A DISSERTATION REPORT ON

INDIAN RETAIL INDUSTRY TRENDS

In Partial Fulfillment of Award of Post Graduate Diploma in Business Management

BY :Pankaj Manchanda Section B (101) Batch 2010-12

Entrepreneurship and Management Process International New Delhi 74 July 2011

SYNOPSIS India is undergoing a retail revolution from the unorganized sector. There are now more modern retail formats such as hypermarkets, supermarkets and malls. Several international companies such as Wal-Mart, Carrefour, and Tesco are planning their entry and establishment into the Indian market while several domestic companies are setting up their retail setups, exclusive showrooms and large format stores such as Reliance, Tata and the whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. These trends indicate that retailing, as an industry has come into its own. According to a study by the confederation of Indian Industry retail sales in India were merely Rs. 135 billion in 2000 but today with over 15 million outlets that provide employment to over 74 million people (7% of the population), the size of the retail industry stands at USD 350 billion and it is expected to grow at a compounded 30% over the next 5 years. Retailing is an important infrastructure perquisite for modernizing India and can facilitate rapid economic growth. Modernization of all retail services would enable efficient delivery of goods and value-added services to the consumer, making a higher contribution to the Gross Domestic Product.

This project focuses on taking an in-depth analysis of retail scenario & consumer trends as they are emerging and identify the various retailing models that would work, in the Indian retail market. The analysis is done by looking at Global retail trends vis--vis the ones in India, the current state of the Indian retail industry, industry characteristics and Economic drivers of change, to understand the consumer buying behavior and what it foretells about the nature of the industry. To predict the kind of retail models that would work in India, besides analyzing the existing ones, the attempt has been to predict potentially promising formats.

CHAPTER 1 Introduction
In 2004 a study conducted by McKinsey titled Indias Retailing Comes of Age had predicted a definite retail revolution in India. This is turning out to be very true. India is the last among the large Asian economies to liberalize its retail sector. The Licensing raj in long over. A number of Indian and International retailers are entering this nascent, through dynamic market, Market liberalization and increasingly assertive consumers are sowing the seeds of a retail transformation that will bring bigger Indian and multinational players on to the scene. The market is huge at US $350 billion overall. The entry of multinational companies has certainly transformed this sector. The supply chain, and consumer interest and awareness in branded products have been built from scratch. Presently, Global players are entering India, indirectly, via the licensee/franchisee route, and more recently through joint ventures with Indian companies as partners. But as the Chinese experience clearly indicates allowing FDI (with restriction) would add buoyancy to the retail sector. All the major cities have major commercial projects under construction for retail purposes. In fact, the retail sector has provided the primary boost, to the commercial property market all over India. The retail sector is also getting acceptance in the job market with more and more business schools focusing on the sector and large retailers setting up retail academics. This sector is estimated to create 50.000 jobs per year in the next five years. The Indian consumers are divided into two categories, viz., high-income urban consumers and low-income urban and rural consumers. The highincome urban consumers are willing to pay a higher price for having the choice of quality products and the complete shopping experience in the large retail store. But, the low-income urban and rural consumers will go for the price sensitive products which are easily available in the smaller stores located nearby. The markets in both categories are very large and hence, there is little direct competition between the two retail sectors. As the awareness and disposable incomes increase in India, the two categories will merge slowly, before the competition actually begins. But till then along with modern retail formats the traditional network especially the kirana stores would coexist. In fact unlike any other mature retail market what will develop in India would be its own homegrown unconventional marketing mix. Since the consumer market is

diverse and traditional retail has deep socio-cultural roots it would be imprudent to emulate blindly the retail growth path of any other country. India remains one of the frontiers of modern retailing. The complexities of the vast and varied market will be a challenge. But the retailer who can shape the nascent retail market as well as adapt to Indias unique characteristics will reap larger rewards over the long term. Industry experts say there is no magic formula that can make an average retailers business boom. The key to generating growth lies in the willingness to invest money for some years and experiment with different retail formats. Pantaloons managing Director Kishore Biyani is a case in point. From departmental store pantaloons and the hypermarket discount store Big Bazaar, he has diversified into other concepts, including a seamless mall called central and the food and grocery home delivery vehicle called Food Bazaar on call. And he says more retail concepts are welcome. So, its appear that like in any other business, he who takes the risk and innovates is most likely to succeed in retail as well.

