Retailing India -bharath

Introduction

Retailing involves all activities incidental to selling to ultimate consumer

for their personnel family and household use. It does this by organizing their availability on a relatively large scale and supplying them to customers on a relatively small scale. (Retail is a French word which means ‘To break a bulk’) Retailers provide the tailored goods to the consumers. Manufacturer

Wholesaler

Retailing

Consumer

Retailing is one of the biggest sectors and it is witnessing revolution in India. The organized sector is expected to grow faster than GDP growth in next few years.

Industry Evolution India tops the AT Kearney's annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. Furthermore a report by PricewaterhouseCoopers foresees India and China to continue as the top sourcing hubs in retail and consumer sector in the coming years. The Indian retail market, which is the fifth largest retail destination globally, according to industry estimates is estimated to US$ 427 billion by 2010 and US$ 637 billion by 2015. Simultaneously, modern retail is likely to increase its share in the total retail market to 22 per cent by 2010. Continuing the robust growth of the organised retail in India, according to the Credit Rating and Information Services of India, the industry raked in US$ 25.44 billion turnover in 2007-08 as against US$ 16.99 billion in 200607, a whopping growth rate of 49.73 per cent. India has one of the largest number of retail outlets in the world. Of the 14

million retail outlets present in the country, nearly 5 million sell food and related products. Thought the market has been dominated by unorganised players, the entry of domestic and international organised players is set to change the scenario. Organised retail segment has been growing at a blistering pace, exceeding all previous estimates. According to a study by ASSCHAM organized retail segment will reach US$22 bn by 2010. The fastest growing segments have been the wholesale cash and carry stores (150 per cent) followed by supermarkets (100 per cent) and hypermarkets (75-80 per cent). Further, it estimates the organised segment to account for 25 per cent of the total sales by 2011.

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Traditionally retailing in India can be traced to The emergence of the neighborhood ‘Kirana’ stores catering to the convenience of the consumers • Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission 1980s experienced slow change as India began to open up economy. Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw the emergence of retail chains •

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Later Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers. For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music; Crossword and Fountainhead in books. Post 1995 onwards saw an emergence of shopping centers, mainly in urban areas, with facilities like car parking targeted to provide a complete destination experience for all segments of society Emergence of hyper and super markets trying to provide customer with 3 V’s - Value, Variety and Volume Expanding target consumer segment: The Sachet revolution - example of reaching to the bottom of the pyramid.

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At year end of 2000 the size of the Indian organized retail industry is estimated at Rs. 13,000 crore

Growth: In growth stage, the market is developing quickly and also ready for modern retailing. Countries, which are in Peaking stage such as India. Retailers entering this stage have the best chance for long-term success. Retailers at this stage should enter through local representations, sourcing offices and new stores. Strategy suggested: The strategy of adopting quality and styled products with new models and shift of advertising from product awareness to product preference .The idea behind adopting this strategy is to strengthen against competitors.

Retailing formats in India

Retail Sales in India Unorganized : Vast majority of the 14 million stores are small "father and son" outlets Fragmented : Mostly small individually owned businesses, average size of outlet equals 50 s.q. ft. Though India has the highest number of retail outlets per capita in the world, the retail space per capita at 2 s.q. ft per person is amongst the lowest. Rural bias: Nearly two thirds of the stores are located in rural areas. Rural retail industry has typically two forms: "Haats" and “Melas". Haats are the weekly markets : serve groups of 10-50 villages and sell day-to-day necessities. Melas are larger in size and more sophisticated in terms of the goods sold (like TVs)

Traditionally three factors have plagued the retail industry:

Experimentation with formats: Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc. Store design : Biggest challenge for organised retailing to create a “customer-pull” environment that increases the amount of impulse shopping. Research shows that the chances of senses dictating sales are upto 10-15%. Retail chains like MusicWorld, Baristas, Piramyd and Globus are laying major emphasis & investing heavily in store design. Emergence of discount stores: They are expected to spearhead the organised retailing revolution. Stores trying to emulate the model of WalMart. Ex. Big Bazaar, Bombay Bazaar, RPGs. Unorganized retailing is getting organized: To meet the challenges of organized retailing such as large cineplexes, and malls, which are backed by the corporate house such as 'Ansals' and 'PVR‘ the unorganized sector is getting organized. • 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying.

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Bombay Bazaar and Efoodmart formed which are aggregations of Kiranas

Leading Retailers India vs. World •

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Indian retail is fragmented with over 12 million outlets operating in the country. This is in comparison to 0.9 million outlets in USA, catering to more than 13 times of the total retail market size as compared to India India has the highest number of outlets per capita in the world widely spread retail network but with the lowest per capita retail space (@ 2 sq. ft. per person)

