1. SMALL V/S MALL
PROJECT BY:
RUCHI SHAH
T.Y.BMS (SEMESTER V)
PROJECT GUIDE:
MS. MONA BHATIA
NAGINDAS COLLEGE OF COMMERCE, ARTS &
MANAGEMENT STUDIES, MALAD (W), MUMBAI
400064.
SUBMITTED TO:
UNIVERSITY OF MUMBAI
2008-09
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2. ACKNOWLEDGEMENT
Success may be defied in many a ways as possible, but the main challenge lies in
achieving it. In this road to success, many factors contribute, without which even the best
efforts would go in vain.
Some call it luck, while the others call it fate. However, we would not call it just our luck.
At this outset I would like to take pride to thank my respected project guide and the
coordinator (BMS department – NK College) Prof. Ms. MONA BHATIA and secondly,
the principal of NK college Mrs. ANCY JOSE for their timely support who has inspired
us and motivated us to get this wonderful and brilliant work experience, without her
valuable guidance and support, the dream of making this project would never come true.
Last but not the least; we extend our thanks to the almighty for all that happened without
any hurdles or problems!
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3. Executive Summary
Retailing consists of all activities involved in selling goods and services to consumers for
their personal, family or household use. It covers sales of goods ranging from
automobiles to apparel and food products and services ranging from hair cutting to air
travel and computer education. Sales of goods to intermediaries who resell to retailers or
sales to manufacturers are not considered a retail activity.
The Indian retailing industry, which was traditionally dominated by small and family-run
stores, has come of age. The retail sector is the second largest employer after agriculture
in the country and also the second largest untapped market after China. There are some
12 million retail outlets in India. Besides, the country is also dotted with low-cost kiosks
and pushcarts. Organized retailing is only 3% of the total retail industry. Over the past
couple of years there have been sweeping changes in the general retailing business.
India's retail sector is going to transform and with a three-year compounded annual
growth rate of 46.64 per cent, retail sector is the fastest growing sector in the Indian
economy. Traditional markets are transforming themselves in new formats such as
departmental stores, hypermarkets, supermarkets and specialty stores.
In the last few years, as modern retail concepts begin to make an appearance across urban
India, the debate on their impact on the traditional Indian retail businesses including the
so-described "mom & pop" stores and the neighbourhood “kirana stores” gets shriller.
Small Indian "Kirana" Shopkeepers Are Already Feeling the Heat from the Malls. The
opposition to large retail shops seems to be growing, and broadening to take in domestic
retail chains as well as the international giants that want to enter the Indian market.
Admittedly, such opposition flies in the face of the received wisdom: studies based on
extensive field surveys have concluded that the spread of organised retailing will not hurt
millions of small mom-and-pop, or kirana, stores across the country. But the experience
so far (and it is early days yet) suggests that this may not be entirely true.
News reports, including those published in this newspaper, have cited instances of small
shops closing down or losing business in areas where large retailers have set up shop.
Analysts are still working out the odds on the kirana v/s organized retail major battle,
vacillating between saying that the two sets of entities will co-exist happily, each serving
different needs and predicting doom for the kirana store, who perhaps would find the
pace daunting. But only as long as the Indian consumer weighs his options in favor of the
kirana – paying MRP at an outlet that’s a stone’s throw away versus paying better prices,
but at the cost of a longer trip to the nearest retail outlet. In any case, most of India still
prefers to walk to the nearby kirana store for nearly everything! This will change if and
when the biggies set up outlets in every other street, in every neighborhood – which they
will, if the numbers make sense. However, Kiranas has opportunities to grow in India in
spite of the growth of malls because these kirana shops will also get benefit of the
growing economy. The argument that the kirana shops will be affected by these malls is
only myth. Therefore both the malls and kirana stores can play simultaneously in India.
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4. Index
Sr.No Contents Page No
1 Introduction 9
2 10-11
Evolution of Indian Retail Sector
Phases in the Evolution of Retail Sector
12-13
3 Boom in Retail Industry
4
Growth of Retail Companies in India 14-17
The Growth Drivers
5 Key Players in Retail Industry 18-20
6 Retailing Scenario - Global 21-22
7 Retailing Scenario - India 23-27
8 Classification of Retail Industry 28
9 Traditional / Unorganized Retailing 29-40
Kirana / Small Local Stores
Characteristics of Kirana Shops
Significance of Kirana Stores
Traditional Format Retailers
Advantage of Kiranas
SWOT Analysis of Kirana Stores
Lots to learn from Kiranas
Interview of Central Kirana Store
Changing face of Kirana
Unorganized Retailing is Getting Organized
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5. 10 41-57
Indian Organized Retail Market
Origin of Modern Retailing in India
Factors Estimated to propel the growth of the
Organized Retailing
Modern / Organized Retailing Formats
Experimentation with Formats
Challenges before Organised Retailing in India
SWOT Analysis of Organized Market
Top 10 retailers in India
11
Malls – The new face of Retail Market 58-61
Advantages of Shopping Malls
Disadvantages of Shopping Malls
The trends to follow in future
Small is Big for Indian Retail
12 The Retail Dictatorship v/s Retail Democracy 62-63
13 Articles Supporting the Inevitable Fight 64-68
Bid to Stop Big-Fish Entry in Retail
HLL teams up with Kiranas to fight malls
Local vendors throws the gauntlet to Reliance Fresh,
Subhiksha
Supermarkets v/s Indian mom-and-pop shops
14 Survey Analysis 69-77
15 Kirana Stores v/s Super Markets 78
16
Case Study 79-80
17 Conclusion 81
18 Appendix 82
19
Questionnaire for Survey 83-84
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6. Objective of the Study
The purpose of this study is
To understand the concept of retailing.
To understand the retail market
To understand what is organised and unorganized retailing
To study the current status of malls and kiranas
To study the effect of shopping malls on Kiranas
To understand consumers’ preferences between shopping malls and
local stores
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7. RESEARCH METHODOLOGY
Marketing research is useful to:
Launch a new product or service or Facility
Determine marketing opportunities
Solving the problem
Effectiveness of ad-campaign
The success defines co-ordination between Research and management. The research
involves a no. of interrelated activities which overlap and do not rigidly follow a
particular sequence. The major steps involved in marketing research process are:
1. Formulation of problem:
A problem well define is half solved. To identify research problems are of 3 types:
Overt difficulties: are those which are not hidden.
Latent difficulties: Which are not so hidden but if not checked would soon
become evident.
Unnoticed opportunities: once the 2 or more problems are identified the next is to
decide which of the problem is to be selected.
Formulation of problem:
Unit of analysis: The study of small v/s mall as a business, its characteristics,
problems, functional areas, growth etc.
Time and space boundaries: The study of small v/s mall workings in India from
its existence in India till today.
Characteristics of Interest: to understand the workings and business practice of
small v/s mall
Environmental condition: SWOT analysis etc.
2. Choice of Research Design:
It is a Descriptive Research which is undertaken to know and understand the
characteristics of small v/s mall. The collected data are of secondary type. The collected
data is framed in a presentable and analytical form.
3. Determining source of data:
The data presented are both of primary and secondary type.
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8. 4. Designing Data Collection Forms:
Observation: The data are collected through own observation. The observation and data
are recorded faithfully and accurately.
Survey: The primary data are collected from fields survey through questionnaire from the
respondents.
5. Determining sampling design and sample size:
The project started with sorting all the raw data and arranging them in perfect order. To
add value to the project and understand the practicality, I have visited some stores who
are the best ones in retailing business.to Further, to understand the consumers better, a
field survey was also conducted to find out the tastes and preferences, purchasing habits,
expectations of the consumers etc. Analysis of this primary data has been done to actually
understand the survey in a better way.
Primary Source includes the survey done in Mumbai for a sample population of 100
people. Also interviews of 1 kirana stores owner and viewpoint of general public have
been taken.
Secondary sources includes the available information on the internet and data available in
books and journals.
6. Organising and conducting the field survey:
The research is organized and conducted by interviewing the respondents.
7. Processing and analyzing the collected data:
The collected data is presented in analyzing form through tabular form and pie digrams.
8. Preparing the Research report:
The objectivity, coherence, charts and diagrams are used freely to express clarity in the
presentation of ideas and research.
9. Conclusion:
The research proceeds from selection of project topic through the collection and analysis
of data to the preparation and submission of report in presentable form.
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9. SMALL V/S MALL
Introduction to Retailing
The word ‘retail’ is derived from the French word ‘retaillier’, meaning ‘to cut a piece off’
or ‘to break bulk’. In simple terms, it implies a first hand transaction with the customer.
