Impact Of Recession On Retail Industies

Introduction

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Retail he word 'retail' is derived from the French word 'retaillier' meaning 'to cut a piece off' or 'to break bulk'. In simple terms it involves activities whereby product or services are sold to final consumers in small quantities. Although

retailing in its various formats has been around our country for many decades, it has been confined for along time to family owned corner shops. Englishmen are great soccer enthusiasts, and they strongly think that one should never give Indians a corner. It stems from the belief that, if you give an Indian a corner he would end up setting a shop. That is how great Indians retail management skill is considered.

Evolution of Indian Retail The evolution of retail industry segment in India: •

Traditional Rural Retail Fairs

•

Traditional Family Run Convenience Stores

Traditional Rural Retail Fairs Traditional family run convenience stores are too well established in India than to be wiped out and besides there is uniqueness in the traditional items that represent the sub-continent. Theretail stores in India are essentially dominated by the unorganized sector or traditional stores. Infact the traditional stores have taken up 98 percent of the Indian retail market. Now stores run by families are primarily food based and the set up is as Kirana or the 'corner grocer' stores. Basically they provide high service with low prices. If the stores are not food based then the type of retail items available are local in nature. Traditional rural retail fairs in India deal in a good number of handcrafts items which are mentioned below: •

Hand painted wooden chest drawers

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Wooden wall brackets

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Embossed wooden table

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Hand painted chairs in chowki

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Wooden corner stand

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Wooden Hand painted table

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Embossed wooden chairs

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Brown wooden stool

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Camel bone Jewelry

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Metal jewelry

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Snake charmer puppets

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Handmade candles

The Suraj Kund mela is also a huge galore of Indian traditional items. This fair is held at Haryana which is 8 kilometers from South Delhi. The fair has been held for the last 20 years. The fair deals in items categorized as •

Indian arts

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Handicrafts

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Heritage

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Culture and tradition

Traditional rural retail fairs have atypical rural set up like: •

Huts of mud

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Thatched platforms

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lamps of wood

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String cots

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Plainness ground

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The small thatched stores are a vibrant display of handcraft items. The focus every year is on a particular State for instance, in 2006 it was Maharashtra. The other group of items representing the Indian Subcontinentavailable there are:

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Classical

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Tribal art

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Folk art

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•

As such Traditional Rural Retail fairs involve credit worthy artisans and weavers of over 350 in number and they are selected from across the country. Along with the county's rich cultural heritage being showcased, the fair is open to foreign traditional goods as well. The more rejuvenating side of these fairs would be listed as under:

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Indian Sweets Snacks

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Indian folk music

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Classical dance

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Bengal tiger show

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Elephant rides

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Tiger show and rides

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Giraffe tricks

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Balloon and Clay items

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Painting

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Games

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Therefore, traditional rural retail fairs are a never ending occupation and the key to it lies in the originality and attractiveness of the items.

Traditional Family Run Convenience Stores Traditional family run convenience stores are too well established in India than to be wiped out and besides there is uniqueness in the traditional items that represent the sub-continent. The retail stores in India are essentially dominated by the unorganized sector or traditional stores. In fact the traditional stores have taken up 98 percent of the Indian retail market. Now stores run by families are primarily food based and the set up is as Kirana or the 'corner grocer' stores. Basically they provide high service with low prices. If the stores are not food based then the type of retail items available are local in nature. The traditional family run convenience stores can take pride in the fact that the Kirana is the most common outlet forms for the consumers. The tough competition for convenience stores are coming from organized retail stores dealing in food items, like:

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•

Apna Bazaar

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Canteen stores

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Food World

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Subhiksha

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Food Bazaar

Convenience Stores are open for long hours and is one of the formats of the Indian retail stores that cater to basic needs of the consumer. A good example of such would be Convenio. These stores are found in both residential as well as commercial markets. The food products of traditional family run convenience stores are comprised of branded as well as non-branded items. The benefits of family run convenience stores is that they give importance to: • • •

Personal touch Facilities of credit Quick home delivery

Non-food based stock comprises of multiple and varieties of local brands. The future of such stores as they face competition from organized sector, would depend on the following particulars: • • • • • •

Place and capacity Diligent area coverage Disciplined work schedule Managing turnover Revenue from assets Customer service and satisfaction

The traditional family run convenience stores serves the purpose of the housewives who definitely wants to avoid traveling long distances to purchase daily needs. The convenience factor in terms of items, among people in general can be highlighted as below: • Groceries • Fruits • Drug Store • Necessary stationery As such traditional family run convenience stores are here to stay and cannot be oversized by the organized retail sector besides, it represents the variety of India.

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Retail Industry The Indian retail market, which is the fifth largest retail destination globally, has been ranked the second most attractive emerging market for investment after Vietnam 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 8–10 per cent in 2007. It is currently around 12 per cent, and is likely to reach 22 per cent by 2010. A McKinsey report 'The rise of Indian Consumer Market', estimates that the Indian consumer market is likely to grow four times by 2025. Commercial real estate services company, CB Richard Ellis' findings state that India's retail market is currently valued at US$ 511 billion. Banks, capital goods, engineering, fast moving consumer goods (FMCG), software services, oil marketing, power, two-wheelers and telecom companies are leading the sales and profit growth of India Inc in the fourth quarter of 2008-09. India continues to be among the most attractive countries for global retailers. At US$ 511 billion in 2008, its retail market is larger than ever and drawing both global and local retailers. Foreign direct investment (FDI) inflows as on January 2009, in single-brand retail trading, stood at approx. US$ 25.18 million, according to the Department of Industrial Policy and Promotion (DIPP). India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. As a democratic country with high growth rates, consumer spending has risen sharply as the youth population (more than 33 percent of the country is below the age of 15) has seen a significant increase in its disposable income. Consumer spending rose an impressive 75 per cent in the past four years alone. Also, organised retail, which accounts for almost 5 per cent of the market, is expected to grow at a CAGR of 40 per cent from US$ 20 billion in 2007 to US$ 107 billion by 2013. India has emerged the third most attractive market destination for apparel retailers, according to a new study by global management consulting firm AT Kearney. It further says that in India, apparel is the second largest retail category, representing 10 per cent of the US$ 37 billion retail market. It is expected to grow 12-15 per cent per year. Apparel, along with food and grocery, will lead the organised retailing in India. India 5