1.1 Retailing
The word Retail originates from a French-Italian word. Retailer someone who cuts off or sheds a small piece from something. Retailing is the set of activities that markets products or services to final consumers for their own personal or household use. It does this by organizing their availability on a relatively large scale and supplying them to customers on a relatively small scale. Retailer is a person or Agent or Agency or Company or Organization who is instrumental in reaching the goods or Merchandise or Services to the End User or Ultimate Consumer. Retailing is the final step in the distribution of merchandise the last link in the supply chain connection the bulk producers of commodities to the final consumers. Retailing covers diverse products such as apparels, consumer goods, financial services and leisure. A retailer, typically, is someone who does not affect any significant change in the product execs breaking the bulk. He is the final stock point who makes products or services available to the consumer whenever require. Hence, the value proposition a retailer offers to a consumer is easy availabilities of the desired product in the desired sizes at the desired times.

1.1.1. Origin of Retail Sector Early Trade: When man started to cultivate and harvest the land, he would occasionally find himself with a surplus of goods. Once the needs of his family and local community were met, he would attempt to trade his goods for different goods produced elsewhere. Thus markets were formed. These early efforts to swap goods developed into more formal gathering. When a producer who had a surplus could not find another producer with suitable product to swap, he may have allowed others to owe him goods. Thus early credit terms would have been developed. This would have led to symbolic representations of such debts in the form of valuable items (such a gemstones or beads), and eventually money.

1.1.2 HOW RETAIL DEVELOPED:

Peddlers and Producers: The retail trade is rooted in two groups, the peddlers and producers. Peddlers tended to opportunistic in their choice of stock and customer. They would purchase any goods that they thought they could sell for a profit. Producers were interested in selling goods that they had produced.

General Store: This division continues to this day with some shops specializing in specific areas, reflecting their origins as outlets for producers (such as pacific concord of Hong Kong), and others providing a broad mix, known as General Store (such as Caseys in the Midwest of the U.S.A.). Although specialists shops are still with us, over time, the general store has increasingly taken on specialist products. Customers have found this to be more convenient than having to visit many shops thus the term Convenience Store has also been applied to these shops. As the popularity of general stores has grown, so have their sizes. This combined with the advent of self-service has lead to the supermarket, or superstore.

Early Markets: Over time, producers would have seen value in deliberately overproducing in order to profit from selling these goods. Merchants would also have begun to appear. They would travel from village to village, purchasing these goods and selling then for a profit. Over time, both producers and merchants would regularly take their goods to one selling place in the Centre of the community. Thus, regular markets appeared. The first shop: Eventually, markets would become permanent fixtures i.e. shops. These shops along with the logistics required to get the goods to them were, the start of the retail trade.

Origins of Retail It is likely that, as markets became more permanent fixtures they evolved into shops. Although advantageous in many respects, this removed the mobility that a peddler or traveling merchant may still have enjoyed. For some shopkeepers, it made sense to obtain extra stock and open up another shop, most probably operated by another family member. This would recover business from peddlers and create new business and the greater volume would allow the shopkeeper to strike a better deal with suppliers. Thus the retail chain would have started. Its thought that this process would have started in china over 2200 years ago with a chain of shops owned by a trader called Lo Kass.