Retailing involves a direct interface with the customer and the coordination of business
activities from end to end – right from the concept or design stage of a product or
offering, to its delivery and post-delivery service to the customer. The industry has
contributed to the economic growth of many countries and is undoubtedly one of the
fastest changing and dynamic industries in the
world today.
Retailing consists of all activities involved in
selling goods and services to consumers for their
personal, family or household use. It covers sales of
goods ranging from automobiles to apparel and
food products and services ranging from hair
cutting to air travel and computer education. Sales
of goods to intermediaries who resell to retailers or
sales to manufacturers are not considered a retail
activity.
Retailing can be examined from many perspectives. A manufacturer of white goods like
washing machine and refrigerators has many options to reach out to consumers. It can
sell through dealers, the company showrooms (Sony World, Videocon Plaza) or
hypermarkets (Big Bazaar).
Retail outlets exist in all shapes and sizes – from a “panwala” to a shoppers’ Stop.
However, most of these outlets are basic mom-and-pop stores – the “traditional “Kirana”
shops in the locality, which are smaller than 500 sq.ft. area with very basic offerings,
fixed prices, zero use of technology, and little or no ambiance. The number of outlets in
India has increased from 0.25 million in 1950 to approximately 12 million today. This
translates to a growth of 48 times over a certain period when the population has trebled.
Retailing in India is gradually inching its way to becoming the next boom industry. The
whole concept of shopping has altered in terms of format and consumer buying behavior,
ushering in a revolution in shopping. Modern retail has entered India as seen in sprawling
shopping centres, multi-storeyed malls and huge complexes offer shopping,
entertainment and food all under one roof.
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10. Evolution of retail
The origins of retailing in India can be traced back to local markets and roaming traders.
Whatever was available locally, entrepreneurs made an estimate of local demand and
ventured to the marketplace to offer their wares to interested people. The product range
was restricted to whatever agricultural produce was made possible by the regional climate
and local manufacturing skills. Enterprising and mobile traders ventured beyond, to
peddle wares perceived by them to be in demand elsewhere. This tribe of moving traders
brought product variety to the markets. This led to the emergence of Kirana stores and
mom-and-pop stores. These stores used to cater to the local people.
Eventually the government supported the rural retail and many indigenous franchise
stores came up with the help of Khadi & Village Industries Commission. The economy
began to open up in the 1980s resulting in the change of retailing. The first few
companies to come up with retail chains were in textile sector, for example, Bombay
Dyeing, S.Kumar's, Raymond, etc.
Growth of large scale retailers was fuelled by the rapid spread of mass production to
more and more product categories. Brisk industrialization ensured replication of large
volume production techniques to innovative areas such as processes foods. Improving
transport facilities enabled retailers to gun for volume – driven procurement. This set the
ball rolling for organized retailing – targeting economies of scale through bulk purchase
and advertising led growth.
Later Titan launched retail showrooms in the organized retail sector. With the passage of
time new entrants moved on from manufacturing to pure retailing. Retail outlets such as
Foodworld in FMCG, Planet M and Musicworld in Music, Crossword in books entered
the market before1995.
Shopping malls emerged in the urban areas giving a world-class experience to the
customers. Eventually hypermarkets and supermarkets emerged. The evolution of the
sector includes the continuous improvement in the supply chain management, distribution
channels, technology, back-end operations, etc. this would finally lead to more of
consolidation, mergers and acquisitions and huge investments.
The opening up of the economy only fueled this globalization. There are, however,
certain bottlenecks as well; the scarcity of space, coupled with the stringent provisions of
the Rent Control Act, act as a dissuasive factor for many players to initiate operations in
the main markets. This also explains why the Raheja’s forayed into their retail venture-
Shoppers’ Stop.
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11. Phases in the Evolution of Retail Sector
Convenience stores, Mom-and-pop / Kirana shops
Source of entertainment and commercial exchange
Weekly markets, Village and rural Melas
Neighborhood stores/convenience
Traditional and pervasive reach
PDS outlets, Khadi stores, Cooperatives
Government supported
Availability/low costs/distribution
Exclusive brand outlets, hypermarkets and supermarkets, department stores and
shopping malls
Shopping experience/efficiency
Modern formats/international
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12. Boom in Retail Industry
Retail industry has brought in phenomenal changes in the whole process of production,
distribution and consumption of consumer goods all over the world. In the present world
most of the developed economies are using the retail industry as their vital growth
instrument. At present, among all the industries of USA the retail industry holds the
second place in terms of employment generation. In fact, the strength of retail industry
lies in its ability to generate large volume of employment.
Not only US but also other developed countries like UK, Canada, France and Germany
are experiencing tremendous growth in their retail sectors. This boom in the global retail
industry was in many ways accelerating by the liberalization of retail sector.
Observing this global upward trend of retail industry, now the developing countries like
India are also planning to tap the enormous potential of the retail sector. Wal-Marts, the
world’s largest retailer have been invited to India. Other popular brands like Pantaloons,
Big Bazaar and Archies are rapidly increasing their market share in the retail sector.
According to a survey, within 5 years, the Indian retail industry is expected to generate
10 to 15 million jobs by direct and indirect effects. This huge employment generation can
be possible because being dependent on the retail sector shares a lot of forward and
backward linkages.
India retail industry is the largest industry in India, with an employment of around 8%
and contributing to over 10% of the country's GDP. Retail industry in India is expected to
rise 25% yearly being driven by strong income growth, changing lifestyles, and favorable
demographic patterns.
It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200
billion. India retail industry is one of the fastest growing industries with revenue expected
in 2007 to amount US$ 320 billion and is increasing at a rate of 5% yearly. A further
increase of 7-8% is expected in the industry of retail in India by growth in consumerism
in urban areas, rising incomes, and a steep rise in rural consumption. It has further been
predicted that the retailing industry in India will amount to US$ 21.5 billion by 2010
from the current size of US$ 7.5 billion.
Shopping in India has witnessed a revolution with the change in the consumer buying
behavior and the whole format of shopping also altering. Industry of retail in India which
has become modern can be seen from the fact that there are multi- stored malls, huge
shopping centers, and sprawling complexes which offer food, shopping, and
entertainment all under the same roof.
India has over 12 million retail enterprises with more than 75% belonging to small family
businesses and basic necessities, especially food related items. Strong fundamental
changes including the changing lifestyles of Indian people, rising incomes etc have
fuelled the growth of modern retailing and has attracted investment in this sector.
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13. Business houses in the country are turning to retail. Modern retailers like Trent,
Shopper’s Stop, Pantaloon, Piramyd, Globus, Vivek and Subhiksha, Foodworld, Big
bazaar, Food bazar have entered the market and are planning for further expansion.
India’s prominent business houses like Reliance industries, Tata, Wadia, Godrej, Hero,
Malhotras are planning to enter retail sector individually and also with foreign partners.
With the government being in the process of determining the level of FDI in retail, a
number of foreign players including Wal-Mart Stores, the world’s largest retail chain
have evinced interest for entering India in a big way. Retail in India has grown beyond
mere retailing and now encompasses sectors such as telecom, automobiles and finance.
India retail industry is progressing well and for this to continue retailers as well as the
Indian government will have to make a combined effort.
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14. Growth of Retail Companies in India
An increasing number of people in India are turning to the services sector for
employment due to the relative low compensation offered by the traditional agriculture
and manufacturing sectors. The organized retail market is growing at 35 percent annually
while growth of unorganized retail sector is pegged at 6 percent.
The Retail Business in India is currently at the point of inflection. Rapid change with
investments to the tune of US $ 25 billion is being planned by several Indian and
multinational companies in the next 5 years. It is a huge industry in terms of size and
according to management consulting firm Technopak Advisors Pvt. Ltd., it is valued at
about US $ 350 billion. Organised retail is expected to garner about 16-18 percent of the
total retail market (US $ 65-75 billion) in the next 5 years.
India has topped the A.T. Kearney’s annual Global Retail Development Index (GRDI) for
the third consecutive year, maintaining its position as the most attractive market for retail
investment. The Indian economy has registered a growth of 8% for 2007. The predictions
for 2008 is 7.9%. The enormous growth of the retail industry has created a huge demand
for real estate. Property developers are creating retail real estate at an aggressive pace and
by 2010, 300 malls are estimated to be operational in the country.