has one of the largest numbers of retail outlets in the world. A report by Images Retail estimates the number of operational malls to grow more than two-fold, to cross 412, with 205 million square feet by 2010, and a further 715 malls to be added by 2015, with major retail developments even in tier-II and tier-III cities in India. •

Marks & Spencer Reliance India is planning to open 35 more stores over the next five years, according to Mark Ashman, CEO of the company. The 51:49 joint venture between UK’s Marks and Spencer and Reliance Retail Ltd already has 15 stores in India.

•

Future Group has been restructured to test the new rules on FDI under Press Notes 2, 3 and 4 issued in February 2009. The company plans to bring in up to US$ 148.7 million in foreign investment. Although FDI is permitted only in single-brand retail and not permitted in multi-brand retail businesses like Future Group's, the conglomerate has created two layers of operations to take advantage of the three Press Notes that allow FDI up to 49 per cent in operating-cum-investment companies as long as they are owned and controlled by Indians.

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Carrefour SA, Europe’s largest retailer, may start wholesale operations in India by 2010 and plans to set up its first cash-and-carry outlet in the National Capital Region. Currently, Carrefour exports goods worth US$ 170 million from India to Europe, UAE, Indonesia, Europe, Thailand, Singapore and Malaysia.

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Jewellery manufacturer and retailer, Gitanjali Group and MMTC are jointly setting up a chain of exclusive retail outlets called Shuddi–Sampurna Vishwas. The joint venture, which plans to open around 60 stores across India by end of this year, will retail hallmarked gold and diamond jewellery.

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Mahindra Retail, a part of the US$ 6.7-billion Mahindra Group, plans to invest US$ 19.8 million by 2010 to step up its specialty retail concept 'Mom and Me'.

Policy Initiatives 100 per cent FDI is allowed in cash-and-carry wholesale formats. Franchisee arrangements are also permitted in retail trade. 51 per cent FDI is allowed in single-brand retailing.

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Road Ahead According to industry experts, the next phase of growth is expected to come from rural markets, with rural India accounting for almost half of the domestic retail market, valued over US$ 300 billion. Rural India is set to witness an economic boom, with per capita income having grown by 50 per cent over the last 10 years, mainly on account of rising commodity prices and improved productivity. According to retail and consumer products division, E&Y India, basic infrastructure, generation of employment guarantee schemes, better information services and access to funding are also bringing prosperity to rural households. The rural market, product design will need to go beyond ideas like smaller sizes (such as single use sachets) to create genuinely new products, according to Ramesh Srinivas, national industry director (consumer markets), KPMG India. According to the Investment commission of India, the overall retail market is expected to grow from US$ 262 billion to about US$ 1065 billion by 2016, with organised retail at US$ 165 billion (approximately 15.5 per cent of total retail sales). India is expected to be among the top 5 retail markets in the world in 10 years. According to new market research report by RNCOS titled, "Booming Retail Sector in India", organised retail market in India is expected to reach US$ 50 billion by 2011. •

Number of shopping malls is expected to increase at a CAGR of more than 18.9 per cent from 2007 to 2015.

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Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50 per cent.

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Organised retailing of mobile handset and accessories is expected to reach close to US$ 990 million by 2010.

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Driven by the expanding retail market, third party logistic market is forecasted to reach US$ 20 billion by 2011.

Exchange rate used: 1 USD = 50.5047 INR

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The Global Retail Industry Retail stores constitute 20% of US GDP & are the 3

rd

largest employer segment in

USA. China on the other hand has attracted several global retailers in recent times. Retail sector employs 7% of the population in China. Major retailers like Wal-Mart & Carrefour have already entered the Chinese market. In the year 2003, Wal-Mart & Carrefour had sales of US $ 70.4 Crore & US $ 160 Crore respectively. The global retail industry has traveled a long way from a small beginning to an industry where the world wide retail sales is valued at $ 7 x 10 5 Crore. The top 200 retailers alone accounts for 30 % of the worldwide demand. Retail turnover in the EU is approximately Euros 2, 00,000 Crore and the sector average growth is showing an upward pattern. The Asian economies (excluding Japan) are expected to grow at 6% consistently till 2005-06. On the global Retail stage, little has remained same over the last decade. One of the few similarities with today is that Wal-Mart was ranked the top retailer in the world then & it still holds that distinction. Other than Wal-Mart's dominance, there's a little about today's environment that looks like the mid-1990s. The global economy has changed, consumer demand has shifted & retailers' operating systems today are infused with far more technology than was the case six years ago.