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Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is higher than the size of Indian retail industry. Almost 100 times more than the turnover of HLL (India's largest FMCG company). Wal-Mart - over 4,800 stores (over 47 million square meters) where as none of India's large format store (Shoppers' Stop, Westside, Lifestyle) can compare. The sales per hour of $22 million are incomparable to any retailer in the world. Number of employees in Wal-Mart are about 1.3 million where as the entire Indian retail industry employs about three million people. One-day sales record at Wal-Mart (11/23/01) $1.25 billion - roughly two third of HLL's annual turnover. Developed economies like the U.S. employ between 10 and 11 percent of their workforce in retailing (against 7 percent employed in India today). 60% of retailers in India feel that the multiple format approach will be successful here whereas in US 34 of the fastest-growing 50 retailers have just one format Inventory turns ratio: measures efficiency of operations. The U.S. retail sector has an average inventory turns ratio of about 18. Many Indian retailers KPMG surveyed have inventory turns levels between 4 and 10. Global best-practice retailers can achieve more than 95 percent availability of all SKUs on the retail shelves (translating into a stockout level of less than 5 %).The stock-out levels among Indian retailers surveyed ranged from 5 to 15 percent.

Developments •

AT Kearney has estimated India’s total retail market at US$ 202.6 billion which is expected to grow at a compounded 30 per cent over the next five years.

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With the organised retail segment growing at the rate of 25-30 per cent per annum, revenues from the sector are expected to triple from the current US$ 7.7 billion to US$ 24 billion by 2010. The share of modern retail is likely to grow from its current 2 per cent to 15-20 percent over the next decade Over next two years India will see several Indian retail businesses attaining a critical mass as growth in the industry picks up momentum driven by two key factors: Availability of quality real estate and mall management practices Consumer preference for shopping in new environments Wal-Mart : huge plans for India. Moving a senior official from its headquarters in Bentonville, Arkansas, to head its market research and business development functions pertaining to its retail plans in India. New York-based high-end fashion retailer Saks Fifth Avenue has tied up with realty major DLF Properties to set up shop in a mall in New Delhi. Tommy Hilfiger, retailer of apparels, expects to open one store each in Delhi, Ahmedabad, Lucknow and Bangalore in the next four months. ITC is experimenting with retailing through its e-Choupal and Choupal

Sagar – rural hypermarkets. • HLL is using its Project Shakti initiative – leveraging women self-help groups – to explore the rural market. • Mahamaza is leveraging technology and network marketing concepts to act as an aggregator and serve the rural markets. International Retailers The world's largest retailer, Wal-Mart, has tied-up with Sunil Mittal's Bharti Enterprises to enter Indian retail market. • Microsoft's first shop-in-shop pilot has been launched with the Tata Group subsidiary Infiniti Retail's multi-brand consumer durables retail format, Croma.

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The Walt Disney Company, consumer product retailing arm of global animation giant, will soon add 135 new stores to its existing 15 stores.

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World's leading coffee chain, Starbucks' enters India through a tieup with the country's leading multiplex operator PVR Limited. Apple Inc has entered into an exclusive marketing and distribution deal with Reliance Retail through "iStore by Reliance Digital". Some of the international players that have already entered India include McDonald's, Pizza Hut, Dominos, Levis, Lee, Nike, Adidas, TGIF, Benetton, Swarovski, Sony, Sharp, Kodak, Medicine Shoppe among others.

Future direction: Concerns Sales tax laws - lead to retailers having state-level procurement and storage leads to Indian retailers having higher inventories. VAT has helped alleviate this a bit. Retail space a report by Images Retail estimates the number of operational malls to more than double to over 412 with 205 million square feet by 2010 and further 715 malls by 2015. Luxury retail Indian luxury retail market is estimated to leap-frog from around US$ 3.5 billion to US$ 30 billion by 2015, according to a survey done by AT Kearney. India's luxury market, estimated to be the 12th largest in the world, has been growing at the rate of 25 per cent per annum. Kids' retail Leading the kids' retail revolution is the apparel business, which accounts for almost 80 per cent of the revenue, with kids' clothing in India following international fashion trends. According to research firm KSA Technopak, the branded segment comprises US$ 701.7 million of the total kids' apparel market-size of over US$ 3 billion. Industry experts say kids' retailing will touch annual growth of 30-35 per cent. E-tailing The increase in the PC and internet penetration along with the growing preference of Indian consumers to shop online has given a tremendous boost to e-tailing-the online version of retail shopping. An estimated 10 per cent of the total e-commerce market is accounted by etailing .According to the Indian Marketing Research Bureau (IMRB) and Internet and Mobile Association of India (IAMAI), the e-tail market is

estimated to grow by 30 per cent to US$ 273.02 million. Rural retail is estimated to cross US$ 45.32 billion mark by 2010 and US$ 60.43 billion by 2015, says a study by CII and YES BANK. And with 87 per cent of rural markets not having access to any sort of organised marketing and distribution, this segment has tremendous potential for growth. Retail Reform The Government allows 100 per cent foreign direct investment (FDI) in cash and carry through the automatic route and 51 per cent in single brand. Besides, the franchise route is available for big operators. To further attract global retailers, the economic survey 2007-08 has suggested a share for foreign equity in all retail trade and 100 per cent in respect of luxury brands and other specialised retail chains.