With over 1,000 hypermarkets and 3,000 supermarkets projected to come up by 2011,
India will need additional retail space of 700,000,000 sq ft (65,000,000 m2) as compared
to today. Current projections on construction point to a supply of just 200,000,000 sq ft
(19,000,000 m2), leaving a gap of 500,000,000 sq ft (46,000,000 m2) that needs to be
filled, at a cost of US$15-18 billion.
According to the Icrier report, the retail business in India is estimated to grow at 13%
from $322 billion in 2006-07 to $590 billion in 2011-12. The unorganized retail sector is
expected to grow at about 10% per annum with sales expected to rise from $ 309 billion
in 2006-07 to $ 496 billion in 2011-12. An increasing number of people in India are
turning to the services sector for employment due to the relative low compensation
offered by the traditional agriculture and manufacturing sectors. The organized retail
market is growing at 35 percent annually while growth of unorganized retail sector is
pegged at 6 percent
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15. 2009 - 2011 are estimates. F&S sources: CSO, NSSO and Technopak Advisers Pvt. Ltd.
By 2012, the retail market is projected to grow to around $551.4 billion. In a country with
over one billion inhabitants, consumer retail demand is growing rapidly as the region
modernizes, paving the way for retail expansion. With swift industry development, the
majority of retailers focus on improving loss prevention solutions that maximize growth
and profitability.
Organized retail consists of 4% of the total Indian retail market and is expected to grow to 15% by
2011.
Between 2003 and 2007 organized retail formats (characterized as chain stores and stores
that are subject to central ownership or franchisees) experienced a Compounded Annual
Growth Rate (CAGR) of 19.5%. By 2012, the organized retail market expects to increase
at a more aggressive rate, projected at 44% CAGR -- prompting retailers to look for
effective and innovative loss prevention methods.
According to the study, shoplifting in the Indian retail market accounted for over 50% of
loss, which remains the number one source of inventory loss. EAS is designed to help
retailers prevent losses due to external theft - India's most significant challenge impacting
retailer profitability and inhibiting future growth. Employee theft represented the second
largest source of inventory loss at 20%.
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16. The Growth Drivers
The retail companies are found to be rising in India at a remarkable speed with the years
and these have brought a revolutionary change in the shopping attitude of the Indian
customers. The Indian Retail growth can be attributed to the several factors including:
Demography Dynamics: Approximately 60 per cent of Indian population below 30
years of age.
Double Incomes: Increasing instances of Double Incomes in most families coupled
with the rise in spending power
.
Plastic Revolution: Increasing use of credit cards for categories relating to Apparel,
Consumer Durable Goods, Food and Grocery etc.
Urbanization: Increased urbanization has led to higher customer density areas thus
enabling retailers to use lesser number of stores to target the same number of
customers. Aggregation of demand that occurs due to urbanization helps a retailer in
reaping the economies of scale.
Potential for Investment: The total estimated Investment Opportunity in the retail
sector is around US$ 5-6 Billion in the Next five years.
Location: With modern retail formats having made their foray into the top cities
namely Hyderabad, Coimbatore, Ahmedabad, Mumbai, Pune, Chennai, Bangalore,
Delhi, Nagpur there exists tremendous potential in two tier towns over the next 5
years.
Sectors with High Growth Potential: Certain segments that promise a high growth
are
Food and Grocery (91 per cent)
Clothing (55 per cent)
Furniture and Fixtures (27 per cent)
Pharmacy (27 per cent)
Durables, Footwear & Leather, Watch & Jewellery (18 per cent)
Fastest Growing Formats: Some of the formats that offer good growth potential
are:
Specialty and Super Market (45 per cent)
Hyper Market (36 per cent)
Discount stores (27 per cent)
Department Stores (18 per cent)
Convenience Stores and E-Retailing (9 per cent)
Supply Chain Infrastructure: Supply chain infrastructure in terms of cold chain
and Logistics.
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17. Rural Retail: Retail sector offers opportunities for exploration and investment in
rural areas, with Corporate and Entrepreneurs having made a foray in the past.
India's largely rural population has caught the eye of retailers looking for new areas
of growth. ITC launched the country's first rural mall 'Chaupal Sagar', offering a
diverse product ranges from FMCG to electronics appliance to automobiles,
attempting to provide farmers a one-stop destination for all of their needs. Other
corporate bodies include Escorts and Tata Chemicals (with Tata Kisan Sansar)
setting up agri-stores to provide products/services targeted at the farmer in order to
tap the vast rural market.
Wholesale Trading: Wholesale trading also holds huge potential for growth.
German giant Metro AG and South African Shop rite Holdings have already made
headway in this segment by setting up stores selling merchandise on a wholesale
basis in Bangalore and Mumbai respectively. These new-format cash-and-carry
stores attract large volumes from a sizeable number of retailers who do not have to
maintain relationships with multiple suppliers for all their needs.
Plans of Large Retailers:
Reliance Retail: investing Rs. 30,000 crore ($6.67 billion) in setting up multiple
retail formats with expected sales of Rs. 90,000 crore plus ($20 billion) by 2009-
10.
Pantaloon Retail: Will occupy 10 mn sq.ft retail space and achieve Rs.9000 crore-
plus ($2 bn) sales by 2008..
Lifestyle: Investing Rs.400 crore-plus ($90 mn) in next five years on Max
Hypermarkets & value retail stores, home and lifestyle centres.
Raheja's: Operates Shoppers' Stop, Crossword, Inorbit Mall, and 'Home Stop'
formats. It will operate 55 "Hypercity" hypermarkets with US$100 million sales
across India by 2015.
Piramyd Retail: Aiming to occupy 1.75 million sq.ft retail space through 150
stores in next five years.
TATA (Trent Ltd.): Trent to open 27 more stores across its retail formats adding 1
mn sq.ft of space in the next 12 DLF malls. Titan industries to add 50-plus Titan
and Tanishq stores in 2007.
RPG: Planning IPO will have 450-plus Music World, 50-plus Spencer's Hyper
covering 4 mn sq.ft by 2010.
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18. Key Players in Retail Industry
The untapped scope of retailing has attracted superstores like Wal-Mart into India,
leaving behind the kiranas that served us for years. Such companies are basically IT
based. The other important participants in the Indian Retail sector are Bata, Big Bazaar,
Pantaloons, Archies, Cafe Coffee Day, landmark, Khadims, Crossword and many more.
The top ten players in retail sector:
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19. Major Indian Retailers
Indian apparel retailers are increasing their brand presence overseas, particularly in
developed markets. While most have identified a gap in countries in West Asia and
Africa, some majors are also looking at the US and Europe. Arvind Brands, Madura
Garments, Spykar Lifestyle and Royal Classic Polo are busy chalking out foreign
expansion plans through the distribution route and standalone stores as well. Another
denim wear brand, Spykar, which is now moving towards becoming a casualwear
lifestyle brand, has launched its store in Melbourne recently. It plans to open three stores
in London by 2008-end.
The low-intensity entry of the diversified Mahindra Group into retail is unique because it
plans to focus on lifestyle products. The Mahindra Group is the fourth large Indian
business group to enter the business of retail after Reliance Industries Ltd, the Aditya
Birla Group, and Bharti Enterprises Ltd. The other three groups are focusing either on
perishables and groceries, or a range of products, or both.
Sr. No. Company Formats
1. Vivek Limited Retail Viveks, Jainsons, Viveks Service Centre,
Viveks Safe Deposit Lockers
2. PGC Retail T-Mart India, Switcher , Respect India ,
Grand India Bazaar ,etc
3. REI AGRO LTD Retail 6TEN Hyper & 6TEN Super
4. RPG Retail Music World, Books & Beyond, Spencer’s
Hyper, Spencer’s Super, Daily & Fresh
5. Pantaloon Retail Big Bazaar, Food Bazaar, Pantaloons, Central,
Fashion Station, Brand Factory, Depot, aLL,
E-Zone etc.
6. The Tata Group Westside, Star India Bazaar, Steeljunction,
Landmark, Titan Industries with World of
Titans showrooms, Tanishq outlets, Chroma
7. K Raheja Corp Group Shoppers Stop, Crossword, Hyper City,
Inorbit
8. Lifestyle International Lifestyle, Home Centre, Max, Fun City and
International Franchise brand stores.
9. Pyramid Retail Pyramid Megastore, TruMart
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20. 10. Nilgiri’s Nilgiris’ supermarket chain
11. Subhiksha Subhiksha supermarket pharmacy and telecom
discount chain.