Scenario of Retailing in India Retailing is the most active and attractive sector of last decade. While the retailing industry itself has been present since ages in our country, it is only the recent past that it has witnessed so much dynamism. The emergence of retailing in India has more to do with the increased purchasing power of buyers, especially post-liberalization, increase in product variety, and increase in economies of scale, with the aid of modern supply and distributions solution. Indian retailing today is at an interesting crossroads. The retail sales are at the highest point in history and new technologies are improving retail productivity. Though there are many opportunities to start a new retail business.

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PRESENT INDIAN SCENARIO * Unorganized market: Rs. 583,000 crores * Organized market: Rs.5, 000 crores * 5X growth in organized retailing between 2000-2005 * Over 4,000 new modern Outlets in the last 3 years * Over 5,000,000 sq. ft. of mall space under development * The top 3 modern retailers control over 750,000 sq. ft. of retail space * Over 400,000 shoppers walk through their doors every week * Growth in organized retailing on par with expectations and projections of the last 5 Years: on course to touch Rs. 35,000 crores (US$ 7 Billion) or more by 2009-11

Let us look at the evolution process:

Detailing reasons why Indian organized retail is at the brink of revolution, the IMAGES-KSA report says that the last few years have seen rapid transformation in many areas and the setting of scalable and profitable retail models across categories. Indian consumers are rapidly evolving and accepting modern formats overwhelmingly. Retail Space is no more a constraint for growth. India is on the radar of Global Retailers and suppliers / brands worldwide are willing to partner with retailers here. Further, large Indian corporate groups like Tata, Reliance, Raheja, ITC, Bombay

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Dyeing, Murugappa & Piramal Groups etc and also foreign investors and private equity players are firming up plans to identify investment opportunities in the Indian retail sector. The quantum of investments is likely to skyrocket as the inherent attractiveness of the segment lures more and more investors to earn large profits. Investments into the sector are estimated at

INR 2000 - 2500 Crore in the next 2-3

years, and over INR 20,000 Crore by end of 2011.

Retail Formats Hypermarket: It is the largest format in Indian retail so far is a one stop shop for the modern Indian shopper.  Merchandise: food grocery to clothing to spots goods to books to stationery.  Space occupied: 50000 Sq .ft. and above.  SKUs: 20000-30000.  Example: Pantaloon retail’s Big Bazaar, RPG’s Spencers (Giant)

Supermarket: A subdued version of a hypermarket.  Merchandise: Almost similar to that of a hypermarket but in relatively smaller proposition.  Space occupied: 5000 Sq. ft. or more.  SKUs: Around 10000.  Example: Nilgiris, Apna Bazaar, Trinethra. Convenience store: A subdued version of a supermarket.  Merchandise: Groceries are predominantly sold.

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 Space occupied: Around 500 Sq. ft. to 3000 Sq. ft.  Example: stores located at the corners of the streets, Reliance Retail’s Fresh and Select. Department store: A retail establishment which specializes in selling a wide range of products without a single prominent merchandise line and is usually a part of a retail chain.  Merchandise: Apparel, household accessories, cosmetics, gifts etc.  Space occupied: Around 10000 Sq. ft. – 30000 Sq. ft.  Example: Landmark Group’s LifeStyle, Trent India Ltd.’s Westside. Discount store: Standard merchandise sold at lower prices with lower margins and higher volumes.  Merchandise: A variety of perishable/ non perishable goods.  Example: Viswapriya Group’s Subiksha, Piramal’s TruMart. Specialty store: It consists of a narrow product line with deep assortment.  Merchandise: Depends on the stores  Example: Bata store deals only with footwear, RPG’s Music World, Crossword. MBO’s: Multi Brand outlets, also known as Category Killers. These usually do well in busy market places and Metros.  Merchandise: Offers several brads across a single product category.

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Kirana stores: The smallest retail formats which are the highest in number (15 million approx.) in India.  Merchandise: Mostly food and groceries.  Space occupied: 50 sq ft and even smaller ones exist. Malls: The largest form of organized retailing today. Located mainly in metro cities, in proximity to urban outskirts.  Merchandise: They lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof.  Space occupied: Ranges from 60,000 sq ft to 7, 00,000 sq ft. Example: Pantaloon Retail’s Central, Mumbai’s Iorbit.

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The organized retail industry is growing at 25- 30 percentage and is expected to reach the mark of 1, 00,000 crore INR by 2011 from the present figure of 35,000 crore INR approx. With such a mouth watering figures the organized retailing has been attracting many players and even persuading the existing retailers to expand and experiment with newer formats. This can also be substantiated by looking the estimation of the organized retail space to be around 72 million sq ft. by the end of 2009.

Growth of Retail Companies in India Growth of Retail Companies in India exhibits the boom in the retail industry in India over the years. The increase in the purchasing power of the Indian middle classes and the influx of the foreign investments have been encouraging in the Growth of Retail Companies in India. Growth of Retail Companies in India : Overview Growth of Retail Companies in India is still not yet in a matured stage with great potentials within this sector still to be explored. Apart from the retail company like Nilgiri's of Bangalore, most of the retail companies are sections of other industries that 14

have stepped in the retail sector for a better business. The Growth of Retail Companies in India is most pronounced in the metro cities of India, however the smaller towns are also not lagging behind in this. The retail companies are not only targeting the four metros in India but also is considering the second graded upcoming cities like Ahmedabad, Baroda, Chandigarh, Coimbatore, Cochin, Ludhiana, Pune, Trivandrum, Simla, Gurgaon, and others. The South Indian zone have adopted the process of shopping in the supermarkets for their daily requirements and this has also been influencing other cities as well where many hypermarkets are coming up day to day. Reasons for the fast Growth of Retail Companies in India: The retail companies are found to be rising in India at a remarkable speed with the years and this have brought a revolutionary change in the shopping attitude of the Indian customers. The Growth of Retail Companies in India is facilitated by certain factors like • existing Indian middle classes with an increased purchasing power • rise of upcoming business sectors like the IT and engineering firms • change in the taste and attitude of the Indians • effect of globalization • heavy influx of FDI in the retail sectors in India To get further details on the Growth of Retail Companies in India and otherretail chain of companies in India, please browse through the following links: •