Growth drivers in India for retail sector: •

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Rising incomes and improvements in infrastructure are enlarging consumer markets and accelerating the convergence of consumer tastes. Liberalization of the Indian economy. Increase in spending per capita Income. Advent of dual income families also helps in the growth of retail sector. Shift in consumer demand to foreign brands. Consumer preference for shopping in new environs. The Internet revolution is making the Indian consumer more accessible to the growing influences of domestic and foreign retail chains. Reach of satellite T.V. channels is helping in creating awareness about global products for local markets. The increasing share of young population in total population of India. Availability of quality real estate and mall management practices. Foreign companies' attraction to India is the billion-plus population.

General Retail Industry Trends-change factors

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The e-channel is still growing fast Experience is everything – Compelling cross-channel experiences are driving product sales and loyalty Customer-centricity is driving business transformation Business innovation is being driven by creativity and design Disruptive innovations are lowering barriers to entry Buyer niches are changing (gender, age, generations 'Y' and ‘Z’) Trial before purchase is becoming expected" Social credentials are defining brands (eco, green, CSR & PSR) Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market across most categories of consumption.

3 Deepening Trends in Consumer Behaviour:

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Customers are becoming more demanding – the Web 2.0 revolution has provided a forum for sharing opinions to the point where consumers really do call the shots. They expect choice and convenience or will go elsewhere. Social Media online is exploding – and is becoming a key vehicle for both strategic marketing and customer engagement.

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Premium products and services still sell well and Green is becoming

iconic – many of the less price sensitive consumers are still highly style and status conscious, and consumers are going to increasingly great lengths to boycott Ok, so that’s 3 consumer trends. How about the Retail Industry in general?

3 Deepening Trends in the brands that have poor ecocredentials Retail Industry:

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The credit crunch is getting worse – and negatively impacting retailer profits.

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The e-channel is still growing fast – online spending in July for example reached £4.8 billion, up 80% on last year to a new all-time high. Retailers are expecting a major shift to online this Christmas.

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The leaders are merging channels – and providing seamless brand and customer experiences across them all. Consumers in return are becoming rapidly less tolerant of pricing, availability or service differentials online and offline.

Challenges for retailing • The first challenge facing the organized retail sector is the competition from unorganized sector. • In retail sector, Automatic approval is not allowed for foreign investment. • Taxation, which favours small retail businesses. • Lack of trained work force. • Low skill level for retailing management. • Intrinsic complexity of retailing- rapid price changes, threat of product obsolescence and low margins. • Organized retail sector has to pay huge taxes, which is negligible for small retail business. • Cost of business operations is very high in India.

Threats 2009 Retail Industry Predictions: Closing Stores, Going Out of Business, and Getting Back to Basics

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In 2009 large and small retailers will be hosting going out of business sales before closing their stores. This is predicted to happen as many

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as 200,000 times by some retail industry analysts. While the numbers are as difficult to predict as the economy itself, it is certain that there will be substantial retail casualties in 2009. There are many retail chains that will be forced out of business in 2009 by their own debt structure and the global credit crunch. There are also many retail stores that will close storefronts in 2009 because a recessed economy demands a recessed retail industry. That’s just the way the economy ebbs and flows. There will be some well-known retail companies that declare bankruptcy in 2009 because their concept is indistinct and their merchandise is redundant. It’s not enough to just show up any more. Retailers need a compelling offer in order to justify their existence.

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At a boardroom level, many accountability discussions about financial mismanagement, forecasting failures, same store sales declines, merchandising missteps, and not so unique selling propositions will be had this year. In 2009, employees at all levels in the retail industry will need to learn and live the serenity prayer, as they accept the things they can’t change, change the things they can, and maintain disciplined focus in order to know which is which. In 2009 retailers will realize that customers won't give second chances after less than "fabulous" experiences because don't need to. The retail industry crisis will bring out the best that some retailers have to offer, they survive. The big winner in 2009 and beyond will be American consumers. A forced discrimination will create conscious consuming habits that will not only redefine the retail industry, but also reprioritize daily existence. Unfortunately, elevated consciousness never comes at a discounted price.

Conclusion:

Many agencies have estimated differently about the size of organized retail market in 2010. The one thing that is common amongst these estimates is that Indian organized retail market will be very big in 2010. The status of the retail industry will depend mostly on external factors like Government regulations and policies and real estate prices, besides the activities of retailers and demands of the customers also show impact on retail industry. As the retail market place changes shape and competition increases, the potential for improving retail productivity and cutting costs is likely to decrease. Therefore it is important for retailers to secure a distinctive position in the market place based on values relationships or experience. Finally it is important to note that these strategies are not strictly independent of each other; value is function of not just price quality and service but can also be enhanced by personalization and offering a memorable experience.

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Employment opportunities in retail sector in India: India's retail industry is the second largest sector, after agriculture, which provides employment. According to Associated Chambers of Commerce and Industry of India (ASSOCHAM), the retail sector will create 50,000 jobs in next few years. Retail companies are starting retail management courses in partnership with management institutes, roping in talent from other sectors and developing comprehensive career growth and loyalty plans for existing employees. Trent has also started in-house learning programmes and now goes to under graduate colleges to recruit students. Since, the job market is hugely receptive to this with more and more business schools focusing on the sector and large retailers setting up retail academics. Challenges of Retailing in India.