12. Trinethra Fabmall supermarket chain and Fabcity
hypermarket chain
13. Vishal Retail Group Vishal Mega Mart
14. BPCL In & Out
15. Reliance Retail Reliance Fresh
16. Reliance ADAG Retail Reliance World
17. German Metro Cash & Carry
18. Shoprite Holdings Shoprite Hyper
19. Paritala stores bazar honey shine stores
20. Aditya Birla Group more Outlets
21. Kapas Cotton garment outlets
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21. Global Retail Industry
Facts about the Global Retail Industry
Worldwide retail sales are estimated at US $7 trillion.
The top 200 largest retailers account for 30% of the worldwide demand.
The money spent on household consumption worldwide increased by 68% between
1980 and 1998.
Retail sales are generally driven by people’s ability (disposable income) and willingness
(consumer confidence) to buy.
The 1998 UNDP Human Development Report points to the fact that global expenditures on
advertising are (including in developing countries ) increasing faster than the world economy,
suggesting that the sector is becoming one of the major players in the development process.
becoming
Retailing in more developed countries is big business and better organised than what it is in
India. With total sales of US$ 6.6 trillion, retailing is the world’s largest private industry,
ahead of finance (US$ 5.1 trillion) and engineering (US$ 3.2 trillion). Some of the
lion).
world’s largest companies are in this sector: Over 50 Fortune 500 companies and around 25
of the Asian Top 200 firms are retailers. Wal Mart, the world’s second largest retailer, has a
Wal-Mart,
turnover of US$ 140 billion, almost one – third of India’s GDP.
3000
2500
2000
1500
0-3000
1000
500
0
INDIA CHINA UK FRANCE USA
Retail Sales in 2000 (in US$ billion)* (Source: A&M magazine, 26th February 2001)
As many as 10% of the world’s billionaires are retailers. The industry accounts for over 8%
of GDP in western countries, and is one of the largest employers. According to the U.S.
According
Department of Labor, more than 22 million Americans are employed in the retailing industry
in over 2 million retail stores – that is, one out of every five workers employed. In short, as
long as people need to buy, retail will generate employment.
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22. 120
100
80
TRADITIONAL
60
ORGANISED
40
20
0
EUROPE MALAYSIA THAILAND INDIA
Share of the Traditional and Organized Retail Sector (Source: The Economic Times, 15
February 2001)
Retailing in the developed world today is far more organized than in India. Up to 80% of
all retail sales in the United States is accounted for by the organized retail sector. The
corresponding figure in Western Europe is 70%, while it is 40% in Brazil and Argentina
and 35% in Korea and Taiwan.
Over the past few decades, retail formats have changed radically worldwide. The basic
department stores and cooperatives of the early 20th century have given way to mass
merchandisers (Wal-Mart), hypermarkets ( Carrefour), warehouse clubs ( Sam’s Club,
Makro), category killers (Toys ‘R’ Us, Sports Authority), discounters (Aldi) and
convenience stores (7 – Eleven).
Organised retail formats worldwide have evolved in three phases:
I. Retailers decide on the category and quality of products and services,
differentiating them from other retailers. Retail formats in this phase are typically
supermarket, department stores and speciality stores.
II. During the second phase, retailers carve a niche for themselves based on a
product category and price. Competition intensifies because the products and
services on offer become virtually standardized and price becomes the main
selling point. This phase normally gives way to discount stores.
III. The third phase arrives when competition peaks. This is when hypermarkets
begin to evolve. Hypermarkets usually compete on price and a wider product
range, but the normally lack product depth and service components.
Globally, retailing is customer – centric with an emphasis on innovation in products,
processes and services. In short, the CUSTOMER IS KING!
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23. Indian Retail Industry
Facts about the India Retail Industry:
.
(Last Updated: September 2009)
The Indian retail market, which is the fifth largest retail destination globally, has been
ranked as the most attractive emerging market for investment in the retail sector by AT
Kearney's eighth annual Global Retail Development Index (GRDI), in 2009. 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. Further, CB Richard Ellis states that India has moved up to the 39th
most preferred retail destination in the world in 2009, up from 44 last year.
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 July 2009, in single-brand retail trading, stood at
approx. US$ 46.60 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
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24. 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 is pegged at around
US$ 8.14 billion, is expected to grow at a CAGR of 40 per cent to touch US$ 107 billion
by 2013.
The organised retail sector, which currently accounts for around 5 per cent of the Indian
retail market, is all set to witness maximum number of large format malls and branded
retail stores in South India, followed by North, West and the East in the next two years.
According to the report ‘Mall Realities India 2010’ by leading property consultants,
Jones Lang LaSalle Meghraj and Cushman & Wakefield India in association with
Shopping Centres Association of India, over 100 malls of over 30 million sq feet of new
shopping centre space are projected to open in India between 2009 and end-2010.
Further, this sector is expected to invest around US$ 503.2 million in retail technology
service solutions in the current financial year. This could go further up to US$ 1.26
billion in the next four to five years, at a CAGR of 40 per cent.
India has emerged the third most attractive market destination for apparel retailers,
according to a study by global management consulting firm AT Kearney. It further says
that in India, apparel is the second largest retail category and is expected to grow by 12-
15 per cent per year. Apparel, along with food and grocery, will lead the organised
retailing in India.
India has one of the largest numbers of retail outlets in the world. The sector is
witnessing exponential growth with retail developments taking place not only in major
cities and metros but 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.
• 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.
• 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.
• 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'.
• Pantaloon Retail India (PRIL) plans to invest more than US$ 103.3 million to
expand its seamless mall Central and the value fashion format Brand Factory over
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25. the next two years.
• Bharti Retail has introduced eight Wal-Mart private labels—including two of its
largest, ‘Great Value’ and ‘George’—in its supermarket chain Easyday, hoping to
attract more consumers with their international design and packaging.
• Italian sportswear brand Lotto will launch two new footwear brands Sabots and
Calcetto in the country in the next few weeks. The plan is to have at least 50
exclusive outlets by March 2010.
• Steel players such as JSW Steel and Essar Steel are increasing their focus on
opening up more retail outlets pan India. JSW Steel currently has 50 such steel
retail outlets called JSW Shoppe and is targeting to increase it to 200 by March
2010. Similarly, Essar Steel also has such retail outlets called Essar hypermarts.
With a total 150 such outlets currently, this segment contributes to about 20-25
per cent to the Essar’s total revenue.
• EBONY Homes, the home furniture retail arm of the US$ 3 billion DS
Constructions, has plans to invest US$ 25.1 billion to set up a chain of 20-25
furniture stores styled Ebony Gautier across the country by March 2012.
• Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns and
markets Asia's largest dairy brand, Amul, plans to add 6,000 Amul retail parlours
across the country in FY 2009.
• With rentals dropping sharply, large retailers such as Aditya Birla Retail, Reliance
Retail and Shoppers Stop, and food chains such as McDonald’s are also looking at
metros and mini-metros for expansion.
• Many major international brands are also looking for a foothold in India. The
brands planning an India entry include The Pizza Company and Spicchio Pizza
(both pizza chains from Thailand), Coffee Club from Australia, Japanese brand
Lolita Fashion, Revive Juice Bars from the UK, Mrs Fields Cookies and Jamba
Juice from the US, and French fashion brand Jules.
• Retail brands such as United Colors of Benetton, Tommy Hilfiger and Puma are
opening factory outlets to sell excess stock and woo the price-conscious buyers.
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.
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
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26. 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 a 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.
• Rural market is projected to dominate the retail industry landscape in India by
2012 with total market share of above 50 per cent.
• Organised retailing of mobile handset and accessories is expected to reach close
to US$ 990 million by 2010.
• Driven by the expanding retail market, third party logistic market is forecasted to
reach US$ 20 billion by 2011.
Exchange rate used:
1usd = 47.9 inr (as on june 2009)
1 usd = 48.41 inr (as on september 2009)
Challenges
To become a truly flourishing industry, retailing needs to cross the following hurdles:
• Automatic approval is not allowed for foreign investment in retail.
• Regulations restricting real estate purchases, and cumbersome local laws.
• Taxation, which favours small retail businesses.
• Absence of developed supply chain and integrated IT management.
• Lack of trained work force.
• Low skill level for retailing management.
• Lack of Retailing Courses and study options
• Intrinsic complexity of retailing – rapid price changes, constant threat of product
obsolescence and low margins
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27. Recent Trends in retailing
Retailing in India is witnessing a huge revamping exercise as can be seen in the
graph
India is rated the fifth most attractive emerging retail market: a potential
goldmine.
Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade)
makes up 3 percent or US$ 6.4 billion
As per a report by KPMG the annual growth of department stores is estimated at
24%
Ranked second in a Global Retail Development Index of 30 developing countries
drawn up by AT Kearney
Kearney.
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28. Classification of Retail Sector:
RETAIL
Unorganized Organised
Retailing Retailing
Unorganized / Traditional retailing:
On the other hand, it refers to the traditional formats of low-cost retailing, for
example, the local Kirana shops, owner manned general stores, paan/beedi shops,
convenience stores, hand cart and pavement vendors, etc.
Organised / Modern retailing:
It refers to trading activities undertaken by licensed retailers, that is, those who are
registered for sales tax, income tax, etc. These include the corporate-backed
hypermarkets, retail chains, and also the privately owned large retail businesses.
In India, the retail industry is broadly divided into the organized and unorganized sectors.
The total market in 2005 stood at Rs. 10,000 billion, accounting for about 9-10% of the
country’s gross domestic product (GDP). Of this total market, the organized sector
accounted for Rs. 350 billion (about 3.5 % of the total) of the total revenues.
According to AT Kearney, the organized retailing industry is expected to cross Rs. 1000
billion revenue mark by 2010.
Traditionally, the retail industry in India comprised of large, medium and small grocery
stores and drug stores which could be categorized as unorganized retailing. Most of the
organized retailing in India had recently started and was mainly concentrated in
metropolitan cities.
The retailing industry seems poised for a significant growth in the coming years owing to
the presence of a vast market, growing consumer awareness about product quality and
services, higher disposable income of consumers and the desire to try out new products.
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29. Unorganized / Traditional retailing
(Kirana / Small Local Stores)
Retail outlets exist in all shapes and sizes – from a “panwala” to a shoppers’ Stop.
However, most of these outlets are basic mom-and-pop stores – the “traditional “Kirana”
shops in the locality, which are smaller than 500 sq.ft. in area with very basic offerings,
fixed prices, zero use of technology, and little or no ambiance. The number of outlets in
India has increased from 0.25 million in 1950 to approximately 12 million today. This
translates to a growth of 48 times over a certain period when the population has trebled.
The small local stores have dominated Indian retailing over the decades and are present
in every village and local community, addressing the needs of the population in the area
and being the point of contact with the consumer. The distribution networks of brands
extend right upto this point to stay in touch with customer needs and preferences.
India like most other countries has a very large network of local stores. The retail
industry in rural India has typically two forms: "Haats" and "Melas". You will find these
in almost every village and locality. A lot of them function as paan and cigarette outlets
with tea and coffee sometimes also offered. Besides this these stores stock and offer
small eats and soft drinks including biscuits, soft drinks, chocolate, sweets, bread and
baked products. Many of them also sell fruits like bananas and a range of toiletries and
cosmetics like soaps, shampoos, toothpastes and some creams. These small stores cater to
the needs of their own local population and travelers who stop by for a smoke or a snack.
A little larger format is the neighborhood grocery store that focuses on grains, foods,
snacks and toiletries besides other home essentials.
Fruits and vegetables that are perishable are usually maintained and offered by exclusive
vegetable stores and not by the normal groceries. Every fair sized village is likely to have
at least one grocery store, a fruit and vegetable shop and a paan and cigarette shop. The
new addition of the past decade is to have a telephone booth that lets locals and travelers
make national and international telephone calls.
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30. This network is very large and spread all across India. It is not really a network since
each store is individual or family owned and has no connection with the other. It does
however represent a network since large consumer product companies like Unilever,
Procter & Gamble, Colgate-Palmolive, Cadbury, Coca Cola, Pepsi and ITC uses them as
their final point of retail to the consumer.
While it is commonly believed that the new retail chains will drive these small stores out
of business, reality points the other way and it is likely that these stores will continue
even in the next two decades of growth. These small stores are very personal and have
strong relationships with the local population. They are points of news and connection.
They offer credit to the local population and help out in times of crisis. They also have a
very good understanding of requirements of the local population and have very low
overheads enabling them to offer the best price for their products.
Characteristics of Kirana Stores
India has sometimes been referred to as a nation of shopkeepers. A high density of
population and the need for convenience has facilitated the operation of over 12 million
stores in India. Of these, nearly 78 per cent are small family-run operations, which use
only household labour. The key characteristics of these stores are:
Small size: Such stores are small in size. They range in area from 200 square feet or
less to 1,500 square feet, depending on the area of operation.
Low operating costs and overheads: These stores are run by family members and
thus, there are no labour costs involved. Little money is spent on lighting, power, fuel
and ambience.
Proximity to consumers: These shops are located within residential areas and can be
accessed by customers on foot. This makes it convenient for households to buy items
on a daily basis.
Strong customer bond: These shop owners know their customers personally and have
strong relationships with them. This helps them gauge likes and dislikes, and
accordingly meet the individual needs of each household.
Additional services: These small stores provide services like a month's credit, which
many customers find very useful. Such stores have also been concentrating on offering
customers the additional convenience of home delivery and obtaining a product on
order.
Non-payment of taxes: Since such small stores do not normally generate bills, they
manage to evade taxes. This saves them money, which they can re-invest and also
makes it possible for them to offer lower prices to select customers
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31. Significance of Kirana stores
Kirana 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. Infact the
traditional stores have taken up 98 percent of the Indian retail marketBasically 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 Kirana stores can take pride in the fact that
the Kirana is the most common outlet forms for the consumers. The tough competition
for Kirana stores is coming from organized retail stores dealing in food items, like:
Apna Bazaar
Canteen stores
Food World
Subhiksha
Food Bazaar
Kirana 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. These stores are found in both residential as
well as commercial markets. The benefit of Kirana stores is that they give importance to:
Personal touch
Facilities of credit
Quick home delivery
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 Kirana stores serve 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 Kirana 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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32. Traditional Format Retailers:
Kiranas:
These are close-to-home stores where a household buys its daily use goods. They stock
a range of goods from staples to FMCG products and milk products, etc. They range
from the very small 200 sq ft stores to 1,500 sq ft establishments. Often those running
the stores know the households personally and provide additional services like
obtaining unstocked items on request, delivering goods to the doorstep and granting a
month's credit.
Paan shops:
These are unique to India. They are very small shops manned by a single individual
whose chief occupation is the making of paan (betel leaf with a few additions). Such
shops also stock tobacco, chocolates and some FMCG articles.
Cart vendor:
Cart vendors sell fresh fruits and vegetables in residential areas and housewives buy
from them on a daily basis. They sell their produce off a cart, which allows them the
freedom to move around from place to place. They often give credit of a few days.
Mandis:
These are markets with a fixed place, where various sellers of a commodity gather.
Buyers visit mandis to make weekly purchases at reasonable prices. Sabzi mandis
specifically stock vegetables.
Haats:
A haat is more of a village phenomenon. Once a week, a market is organized in a
particular location, where sellers from different areas gather to sell their products.
Buyers congregate to buy an assortment of goods, ranging from fruits and vegetables to
household goods, clothes and accessories like bangles, etc.
Mela:
A mela is organized once every few months generally around the time of a festival. In
addition to the sale of a variety of goods not easily accessible to villagers, the mela also
provides entertainment.
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33. Advantage of Kiranas
Kirana, having a wide reach and deep penetration, is poised for equal growth with the
help of larger peer. Transportation, warehousing and distribution infrastructure in
enigmatic India will continue to be managed by the Kirana.
Low operating costs and overheads
Proximity to consumers
Long operating
Additional services (like home delivery, credit Attractive ambience, convenience
and customized products)
Strong relationship with customers
Non-payment of taxes
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34. SWOT Analysis of Kirana stores
STRENGHTS:
These stores are located in prime residential areas. The rentals in these areas and other
logistics are mostly unviable for large stores.
They enjoy a near monopoly in areas that are backward or do not have a population
with sustainable purchasing power (like rural areas), since organized retailers are
unlikely to enter such regions.
It has Price advantage over its competitors for Branded goods and commodities.
It has a wide product range catering to all types of customer needs.
Kirana stores are reliable and have its own uniqueness.
Kirana stores have another USP when it comes to malls. While malls offer home delivery
of goods provided the bill exceeds a certain minimum amount, kirana stores offer the
same service for any bill size.
Since such small stores do not normally generate bills, they manage to evade taxes. This
saves them money, which they can re-invest and also makes it possible for them to offer
lower prices to select customers.
WEAKNESS:
Promoters do not possess adequate financial strength for expansion on their own.
Storekeepers often do not provide quality assurance, especially of goods sold loose.