Big Bazar

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Giants

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Shoprite

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Lifestyle

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Pantaloons

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Landmark

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Indus Fila

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Fame Adlabs

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Inox India

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PVR Cinemas

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Major Player of Retail Industry The Indian retail sector has been euphoria over the last five years. India topped the A.T. Kearney's Global Retail Development Index for two consecutive years and this has infatuated Indian as well as foreign retail players to go gaga on the merchandising track. According to geographical expansion, Delhi/NCR and Mumbai are the felicitated regions as the top companies have rated the spending potential of consumers in the vicinity of the national capital and the financial capital as excellent. Other metros such as Kolkata, Chennai, Hyderabad and Bangalore have caught the sight of investors but their fortunes are yet to be illuminated. Companies like the Future Group, Reliance, Bharti-Walmart, DLF etc. have shown the way for other to enter. The countries are expecting a surge in the growth sprint and let’s hope for the best.

Top Companies Big Bazaar is a chain of department stores in India, currently with 75 outlets. It is owned by the Pantaloon Retail India Ltd, Future Group. It works on the same economy model as Wal-Mart and has considerable success in many Indian cities and small towns. The idea was pioneered by entrepreneur Kishore Biyani, the CEO of Future Group. Currently Big Bazaar stores are located only in India. It is the

biggest and the fastest growing chain of department store and aims at being 350 stores by the end of year 2010. It offers all types of household items such as home furnishing, utensils, fashion products etc. It has a grocery department and vegetable section known as the

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Food Bazaar and its online shopping site is known as FutureBazaar.com. The real estate fund management company promoted by the Future Group expects to develop more than 50 projects across India covering a combined area of more than 16 million sq. ft. On April 1 2007, Big Bazaar had to shut its outlets in Mumbai as the 120 retrenched employees called a strike with the support of Bhatia Kamgar Sena (the trade Union wing of Shiv Sena). Later the management agreed to reinstate the sacked workers

Pantaloon Retail India Ltd, is India’s leading retail company with presence across food, fashion, home solutions and consumer electronics, books and music, health, wellness and beauty, general merchandise, communication products, E-tailing and leisure and entertainment. Headquartered in Mumbai (Bombay), has over 450 stores across 30 cities in India and employs over 18,000 people. Pantaloon founded by Mr. Kishore Biyani. The company owns and manages multiple retail formats catering to a

wide cross-section of the Indian society and its width and depth of merchandise helps it capture almost the entire consumption basket of the Indian consumer. Founded in 1987, as a garment manufacturing company, Pantaloon Retail forayed into modern retail in 1997 with the opening up of a chain of department stores, Pantaloons. In 2001, it launched Big Bazaar, a hypermarket chain, followed by Food Bazaar, a supermarket chain. It went on to launch Central, a first of its kind, seamless mall located in the heart of major Indian cities. Some

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of its other formats include, Collection I (home improvement products), E-Zone (consumer electronics), Depot (books, music, gifts and stationeries), all (fashion apparel for plus-size individuals), Shoe Factory (footwear) and Blue Sky (fashion accessories). It has recently launched its retailing venture, futurebazaar.com. In India's chaotic markets, Kishore Biyani is the unchallenged king of retail. He has the knack of catching rivals off-guard and striking where it hurts most. And now that he's set himself the task of retaining control of the largest retail space in the country, he won't let anyone - suppliers or international promoters included - catch him slacking. The latest to face the wrath of the 43-year-old is South African hypermarket Shop rite, which opened shop in Mumbai last month through a franchise agreement with local company Normal Lifestyle. The hypermarket began retailing products from big boys Nestle, Unilever and Procter & Gamble at consumer discounts of 20-30 per cent, lower than even Biyani's purchase prices in his Big Bazaar and Food Bazaar stores.

Reliance Fresh is the retail chain division of Reliance Industries of India which is headed by Mr.Mukesh Ambani. Reliance has entered into this segment by opening new retail stores into almost every metropolitan and regional area of India. Reliance plans to invest Rs 25000 cores in the next 4 years in their retail division and plans to begin retail stores in 784 cities across the country. The Reliance Fresh supermarket chain is RIL’s Rs 25,000 crore venture and it plans to add more

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stores across different g, and eventually have a pan-India footprint by year 2011. The super marts will sell fresh fruits and vegetables, staples, groceries, fresh juice bars and dairy products and also will sport a separate enclosure and supply-chain for non-vegetarian products. Besides, the stores would provide direct employment to 5 lakh young Indians and indirect job opportunities to a million people, according to the company. The company also has plans to train students and housewives in customer care and quality services for part-time jobs. Reliance Fresh recently (24th Jan, 2007) opened several "Fresh" outlets in Chennai, New Delhi, Hyderabad, Jaipur, Mumbai, Chandigarh, Ludhiana increasing its total store count to 40. Reliance is still testing its retail concepts by controlled entry beginning in the southern states

