats, such as hypermarkets, superstores, supermarkets, discount and convenience stores are widely present in the developed world, whereas such forms of retail outlets have only just begun to spread to developing countries in recent years. In developing countries, the retailing business continues to be dominated by family-run neighborhood shops and open markets. As a consequence, wholesalers and distributors who carry products from industrial suppliers and agricultural producers to the independent family-owned shops and open markets remain a critical part of the supply chain in these countries. Indian retail is dominated by a large number of small retailers consisting of the local kirana shops, owner-manned general stores, chemists, footwear shops, apparel shops, paan and beedi shops, hand-cart hawkers, pavement vendors, etc. which together make up the so-called unorganized retail or traditional retail. The last 3-4 years have witnessed the entry of a number of organized retailers opening stores in various modern formats in metros and other important cities. Still, the overall share of organized retailing in total retail business has remained low.
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retailing. Organized retailing played a significant role in the present-day developed countries during their period of high growth
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labelling. All these will enhance farmers realizations, improve quality of products at the shop and reduce the ultimate consumer price. Link with Manufacturing The Planning Commission has identified four sectors as the major employment generating sectors for the Eleventh Plan period, 2007-12. They are: (i) food processing industry; (ii) textiles and clothing; (iii) tourism; and (iv) construction. Of these sectors, all except tourism are getting a fillip with the growth of organized retail. Boost to Exports Organized retails link with exports comes through foreign players. International retailers look for sources around the world and a country in which they operate becomes a source for their global sales. Some of the international retailers that have plans for India in the future have already developed suppliers in the country and have started exporting from India. For example, Wal-Mart exported an equivalent of US$ 600 million, and IKEA about 380 million Euros from India in 2006-07. Impact on Growth and Productivity Organized retailing will remove various inefficiencies that characterize the present Indian distribution system, which in turn will provide better price for the farmers and suppliers on the one hand, and lower prices for consumers.
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Impact on Employment and Prices The growth of organized retail will enhance the employment potential of the Indian economy. While providing direct employment in retail, it will drive the growth of a number of activities in the economy which in turn will open up employment opportunities to several people. This includes the small manufacturing sector especially food-processing, textiles and apparel, construction, packing, IT, transport, cold chain, and other infrastructure. It may adversely affect employment in unorganized retail and the trade intermediaries associated with the traditional supply channels but the additional jobs created will be much higher than those that are lost. Improvement of Government Revenues Another significant advantage of organized retailing is its contribution to government revenues. Unorganized retailers normally do not pay taxes and most of them are not even registered for sales tax, VAT, or income tax. Organized retailers, by contrast, are corporate entities and hence file tax returns regularly. The growth of organized retail business will be associated with a steady rise in tax receipts for the central, state, and local governments.
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their equal joint venture agreement that had been awaiting government approval for the past several months.
The wholesale retailing venture, Bharti Wal-Mart Private Ltd, is a wholesale cashand-carry and back-end supply chain management, the two companies said, in line with government of India guidelines that prohibit foreign multi brand retail operators in the country, though foreign single-brand retailers are allowed a 51-per cent stake in joint ventures. The JV will open 10 to 15 cash-and-carry facilities over seven years. The first of the stores, which will sell groceries, consumer appliances and fruits and vegetables to retailers and small businesses, is slated to open in north India by the end of 2008. The venture will support farmers and small manufacturers who have limited infrastructure and distribution strength, and the supply chain will enable minimum wastage, particularly of fresh foods and vegetables.
In addition, Bharti Retail, the 100-per cent subsidiary of Bharti Enterprises, that will own and manage the retail stores, has entered into a franchise agreement with Wal-Mart, which will provide technical support to Bharti Retail. Wholesale cash-and-carry operations provide small retailers and business owners a wide range of quality products at competitive wholesale prices that help them enhance their businesses and profitability.
The Bharti Wal-Mart business-to-business (B2B) wholesale cash-and-carry joint venture will serve kirana (grocery shops) stores, fruit and vegetable resellers, restaurants and other business owners. It also will serve other retailers such as Bharti Retail, which is setting up a chain of stores in India that are 100 per cent
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owned and operated by Bharti. The wholesale cash-and-carry venture will invest in setting up an efficient supply chain and link farmers and small manufacturers directly to retailers, thereby maximising value for farmers and manufacturers on the one end and retailers, and in turn, consumers on the other.
The most important factors responsible for retail sector development in India are liberalization of the economy, upward mobility of middle class, shifting consumerdemands, and expansion of ICTs (A. T. Kearney Report, 2007). Liberalization of the economy since the 1990s is definitely the single-most important factor leading to a shift towards a new organized form of retailing. Organized retailing is expected to bring about positive employment impact in terms of quantity (more jobs will be created) and quality (security of job, benefits etc. will be better). Since the liberalization of the economy there has been a visible impact on the income level of the middle class, which as a whole is upwardly mobile, with a huge disposable income in hand.
Conclusion
By doing this project on ORGANISED AND UNORGANISED RETAIL MARKETING we got an detailed idea about the scope of organised and unorganized retail sector in India and also their future in Indian marketing sector.
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Retail trade is expected to grow at 13 per cent per annum during 2007-12. Its value will then be about US$ 590 billion in 2011-12. With this expected increase it is inconceivable that the rising demand would be effectively met by the unorganized sector. As in other countries, this provides the basis for the expansion of organized retail. The share of organized retail in total trade has risen in all developing countries in recent years. In China it was 20 per cent in 2006, Brazil 36 per cent, South Korea 15 per cent, Indonesia 30 per cent, Poland 20 per cent, Thailand 40 per cent, and Vietnam 22 per cent. The international experience shows that in nearly all emerging economies, governments have taken policy measures to improve the operating conditions for unorganized retail. The major factors that attract unorganized retailers to consumers are proximity, goodwill, credit sales, bargaining, loose items, convenient timings, and home delivery. Consumers have generally gained with the emergence of organized outlets through the availability of better quality products, lower prices, one-stop shopping, choice of additional brands and products, family shopping, and fresh stocks.
Lower income consumers have saved more from purchases at organized outlets. Intermediaries do not appear to be adversely affected so far although there are signs of their losing business in products such as, fruit, vegetables, and apparel.
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Farmers have benefited through direct procurement by organized retailers as this provides an alternative channel for selling their produce with better revenue realization.