However, with FMCG companies themselves branding various goods like flour,
pickles, sugar, etc, this might check the problem.
Small storekeepers are increasingly becoming conscious of hygiene issues.
Variety in terms of quality, Styles is on regional basis and very low range is available at
any given single place.
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35. There is a large change in atmospherics of small shops due to competition from Big
Retailers
These stores have to face Job losses Since it provide job opportunities to semi-skilled
and unskilled people
Established Branded Retailers are price-competitive
OPPORTUNITIES:
Low capital requirement (due to uncontrolled low rents and minimal operating
overheads) helps them turn faster and increase in number with easy entry and exit.
Proximity to consumers and strong relationships will help them to gauge customer
needs and stock accordingly, thus gaining more business.
THREATS:
Long operating hours might be threatened with organized players and associations
demanding 24 X 7 operating permissions.
The additional services that were unique to them are now being replicated by all
players. The increasing use of credit cards provides easy credit even otherwise.
With huge stores coming up in catchments areas of 5-7 kilometers of
approachable distance and large chains planning to set up hub-and-spoke smaller
stores, the very existence of traditional stores is in danger.
Traditional stores have low or no bargaining power due to their small scale of
operations. Thus, the biggest threat they face from organised players is the latter's
ability to provide quality products at a discount.
Due to their small size, traditional stores are unable to stock a variety of goods,
which is what consumers are now demanding owing to increasing awareness.
Traditional stores rarely invest in ambience. They also do not provide the
customer the chance to look at various brands and varieties before making a
choice.
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36. Lots to LEARN From KIRANAS…
According to a new study published in Economic times, Indian consumers are still
visiting local kirana stores (mom n' pop stores in India) while they love the shopping
experience of malls. Besides, the bulk shopping that they do at these modern retails
stores, there are the daily top-ups to do at the local groceries (Kirana Stores) and the
perishables that have to be bought daily. For Kiranas the proximity is the major
advantage. Considering the largest retailer, Pantaloons (through Food Bazaar), does not
think it a bright idea to compete with them, discount retailer Subhiksha still fine-tuning
its format. “There is a huge opportunity in home deliveries and the trick is to beat the
kirana stores at their own game,” says R. Subramaniam, Managing Director, and
Subhiksha Retail.
Today home delivery services comprises a mere 5% of the leading food retailer turnover
but the players like Wadhwan foods, pyramid retail’s True Mart, Subhiksha are expecting
to generate more than 20% of their total revenue from the home delivery services.
Having set up multi-channel distribution systems after buying Sangam Direct, the home
delivery channel of HUL, Wadhwan Foods would be exploiting the synergies between its
store and non-store formats. For instance, it would now have the call centers operating on
behalf of Sangam Direct or to direct calls to its nearest Spinach outlets to service
customers. Sangam Direct was operating under central warehousing concept which is
time consuming as well as it incurs more cost.
Here Kiranas leads the organized retailer due to there reach in the market. In order to
increase the reach in the market the organized sector should include a Hub and Spoke
model in their supply chain. Instead of going for the centralized warehouse, small-sized
convenience stores are likely to be the ones to crack the home delivery format.
The organized retail stores have to match with the consumer expectations. Kiranas are
already offering this programme which includes stock rotation and loyalty programs,
along with credit and discount policies. The organized retail stores still have to learn a lot
from the kiranas.
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37. Interview
Kirana Stores: (Central Kirana Stores)
This store is the small, friendly neighborhood stores, which have been offering
customized services to their customers. The shop,
which has contributed to this study, is situated in
small locality at Kurar village, Malad (E). Central
stores have seven branches out of which five are
situated in Malad (E) itself; covering different
areas and the rest three are situated in Gorgon
(W). These stores are of different sizes and had
been in existence right from 5-7 years. The
owner’s name is Mr. Rajesh Shah and he has
been quite successful in his field.
The information gathered through the interviews is given below –
The store provides a wide range of varieties of products. In addition to groceries, other
items are also sold like stationary, imported food articles, cold drinks, ice creams,
medicines etc.
The owner said that the store had a higher percentage of regular customers than walk-in
customers. The regular customers were from the nearby areas, but he also claimed to
have customers from far off areas too. New customers are usually generated through
word-of-mouth.
The owner himself decides on which brands to stock according to the preferences of their
customers and estimated the amount of goods to stock according to their periodic sales
figures.
The owner expressed a desire to expand his stores if given the opportunity to do so;
however, he lacked finance and space to expand. He believed that a shop located on the
main road would have more sales. He also said that he was satisfied with his business
volume and in addition, he has no time to look after a bigger store.
When asked about why their regular customers chose to visit their store, the owner listed
availability of good quality and fresh products, customer satisfaction, prices and owner-
customer relationship as the primary reasons for their customers' loyalty.
Central Kirana stores provide free home delivery to their customers and had a credit
period ranging from 15 to 30 days which may go upto 60 days depending upon the
worthiness of customers.
On an average, these stores remained open from 8 in the morning to 10 in the night. The
store also remained open on Sundays, at least for half a day.
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38. Do you think that the expansion of malls (modern retailing) is becoming a barrier for the
growth of local kirana shops? Do the store owners have to fear from the development of
malls? Give your opinion.
(Translated in English) The kiranas have evolved to cater to different segments of the
market and I feel that they are making enough profits which is why they continue to be in
the business. Till recently “kiranas” or neighbourhood stores were the only choice
available to the consumer, even in the urban areas. But slowly and gradually the situation
is changing. Over the last 5-6 year, there has been a
significant growth in the number of malls. There is
an increased demand for quality retail space which
includes food & apparel chains, consumer durables
& multiplex operators. Since the consumer’s
preference has been diverted towards malls, local
kirana stores have to suffer badly but “I don’t feel
that existence of Supermarkets have affected my
Business at all, infact due to its existence we have
become more customers oriented. We have a
specific customer base from long ago and the new
customers add on everyday. We just try our optimum to satisfy and maintain the
customers offering them discounts and mothwatering rates in varied products. Initially it
was tough but now we are able to satisfy all the needs of the customer, infact we end over
providing the, augmented products.
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39. Changing Face of Kirana
The Indian manufacturers and marketing companies have resorted to an aggressive
promotional activity in the kiranas by hiring exclusive shelves. Products of these
companies get captive shelf space, a win-win situation for both the parties. Certainly the
aggressiveness has come in the wake of the arrival of foreign companies with cash-and-
carry operations.
While many of these companies are prospective suppliers to the larger formats, but at the
same time they are well aware of the negotiating power of the large formats. Every Day
Low Price (EDLP) most prevailing strategy of large formats is again cause of worry. This
has also given the Kirana a shot in the arm, in terms of improving their image. The
Kirana are getting more organized coupled with more customer friendly environment.
Kirana have also resorted to innovating ways of Customer Relation Management, largely
being seen as domain of large corporate till now.
The brand manufacturers need to walk the tight rope while planning their response to
large formats to ensure that while they get to supply the retail giants, they also don't
alienate the local Kirana. While dealing with the large buyers like Wal-Mart or Reliance
Retail, they need to understand the relative power structure of the buyers and them will
change. National brands, such as Hindustan Lever and Procter & Gamble, should find
innovative ways to help Kirana with tailored services to ensure they also thrive and do
well.
Kishore Biyani - face of Indian Retail Industry - says, "In India, no retailer has made big
money so far. The money is in the peripheral activities; it's never in the retail itself. It's
the power of retail that gets you the money; it's never the transaction that gets you the
money." The ambivalent tone of the statement suggests that the underlying dynamics of
stand-alone retail are not attractive.
Local Kirana is here to stay for ever, in its new avatar!
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40. Unorganized Retailing is getting Organized
To meet the challenges of organized retailing that is luring customers away from the
unorganized sector, the unorganized sector is getting organized. 25 stores in Delhi under
the banner of Provision mart are joining hands to combine monthly buying. Bombay
Bazaar and foodmart have also been formed which are aggregations of Kiranas.
India's retail sector is going to transform and with a three-year compounded annual
growth rate of 46.64 per cent, retail sector is the fastest growing sector in the Indian
economy. Traditional markets are transforming themselves in new formats such as
departmental stores, hypermarkets, supermarkets and specialty stores. Western-style
malls have begun appearing in metros and near metro cities, introducing the Indian
consumer to a new shopping experience.
KSA-Technopak, a retail consulting and research agency, predicts that by 2010,
organized retailing in India will cross the US$ 21.5-billion mark from the current size of
US$ 7.5 billion.