Subhiksha is an Indian retail chain with more than 760 outlets selling groceries, fruits, vegetables, medicines and mobile phones. It was started and is managed by Mr. R. Subramaniam, IIM Ahmedabad alumni. He also plans to invest Rs.500 crore to increase the number of outlets to 2000 across the country by 2009. Derived from the Sanskrit word, Subhiksham or "giver of all things good", It opened its first store in Thiruvanmiyur in Chennai in March, 1997 with an investment of about Rs. 5 lakh. The retail chain has seen a considerable growth by offering goods at cheaper rates and there by increasing its customer base. It

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is also dubbed as India's largest retail chain. Vision to deliver consistently better value to Indian consumers, has guided Subhiksha to deliver savings to all consumers on each and every item that they need in their daily lives, 365 days a year, without any compromise on quality of goods purchased. Subhiksha now has the pan Indian presence with stores across Delhi, UP, Punjab, Hariyana, Gujarat, Maharashtra, AP, Karnataka and TN. It has recently commenced operation in Kerala also. Today, it is a multi-location, professionally managed and vibrant organization. Subhiksha now has even opened Specialized Mobile shops called Subhiksha Mobile where mobiles are sold at a discounted price Subhiksha is India's largest supermarket, pharmacy and telecom chain. Started in 1997 as a single store entity in South Chennai, it is now present nationally across 1000 outlets and spread across more than 90 cities. You can now locate the nearest Subhiksha store in your area with the Store Locators. ICICI Venture Capital has a 24% stake in Subhiksha.

Food world is a chain of supermarket stores. It was started in May 1996 as a division of Spencer & Co, a part of the RPG Group. In August 1999 it became a separate company. Currently it operates 89 stores in Bangalore, Chennai, Coimbatore, Erode, Hyderabad, Kodai, Pondichery, Pune, Secunderabad, Salem, Trivandrum and Vellore

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DLF Retail Developers Ltd. is one of the troikas of the DLF Group. Besides being India's largest real estate developer, DLF is also of the leaders in innovating shopping malls in India. It caught public eye when it launched the 2, 50,000 sq ft. shopping mall in Gurgaon. It has brought a dramatic change in the lifestyles and entertainment with its City Centers and DT Cinemas. DLF has plans to invest Rs. 2000-3000 crore in all the emerging areas from metros to class cities in the next two years. Till last year the company was involved in building 18 malls out of which 10 were in the NCR region. Future plans of DLF involve opening up of 100 malls (specialty malls, big box retailing and integrated malls) across 60 cities in next 8-10 years. They are slowly transforming into 'lease' and 'revenue share'

models.

Local players like ITC, the A.V. Birla Group and Tatas have given the hints to enter organized retail. France’s Carrefour SA and Britain’s Tesco too were recently in news for their future plans to explore the Indian retail market

Bharti Retail, a wholly owned subsidiary of Bharti Enterprises. Has announced two joint ventures (JV)with the international retailing behemoth, Wal-Mart. The first JV ensures cash and carry business, in which 100 percent FDI is permitted and it can sell only to retailers and distributors. The second JV concerns the franchise arrangement. Sunil Mittal, Chairman of the Bharti Group assured that the ventures will use 21

“low prices every day” and “best practices for the satisfaction of the customer”. Processed foods and vegetables will be delivered by Bharti Field Fresh, Bharti's JV with Rothschild. Bharti Retail aims to foray every city with a population exceeding 1 million. It has plans to come up with an investment of more than $2 billion in convenience stores, supermarkets and hypermarkets spread over an aggregate 10 million sq. ft. The expansion drive looks ambitious but analysts are worried that Bharti may face stiff competition from Pantaloon and Reliance as they too have sanguine plans to flood the markets with thousands of retail outlets in the coming five years. Bharti Telecom also has plans to offer all its fixed and mobile telecom products and services from a single window to the SMB (Small and Medium Business) enterprises under the Bharti Infotel division...

Lifestyle is part of the Landmark Group, a Dubai-based retail chain. With over 30 years’ experience in retailing, the Group has become the foremost retailer in the Gulf. Positioned as a trendy, youthful and vibrant brand that offers customers a wide variety of merchandise at exceptional value for money, Lifestyle began operations in 1998 with its first store in Chennai in 1999 and now has 13 Lifestyle stores, 5 Home Centers and 1 Baby shop store across Chennai, Hyderabad,

Bangalore,

Gurgaon,

Delhi,

Mumbai

and

Ahmedabad.

Business World-IMRB Most Respected Company Awards Survey has rated

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Lifestyle as the Most Respected Company in the Retail Sector in 2003 and 2004. Lifestyle has also been awarded the ICICI-KSA Technopak Award for Retail Excellence in 2005, the Reid & Taylor Retailer of the Year Award for 2006 and more recently, the Lycra Images Fashion Award for the Most Admired Large Format Retailer of the Year in 2006

The foundation of Shopper's Stop was laid on October 27, 1991 by the K. Raheja Corp. group of companies Shoppers’ Stop aims to position itself as a global retailer. The company intends to bring the world’s best retail technology, retail practices and sales to India. Currently, they are adding 4 to 5 new stores every year with an immense amount of expertise and credibility, Shopper's Stop has become the highest benchmark for the Indian retail industry Shopper's Stop in the only retailer from India to become a member of the prestigious Intercontinental Group of Departmental Stores (IGDS). With its wide range of merchandise, exclusive shop-in-shop counters of international brands and world-class customer service, Shoppers’ Stop brought international standards of shopping to the Indian consumer providing them with a world class shopping experience. The stores offer a complete range of apparel and lifestyle accessories for the entire family. From apparel brands like Provogue, Color Plus, Arrow, Levi’s, Scullers, Zodiac to cosmetic brands like Lakme, Chambor, Le Teint Ricci etc., Shoppers’ Stop caters to every lifestyle need. Shoppers' Stop retails its own line of clothing namely Stop, Life, Kashish,

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Vettorio Fratini and DIY. The merchandise at Shoppers’ Stop is sold at a quality and price assurance backed by its guarantee stamp on every bill. Their motto: “We are responsible for the goods we sell”.