The First Self-Service Store This all changed in 1915 when Albert Gerrand opened the groceteria in Los Angeles, the first documented self-service store. This was soon followed a year later by the Piggly Wiggly self service store, founded by Clarence Saunders in Tennessee in the U.S. Growth: This new type of shopping was more efficient and many customers preferred it. Although personal services stores remain to this day, this new concept started a rapid growth of self-service stores in the United States. Other countries were slow to take up the idea, but there has been a steady rise in the global amount self0service stores ever since.

Efficiency: These entrepreneurs noticed that their staff had to spend a great deal of time taking grocery orders from customers. The groceries were stacked on shelves allowing customers to walk around and browse, collecting their shopping in a basket that was supplied. The shopkeeper would only need to tot up the final bill at the end of the process and transfer the goods from the basket to the customer and receive payment.

1.1.3 Family Business to Formal Structure: Although retail chains would have been mostly run by families, as some chains grew, they would have needed to employ people from outside of their family. This was a limiting factor as there would have been a limit to the amount of trusted non-family members available to help run the chain. Another, even more definite limiting factor was the distance the furthest shop would have been from the original shop. The greater the distance, the more time and effort would have been needed to effectively manage outpost shops and to service them with goods. There was, therefore, a natural barrier to expansion. That was the case until transport and communications became faster and more reliable. When this happened towards the end of the 19th century, chains became much bigger and more widespread. Many of these businesses became more structured and formalized, leading to the retail chain that we see today.

1.2 Top Ten Retailers Worldwide Rank Retailer No of Stores Owned Sales in FY-00 US$ Millions
1. Wall-Mart Stores Inc. (USA) 2. Carrefour Group (France) 3. The Kroger Co. (USA) 4. The Home Depot, Inc. (USA) 5. Royal Ahold (Netherlands) 6. Metro AG (Germany) 7. Kmart Corporation (USA) 8. Sears, Roebuck and Co. (USA) 9. Albertsons, Inc. (USA) 10. Target Corporation (USA)

TRADITIONAL RETAIL SCENE IN INDIA

India is the country having the most unorganized retail market. Traditionally the retail business is run by Mom & Pop having Shop in the front & house at the back. More than 99% retailers function in less than 500Sq.Ft of area. All the merchandise was purchased as per the test & vim and fancies of the proprietor also the pricing was done on ad hock basis or by seeing at the face of customer. Generally the accounts of trading & home are not maintained separately. Profits were accumulated in slow moving & non-moving stocks which were to become redundant or consumed in-house. Thus profits were vanished without their knowledge. The Manufactures were to distribute goods through C & F agents to Distributors & Wholesalers. Retailers happen to source the merchandise from Wholesalers & reach to end-users. The merchandise price used to get inflated to a great extent till it reaches from Manufacturer to End-user. Selling prices were largely not controlled by Manufacturers. Branding was not an issue for majority of customers. More than 99% customers are price sensitive & not quality or Brand Sensitive at the same time they are Brand conscious also. Weekly Bazaar in many small tows was held & almost all the commodities were on the scene including livestock. Bargaining was the unwritten law of market. Educational qualification level of these retailers was always low. Hence market was controlled by handful of distributors &/or Wholesalers. Virtually there was only one format of retailing & that was mass retail. Retailer to consumer ratio was very low, for all the categories without exception. Varity in terms of quality, Styles were on regional basis, community based & truly very low range was available at any given single place. Almost all the purchases / (buying) by mass population was need oriented & next turn may be on festivals, Marriages, Birthdays & some specific occasions. Impulsive buying or consumption is restricted to food or vegetables etc. Having extra pair of trousers or Shirts or Casuals & Formals & leisure wear & sports wear & different pair of shoes for occasions is till date is a luxury for majority population except for those living in Metros. Purchasing power of Indian urban consumer is very low and that of Branded merchandise in categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food, Jewellery, are slowly seeping into the lifeline of Indian City folks. However electronic & electrical home appliances do hold appropriate image into the minds of consumers. Brand name does matter in these white goods categories. In the coming times also majority of organized retailers will find it difficult to keep balance with rest of the unbranded retail market which is very huge.