The Indian retail market is of enormous size about US$ 350 billion. But organized retail
is not so huge and it is at only US$ 8 billion. However, the opportunity for growth is
huge—by 2010, organized retail is expected to grow to US$ 22 billion. With the growth
of organized retailing estimated at 40 per cent over the next few years, Indian retailing is
clearly at a tipping point.
This article is an attempt to analyze the areas where retail sector is growing and will
grow, what will be the target market segment for the retailers and how will they try to
serve this segment.
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41. Indian Organized Retail Market (Shopping Malls, Supermarkets)
Indian organized retail market is growing at a fast pace due to the boom in the India retail
industry. In 2008, the retail industry in India amounted to Rs 10,000 billion accounting
for about 35% to the country's GDP. The organized retail market in India out of this total
market accounted for Rs 350 billion which is about 4% of the total revenues.
Retail market in the Indian organized sector is expected to cross Rs 1000 billion by 2010.
Traditionally the retail industry in India was largely unorganized, comprising of drug
stores, medium, and small grocery stores. Most of the organized retailing in India have
started recently and is concentrating mainly in metropolitan cities.
The growth in the Indian organized retail market is mainly due to the change in the
consumer’s behavior. This change has come in the consumer due to increased income,
changing lifestyles, and patterns of demography which are favorable. Now the consumer
wants to shop at a place where he can get food, entertainment, and shopping all under one
roof. This has given Indian organized retail market a major boost.
Retail market in the organized sector in India is growing can be seen from the fact that
1500 supermarkets, 325 departmental stores, and 300 new malls are being built. Many
Indian companies are entering the Indian retail market which is giving Indian organized
retail market a boost. One such company is the Reliance Industries Limited. It plans to
invest US$ 6 billion in the Indian retail market by opening 1000 hypermarkets and 1500
supermarkets.
Pantaloons is another Indian company which plans to increase its retail space to 30
million square feet with an investment of US$ 1 billion. Bharti Telecoms an Indian
company is in talks with Tesco a global giant for a £ 750 million joint venture. A number
of global retail giants such as Wal-Mart, Carrefour, and Metro AG are also planning to
set up shop in India. Indian organized retail market is increasing and for this growth to
continue, the Indian retailers as well as government must make a combined effort.
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42. Origin of Modern Retailing in India
Retailing, which is one of the largest sectors in the global economy, is going through a
transition phase in India. However the Indian retail sector is still in a nascent stage.
Organised retailing still contributes to only about 2% of the total retailing in the country.
Now a question that would arise is what constitutes Organised Retailing. Mr. Raghu
Pillai, the Managing Director of Food World, which is one of the leading organised foods
retailing chain in India, says that, “Organised Retailing presupposes a retailers’ ability to
manage or more importantly influence a set of supply chain variables in a commercially
viable and sustainable way”. Efficient management of the supply chain to ensure the
profitability of the entire chain, large outlets with modern ambiance and facilities, a wide
product profile, self service facilities etc are generally the features of a modern retail
store. Organised retailing aims at providing an ideal shopping experience for the
consumer based on the advantages of large-scale purchases, consumer preference
analysis, excellent ambience and choice of merchandise. However, there are no single
formats, designs, facilities or product portfolios that can be identified as the success
formula and as a general rule differentiation between chains is necessary to increase
viability.
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.
Largely in the post independence period, Indian retailing has been unorganized, to the
most part untouched by corporate business principles. When the economy started to be
opened in the 1980s the situation began to change slowly. Emergence of retail chains was
at first witnessed in the textiles sector, with companies like Bombay Dyeing, Raymond,
S. Kumar‘s and Grasim, opening their own outlets. Titan then successfully created a
retailing concept, by establishing its series of elegant showrooms. The later half of the
nineties has been a witness to a fresh wave of entrants in the retailing business. The new
chains have not been restricted to textiles and garment sellers but there have been entrants
from various fields of commerce. Foodworld and Subhiksha in food and Fast-Moving
Consumer Goods; Musicworld and Music café in music; Vivek’s and Vijay sales in the
consumer durables etc were the beginners. Now the number of players and the variety of
formats and product categories reflect variety.
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43. Growth of Modern / Organised Retail in India
Organised retailing in India initially began in the south. The availability of land at prime
locations coupled with lower real estate prices (compared to Mumbai and Delhi) made
multi-storeyed shopping complexes possible. And now south India – notably Chennai
and, to a lesser extent Bangalore and Hyderabad – has emerged as a centre of organised
retailing. In fact, in Chennai, nearly 20% of food sales now is accounted for by super
markets and an equal share of consumer durables is sold through specialty chains
Vivek’s.
It took two years of recession for this concept of shopping to take root in major cities like
Mumbai and Delhi. Recession brought down property prices in these cities, and it was
during this slump that big business houses took notice of the potential in retailing.
India is rapidly evolving into an exciting and competitive marketplace with potential
target consumers in both the niche and middle class segments. Manufacturer – owned and
retail chain stores are springing up in urban areas to market consumer goods in a style
similar to that of malls in more affluent countries. Even though big retail chains like
Crossroads, Saga and Shoppers’ Stop are concentrating on the upper segment and selling
products at higher prices, some like RPG’s Food World and Big Bazaar are tapping the
huge middle class population. During the past two years, there has been a tremendous
amount of interest in the Indian retail trade from global majors as well. Over the years,
international brands like McDonalds, Swarovski, Lacoste, Domino’s, Pepsi, and Benetton
among a host of others have come in and thrived in India.
Retailing is one of the fastest growing industries in India, catering to the world’s second –
largest consumer market. A sunrise industry, it offers tremendous potential for growth
and contributes 8 – 10% to overall employment. However, this is still low as compared to
20% in the USA. As India moves towards being a service-oriented economy, a rise in this
percentage is expected. The number of retail outlets is growing at about 8.5% annually in
the urban areas, and in towns with a population between 100,000 to 1 million the growth
rate is about 4.5%. With the increasing assertiveness of the Indian consumer, and a
growing supply base – both from within Indian as well as from other countries ( with
import becoming easier) – the retail sector in India is poised for a significant change in
the coming decade.
However, the boom in retailing has been confined primarily to the urban markets. There
are two main reasons for this. Firstly, the modern retailer is yet to exhaust the
opportunities in the urban market and has therefore probably not looked at other markets
seriously. Secondly, 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
need 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
to be a part of it. Hence, one can assume that the retailing revolution is emerging along
the lines of the economic evolution of society.
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44. Organised Retail in India
( Wednesday, July 18, 2007)
As India surges high with its growth story, the retail sector in the country is bound to
come across opportunities like never before. Till a few years back, the retail sector in
India was more of an unorganized one with petty vendors dominating the chunk of the
industry but now the scenario has fast been changing. Finally, the sector is converting
into what we call as organized retailing.
Not only Indian corporate majors like Reliance, ITC and Pantaloon have entered into the
segment but more and more foreign players are also showing interest in USD 350 billion
Indian retail markets.
Today, we turn around and find huge shopping malls and multiplexes all the way.
Perhaps that’s why the retail revolution is said to be spearheading the real estate boom in
India.
The retail sector boom
While the Indian real estate markets boom with organized retailing, the segment ensures a
fluffy growth pad for itself. According to the estimations of KSA-Technopark, a retail
consulting and research firm, organized retailing in India will grow three-fold in the next
3-years, achieving the size of USD 21.5 billion from the current one of USD 7.5 billion.
Given the favourable growth patterns, expanding middle class and easing economic
policies, India is ranked as the most attractive emerging markets for retail investment,
even above Russia and China.
KIT: Organised retail in India APRIL 21, 2009
The organised retail market in India is about $18 billion (Rs 89,217 crore).
It is estimated to grow more than 40 per cent year-on-year, considering the expected
infusion of over $30 billion (Rs 148,995 crore) in the next five years.
Over 20,000 new retail outlets are expected to open within this segment, giving
employment to over 150,000 people.
By 2013, organised retail is likely occupy 500 million square feet of space.
The total employment to be generated from growth over the next five years is estimated
at over 2 million.
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45. Factors Estimated to Propel the Growth of the Organized Retailing:
Increased Purchasing Power:
The National Council of Applied Economic Research classifies households into five
categories—lower, lower middle, middle, upper middle and high. The movement of
households within these income categories reflects the changing dynamics of the Indian
market. 33% of Indian households are in the middle- to high-income category in 2004.