Vishal Mega Mart

is one of fastest growing

retailing groups in India. Its outlets cater to almost

all price ranges. The showrooms have over 70,000 products range which fulfills all your household needs, and can be catered to less than one roof. It is covering about 1996592 lac sq. ft. in 18 states across India. Each store gives you international quality goods and prices hard to match. The cost benefits that is derived from the large central purchase of goods and services is passed on to the consumer the group had a turnover of Rs. 1463.12 million for fiscal 2005, under the dynamic leadership of Mr. Ram Chandra Aggarwal. The group had of turnover Rs 2884.43 million for fiscal 2006 and Rs. 6026.53 million for fiscal 2007.the group’s prime focus is on retailing. The Vishal stores offer affordable family fashion at prices to suit every pocket.

Welspun

Retail

Limited

(W.R.L.)

was

established in 2003 as a part of Welspun Group, one of the fastest growing business conglomerates in India. Welspun is a U.S. $1 billion group, into diverse businesses, industries, regions and has six companies under the umbrella brand. Our International Home Textiles Company; Welspun India Limited (W I L) launched its Indian retail division,

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WRL with an aim to capture the Home Textiles market in 2003. The Retail brands, SPACES- Home & Beyond has carved its niche with its fashion driven model in the country's major metros, while Welhome targets a larger audience with its value for money model. The turn over of the Retail division stands at 100 crore, expected to double in the next 5 years

Key Differentiating Attributes  W.R.L. is the first Retailer of soft furnishing for "Home" in India.  W.R.L. has two models that cater to both, the aspiration clientele and the value for money conscious clientele.

 Launched Spaces -Home & Beyond and Welhome (Welspun Factory Outlet) in the same year.

 Phenomenal growth anticipated in FY 2007-08.  Design Studio ranks amongst the best in the country.  Panel of International Designers for the new collections.  Offer specialized products at affordable prices, Bed sheets starting at Rs. 199, towels starting at Rs. 79 and Curtains starting at Rs. 99

Trent is the retail arm of the TATA group. Started in 1998, Trent operates Westside, one of the many growing retail chains in India. The foresight of the TATA Group, which invested in retail relatively early, is paying high dividends as retail is one of the booming sectors in India. The company has a turnover of Rs. 357.6 crores (FY 2005-2006) and currently operates 22 stores in the major metros and mini metros of India. An international shopping experience, a perception of values, and offering the latest styles, has created a loyal following for Westside's own brand of merchandise. Westside was named the 'Most Admired Large 25

Format Retail Chain of the Year' by the Lycra Images Fashion Awards 2005.Westside operates stores in Mumbai, Ahmedabad, Bangalore, Delhi, Chennai, Kolkata, Hyderabad, Pune, Surat, Vadodara, Indore, Noida, Gurgaon, Ghaziabad, Mysore, Jaipur, Lucknow, Nagpur.

Wal-Mart Stores, Inc.

is

an

American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue, according to the 2007 Fortune Global 500. Founded by Sam Walton in 1962, it was incorporated on October 31, 1969. It opened its home office and first distribution center in Bentonville, Arkansas. It had 38 stores operating with 1,500 employees and sales of $44.2 million .Wal-Mart is the largest grocery retailer in the United States, with an estimated 20% of the retail grocery and consumables business, as well as the largest toy seller in the U.S., with an estimated 22% share of the toy market. Wal-Mart is the largest private user of electricity in the US. Owns a subsidiary electric company in Texas, and will possibly move into the power business. It is also undertaking a number of environmentally conscious initiatives to reduce energy usage and waste. Wal-Mart operates in Mexico as Walmex, in the UK as ASDA, and in Japan as Seiyu. It has wholly-owned operations in Argentina, Brazil, Canada, Puerto Rico, and the UK. Wal-Mart's investments outside North America have had mixed results: its operations in South America and China are highly successful, but it sold its retail operations in South Korea and Germany in 2006 after sustained losses. On September 12, 2007, Wal-Mart introduced new advertising with the slogan, "Save Money Live Better," replacing the

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"Always Low Prices, Always" slogan, which it had used for the previous 19 years. Global Insight, which conducted the research that supported the ads, found that WalMart's price level reduction resulted in savings for consumers of $287 billion in 2006, which equated to $957 per person or $2,500 per household

Carrefour SA

is a French international hypermarket

chain, with a global network of outlets. The group was created by Marcel Fournier and Denis Deffore in 1957. It is the second largest retail group in the world in terms of revenue after Wal-Mart. Carrefour operates mainly in Europe, Brazil, Argentina, Dominican Republic and Colombia, but also has shops in North Africa and Asia. Carrefour means cross-road in French. Carrefour is active in many types of retail distribution: hypermarkets, supermarkets, Discount Store, Grocery Stores, Cosmetics, and Cash & Carry. Recently The $130 billion French retail Carrefour has set up a 100 percent-owned arm to enter the wholesale merchandise business in India and will opt for the franchising route to open multi-brand retail stores in the country, Carrefour WC&C India will also enter these areas where the Indian 27

franchisee can get the same technical expertise that go into running the retail trade stores of the French company across the globally.

The Kroger Co. is an American retail supermarket chain and parent company, founded by Bernard Henry Kroger in 1883 in Cincinnati, Ohio. It reported over US$66 billion in sales during fiscal year 2007 and is currently the second-largest grocery retailer in the country by volume and third-place general retailer in the country, with Wal-Mart and The Home Depot filling slots one and two, respectively. Kroger operated, either directly or through its subsidiaries, 2,500 grocery stores, 579 of which had fuel centers, nearly 800 convenience stores, 400-plus jewelry stores, and 42 manufacturing facilities in 32 states; we employ a growing family of more than 290,000 associates coast-to-coast and presently Kroger is active in many other Retail Distribution like Bakery, Banking, beer, dairy, wine etc…. The slogan of Kroger co. is “Right Store. Right Place”. Kroger’s recently launched Perishable Donations Partnership will bring critically needed perishable food items into the food bank process. The company-wide program will increase the number of stores in the Kroger family that donate safe, perishable food to Second Harvest food banks that are equipped to safely handle and distribute

fresh

food.

Kroger’s

goal

of nutritious, fresh food across the country.

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is

to

donate

50

million

pounds

Recession  A Recession is a contraction phase of the business cycle. 

National Bureau of Economic Research (NBER) is the official agency in charge of declaring that the economy is in a state of recession.

 They define recession as: “Significant decline in economic activity lasting more than a few months, which is normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”.  For this reason, the official designation of recession may not come until after we are in a recession for six months or longer.

What Causes Recession?  An economy typically expands for 6-10 years and tends to go into a recession for about six months to 2 years. 

A recession normally takes place when consumers loose confidence in the growth of the economy and spend less.

 This leads to a decreased demand for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment. 

Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment. •

US Crisis Hits India

US faced major crisis because of – • • • • •

Sub prime mortgage crisis (home loan defaults) Rising oil prices at $100 a barrel Global Inflation High unemployment rates A declining dollar value

All this slowed down the growth of the economy and as the GDP growth rate fell to 2%, recession set in.

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Low GDP growth indicating Recession in US

Impact on India A slowdown in the US economy is bad news for India because: • • •

Indian companies have major outsourcing deals from the US India's exports to the US have also grown substantially over the years. Indian companies with big tickets deals in the US are seeing their profit margins shrinking.

Anatomy of the economic depression in India  Share Market

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• • • •

More people have sold the shares in the Indian share market than they bought in the recent weeks. This has added to the fall of sensex to lower points. Foreign investors have pulled out from stock markets leading to heavy losses in stocks and mutual funds Stock broking houses are laying-off people Because of such uncertainty many people have started saving money in banks rather than investing

Recession Impact on Retails Retail sales fell off a cliff in September, plunging by the largest amount in three years as worried consumers shunned the malls and auto showrooms in the midst of the country's financial meltdown. The Commerce Department reported Wednesday retail sales decreased 1.2 percent last month, nearly double the 0.7 percent drop that had been expected. It was the biggest decline since retail sales fell by 1.4 percent in August 2005. The bigger-than-expected decline significantly increased the risks of a recession because consumer spending is two-thirds of total economic activity. The news spread recession jitters across Wall Street, as stocks fell sharply pushing the Dow Jones industrials back below 9,000 at times. The weakness was led by a 3.8 percent drop in auto sales. Sales dropped below 1 million units as consumers struggled to find financing. Retail sales have now fallen for three consecutive months, the first time that has occurred on government records that go back to 1992. Economists had expected sales to be down in September as a flood of bad news about the financial system and rising unemployment increased consumers' worries. Many analysts believe the overall economy, as measured by the gross domestic product, is slipping into a recession, triggered by a steep slump in housing and the severe credit crisis. Even excluding auto sales, retail sales showed widespread weakness, falling by 0.6 percent or double the decline outside of autos that had been expected. "The consumer shut up shop even before the markets got crushed and that is not good news for the economy," said Joel Naroff, chief economist at Naroff Economic Advisors. "What is ominous is that the declines in spending were broad based."

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Sales at department stores fell by 1.5 percent following an even bigger 1.6 percent drop in July. Sales at furniture stores fell by 2.3 percent. Sales at appliance stores slid 1.5 percent.

In other economic news, the Labor Department reported that wholesale prices fell for a second straight month, declining by 0.4 percent, thanks to a big drop in energy costs. However, core wholesale prices, which exclude food and energy, rose by 0.4 percent, double what economists had been expecting. Federal Reserve policymakers are counting on the economic slowdown to dampen inflation pressures and give them more room to cut interest rates if needed to keep the financial crisis from pushing the country into a deep downturn. The central bank last week cut a key rate by a half-point at an emergency meeting, coordinating the move with other major economies. In a third report, the Commerce Department said businesses increased their inventories by 0.3 percent in August — the smallest advance in five months. The increase was below the 0.5 percent rise that economists had expected and sharply lower than the 1.1 percent jump in July. Economists are watching to see whether business confidence begins to falter as the economy weakens. Business plans on inventory growth and investment spending are key factors influencing economic activity.

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Analysts said the slowdown in inventory growth could also be reflecting the serious problems in the market for commercial paper, where businesses obtain short-term loans to fund their day-to-day operations such as buying inventories. That market has frozen up in recent months as banks have grown concerned about the risks of bad loans. In one of many emergency measures implemented by the government during the current credit crisis, the Federal Reserve has announced that it will start a program later this month to support the commercial paper market in an effort to get those loans back to more normal levels.