This is projected to increase to 49% by 2010. The impact of increasing income levels is
reflected in the sales trend for high involvement products like cars and multi-utility
vehicles (MUVs) in the Indian market. The Society of Indian Automobile
Manufacturers registered growth in commercial vehicle segment a rate of 10%. While
the M&HCV segment has grown by 4.5%, the LCVs grew by more than 19% during
2005-06 as compared to 2004-05.
Changing Consumption Patterns:
The rapid pace of organized retailing is fueled by changing consumer habits in both
cities and large town by (DINKS) Double income no kids group and increased
aspirations caused by exposure to the satellite television, cable and other channels. The
growth for the changing habit patterns would be affected by the mobile telephones (new
product categories like ring tones estimated at INR 400 crore) and increasing credit-
card usage (estimated to reach 21mn the end of 2006).
Young Indian Consumers:
The Indian consumer segment is the youngest in the world with a median age of 24 as
compared to other developed nations. With fertility rates at an estimated three children
per woman and a population growth rate at 1.6% pa, the population is expected to
continue to grow to 2050. There should also be a big surge in the 20-34 age group—up
from 210m (25%of the total population) in 1991 to an estimated 312m (27% of the total
population) by 2010. This increase in population would lead to acceleration of demand
of personal care products and personalized financial services.
More Available Retail Space:
The boom in the retail sector is also associated with the rise of mall all across the
country. There are 220 mall project in the pipeline till 2007, 139 in the big 8 cities
including the metros and 81 in other Tier II cities. Developers are keeping in mind the
astonishing pace with which the new supply is expected to enter the market and are
developing ‘specialty malls’ and other propositions to offer a different experience to the
changing consumer.
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46. Easier Financing:
Interest rates have dropped down over a couple of years making it much easier for
investors to develop a mall and economically viable for retailers to set up shops. The
fall in real-estate prices as well as lower borrowing rates still ensure that current rental
yields are attractive for developers.
Improved Logistics and Better Infrastructure:
Infrastructure spending has improved the state of India’s roads and transport system.
Connectivity has enabled the faster movement of goods, especially perishable goods,
from one part of the country to another. Logistics has improved, enabling more efficient
retail operations. Retailers have benefited from the improved infrastructure, and further
improvements should only increase the benefits to retailers. As the retailers continue to
grow their presence, there is going to be an imminent need for a single, enterprise-wide
IT platform to manage operations. At the close, it may be considered that organized
retailing in India is a sunrise sector. Despite being at a fairly nascent stage of its
evolution and facing certain hindrances posed by socio- economic factors, it has a fine
promise to emerge as a front runner in times to come.
Indian Organized Retail Scenario
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47. Organized Retailing Formats
Designing a retail format depends on several factors – product categories stocked, target
customers’ demographic profiles, real estate costs, brand consistency and location being a
few of them. For example – groceries, teenage crowd, affluent neighborhoods and niche
products influence to a large extent the kind of ambience and display to expect.
“Evolving Retail Formats”, traces the origins of various retail formats such as
supermarkets, department stores, discount stores, hypermarkets and many more. The
underlying factors responsible for the acceptance and popularity of the formats give an
idea about the way organized retail has kept pace with marketers’ requirements and
customer’s expectations. Format choice determines to a large extent viability of retail
enterprise, along with location.
Wider product basket, broader brand choice, desire for better value, craving for a
comfortable ambience, drive for a bargain price, one-stop shopping for a wide assortment
of products and narrow product category shopping – all played a role in evolution of
different formats. While many formats were dictated by changing customer needs and
perceptions, a professional approach by retailers themselves was responsible for
experimentation in formats. Some of the prevalent relating formats in India include:
Convenience stores:
These are relatively small stores 400-2,000 sq. feet located near residential areas. They
stock a limited range of high-turnover convenience products and are usually open for
extended periods during the day, seven days a week. Prices are slightly higher due to the
convenience premium.
MBO’s:
Multi Brand outlets, also known as Category Killers, offer several brands across a
single product category. These usually do well in busy market places and Metros.
Supermarkets:
Large self service outlets, catering to varied shopper needs are termed as Super
markets. These are located in or near residential high streets. These stores today
contribute to 30% of all food & grocery organized retail sales. Super Markets can
further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and
large supermarkets ranging from a size of 3,500 sq ft to 5,000 sq ft. having a strong
focus on food & grocery and personal sales. The concept of enabling a better ‘shopping
experience’ can be traced to the spread of supermarket culture – which attracted
customers from a large geographic pocket. Nilgiris and Food World are major Indian
players operating in this way.
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48. Department stores:
Department stores stock a deep collection of a wide range of product categories – in
emerging and new product categories. Perceived higher value by customers (unhurried
shopping) and providing better ambience by retailers brought about remarkable
transformation in the way retailing went higher up the value chain. These are large
stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. It can
be further classified into localized departments such as clothing, toys, home, groceries,
etc. shoppers’ Stop, J C Penny, Lifestyle and Sears – with their assortment of products
and services are prime examples of national and international department stores.
Discount Stores:
Discount Stores are scaled down (stock less upmarket products) versions of department
stores, located in low-cost areas. They have relatively wider range and smaller
collection. While bulk buying aids them to sell at lesser prices, recourse is also taken to
source season-end products and manufacturers’ ‘seconds’. As the name suggests,
discount stores or factory outlets, offer discounts on the MRP through selling in bulk
reaching economies of scale or excess stock left over at the season. The product
category can range from a variety of perishable/ non perishable goods. Target and
Kmart are examples of this format.
Hypermarkets:
Hypermarkets are a one-stop-for-all-needs kind of offering (with 400-600 SKU’s),
spread over a huge area and bridging the gap between FMCG and durables’ outlets.
They are typically large, starting from 40,000sq. ft plus are usually located outside the
city limits. This format comprises of a multiple division layout, and usually has an”
industrial- look” interior. Hypermarkets generally provide daily necessities and grocery
like items. Pricing is competitive and they also offer volume discounts. Driven by bulk
purchase and bulk selling, everyone gained, with the exception of erstwhile trade
partners of manufacturers. Hypermarkets brought into focus the scale of operations –
volume driven sustenance. Giant, promoted by RPG group, is a recent Indian initiative
into this format.
Shopping Malls:
It is the largest form of organized retiling today. Shopping malls’ popularity can be
ascribed to a shift in the attitude towards shopping. Unlike the disadvantage of
sufficient travel demanded to reach out to a hypermarket, malls sprang up at relatively
nearer localities. Malls are located mainly in metro cities, in proximity to urban
outskirts, this format ranges from approximately 60,000 sq ft to 7,00,000 sq ft and
above. They lend an ideal shopping experience with an amalgamation of product,
service and entertainment, all under a common roof. India's largest shopping arcade
Spencer Plaza (600,000-sq-ft) in Chennai is an example.
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49. Specialty Stores:
These formats focus on a specific product category, Medium sized layout in strategic
location. Specialty stores provide a large variety base for the consumers to choose from.
Despite the presence of the basic ingredients required for growth of the retail industry
in India, it still faces substantial hurdles that will retard and inhibit its growth in the
future. One of the key impediments is the lack of FDI. This has largely resulted in
limited capital investments in supply chain infrastructure, which is a key for
development and growth of retailing and has also constrained access to world-class
retail practices. Lack of proper infrastructure and relatively high cost of real estate are
the other impediments to the growth of retailing. While the industry and the
government are trying to remove many of these hurdles, some of the roadblocks will
remain and will continue to affect the smooth growth of this industry. Examples include
foot ware, garments, consumer electronics, watches, food, Jewellery, books and music.
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50. 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; the old ones tweaked around or just
discarded. Some of these are listed in Table below.
Retailer Current Format New Formats. Experimenting With
Shoppers' Stop Department Store Quasi-mall
Ebony Department Store Quasi-mall, smaller outlets, adding food retail
Crossword Large bookstore Corner shops
Piramyd Department Store Quasi-mall, food retail
Pantaloon Own brand store Hypermarket
Subhiksha Supermarket Considering moving to self service
Vitan Supermarket Suburban discount store
Foodworld Food supermarket Hypermarket, Foodworld express
Globus Department Store Small fashion stores
Bombay Bazaar Aggregation of Kiranas
E food mart Aggregation of Kiranas
Metro Cash and carry
S Kumar's Discount store
Retailers are also trying out smaller versions of their stores in an attempt to reach a
maximum number of consumers. A crossword bookstore is experimenting with
Crossword Corner, to increase reach and business from their stores. Foodworld is
experimenting with a format of one-fourth the normal size called Foodworld Express.
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