Impact of Recession Retail sector deep in recession Retail sales deteriorated further in April, confirming the recession in the local economy continued into the 2nd quarter. Wholesale andretail trade contracted 2.5% (saar) in the 1Q09. Although interest rates have already been cut by 4.5%, the positive impact on spending will take time to become apparent. Further cuts in interest rates are possible, but the SARB may keep rates unchanged at the June meeting because of the stickiness of inflation and the time lags involved in monetary policy. Household finances are taking strain despite the lower interest rates. Reducing the huge debt burden accumulated in previous years is a priority for many households. Banks have also tightened their lending criteria significantly and only a small portion of credit applications are being approved. At the same time weak equity and property prices are putting household balance sheets under pressure and reducing the propensity of households to borrow. Given the surge in mortgage lending in recent years, many households currently have negative property equity on their balance sheets. The result is that households are cutting back on discretionary spending in a big way and saving more. The labour market is also taking strain with increasing unemployment and falling wage increases. In many sectors, such as manufacturing, current wage increases are way below the inflation rate. Current statistics suggest that retail inflation is still around 10%.

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•

Seasonally adjusted real retail sales were 1.3% lower in April than in March and 6.9% lower than a year ago.

•

April real retail sales (seasonally adjusted) were also 4% lower than the 1st quarter average.

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Challenges KEY CHALLENGES: 1) Location: "Right Place, Right choice" Location is the most important ingredient for any business that relies on customers, and is typically the prime consideration in a customer’s store choice. Locations decisions are harder to change because retailers have to either make sustainable investments to buy and develop real estate or commit to long-term lease with developers. When formulating decision about where to locate, the retailer must refer to the strategic plan. * Investigate alternative trading areas. * Determine the type of desirable store location. * Evaluate alternative specific store sites.

2) Merchandise: The primary goal of the most retailers is to sell the right kind of merchandise and nothing is more central to the strategic thrust of the retailing firm. Merchandising consists of activities involved in acquiring particular goods and services and making them available at a place, time and quantity that enable the retailer to reach its goals. Merchandising is perhaps, the most important function for any retail organization, as it decides what finally goes on shelf of the store. 3) Pricing: Pricing is a crucial strategic variable due to its direct relationship with a firm's goal and its interaction with other retailing elements. The importance of pricing decisions is growing because today's customers are looking for good value when they buy merchandise and services. Price is the easiest and quickest variable to change. 35

4) Target Audience: - "Consumer the prime mover" "Consumer Pull", however, seems to be the most important driving factor behind the sustenance of the industry. The purchasing power of the customers has increased to a great extent, with the influencing the retail industry to a great extent, a variety of other factors also seem to fuel the retailing boom. 5) Scale Of Operations: Scale of operations includes all the supply chain activities, which are carried out in the business. It is one of the challenges that the Indian retailers are facing. The cost of business operations is very high in India.

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Conclusion

T

he future for organized retail in India is a bright one. The demographics, the sense of optimism and the deep-rooted entrepreneurial culture are ready ingredients for success. The retail industry needs to get organized and drive

its own destiny. The government needs to be lobbied with, to help create a conducive environment so that the latent entrepreneurial spirit can get unleashed and ultimately value can be delivered to consumers who will push their shopping carts and participate actively in this great retail boom. While there are obstacles, there are clear opportunities in modern retailing in India. In such a scenario, preparedness of Indian retailers in terms of having appropriate formats, scalable processes, appropriate technology and relevant organization capability would be crucial to success. The Indian market is extremely price-quality sensitive; it makes sense to enter the gigantic market in a phased manner; hence for the multinational players it is imperative to have the right local partners – dealers, distributors and retailers. The Indian retail sector is ready to take on challenges from global retail players such as Wal-mart and Carrefour because unlike them, they have a better understanding of the Indian consumer’s psyche. Ultimately, a successful retailer is one who understands his customer. The Indian customer is looking for an emotional connection, a sense of belonging. Hence, to be successful any retail outlet has to be localized. The customer should feel that it is a part of his culture, his perceived values, and does not try to impose alien values or concepts on him. Indian customer is not keen to buy something just because an international company sells it. Ultimately, it boils down to how much localization and adaptation the company is willing to do for India. Other than tremendous money power, global companies have nothing extra or special that the Indian retail business does not have. To use a clichéd phrase - We live in exciting times. Only three percent of India’s retail market is organized. The future shows tremendous potential for growth in the retail sector. Almost all large companies worldwide are looking to establish a base or stake in the Indian market. In this scenario, the Indian retail sector itself must seize the initiative to realize the dreams of contributing to a prosperous and booming economy.

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The focus should be on the Indian horizon before looking for retail opportunities in other countries because India itself is a big retail market. And with the big cities getting saturated, the tier II cities hold the key for the prosperity of the retailers in India, provided they come up with innovations needed to suit the culture and demographics of these cities.

We shall end with “Mr. Kishore Biyani’s famous gospel for retailing in India”– “Rewrite rules…but Retain the values”.

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Bibliography Websites: 1. 2. 3. 4. 5. 6. 7.

www.google.com www.etretailbiz.com www.mothersprideonline.com www.futuregroup.com www.rbk.com www.retailindustry.about.com www.pantaloon.com

Books: 1. Marketing Management by Philip Kotler 2. Organizational Behavior by Stephen P Robbins. 3. Consumer Behavior by Leon G. Schiffman & Lesile Lazar Kanuk Magazines: Business today Business world - The Marketing White book, 2008 Press Sources: Economic Times Business Standard

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