chapter no. 1 introduction of retailing in...

Chapter No. 1 - Introduction

CHAPTER NO. 1

INTRODUCTION OF RETAILING IN INDIA

1.1 Introduction

1.2 Meaning of Retailing

1.3 Channels of Distribution

1.4 Evolution of Indian Retail Sector

1.5 Structure of the Indian Retail Sector

1.6 The changing trends in retailing due to globalization

1.7 The organized and unorganized Retailing potentials in Indian

Retail Market

1.8 Foreign Direct Investment in Indian retail market with reference to

Thane District

1.1. INTRODUCTION :Almost everything we use in our daily lives including the food we eat, the

clothes we wear, and the things we need for our house and for ourselves that are

brought from the retail stores. Goods are manufactured all over the world but the

ultimately sold to us through these retail stores. Retailing is the activity between the

producer and the individual consumer buying for personal consumption. Most people

have a liking for buying and selling in its broadest sense; children love playing at


shops, and this trait is clearly reflected in our national economic organization. Over

the long years has been built up a distributive organization of considerable scope,

which has proved of inestimable national benefit.

One of the outstanding features of Indian life is the number and variety of its

retail shops. This aspect has been commented upon by numerous overseas and

foreign visitors. Everyone has heard of the caustic remark attributed that India is

“Sone Ki Chidiyan”. Both the retail players International as well as domestic, looking

at the India as potential goldmine. It is found in latest research that India is the 5th

most attractive destination for international retail players as it is an emerging retail

market and has the highest retail density in the world. The overall retail market in

India is likely to reach Rs. 47 Trillion (US$ 792.84 Billion) by FY 17.1

Retailing in India is one of the important pillar of its economy and accounts

for about 15 percent of its Gross Domestic Product. The Indian retail industry is the

fifth largest in the world. It has two sectors one is organized and the other is

unorganized retail sector. However, it is assumed that the traditional retail outlets, the

so called mom and pop stores, or the local Karana stores are in the unorganized

sector. This sector has over 12 million retail outlets of various sizes and formats.

Some are of the view that shops with less than 500 sq. ft. space can be treated as

unorganized retail outlets, which includes street stores, counter stores, kiosks and

vendors, where the ownership and management rests mostly with one person.

Normally, the unorganized retail outlets do not have an association to promote their

interests. The organized retailers are also called as modern retailers. They operate in

larger shop space 500 sq.ft. plus. They are normally organized as departmental stores,

specialty shops, shops in shopping malls, and so on that offers a large variety of

products in terms of quality, value for money and makes shopping a memorable

experience.2

The prospects of retail sector in India are bright. It is poised to show high

growth rate in coming years. The existing players and new entrants are gearing up to

explore the fast growing Indian retail Market. The government policy is favorable to

rapid expansion of retail sector. FDI is also encouraged in the single and multi-brand


retail. As a result, foreign investment in the retail sector is likely to increase in the

near future. Even the investment of the Indian corporate sector in the retail sector will

increase. Tata, Birla and Reliance have already invested many crores in the retail

sector. Big Indian retailers will try to attract foreign investment in their existing retail

business.

The expansion and growth of retail sector is likely to offer new benefits to

primary producers and consumers. The employment opportunities will increase in the

retail sector as well as in food processing and other areas of Indian economy. This is

an indirect benefit of growing retail sector in India. Indian retailing is providing jobs

to roughly 15% of employable Indian adults. It is the biggest contribution to India’s

GDP after agriculture. India is now more attractive than ever before to global

retailers due to its enormous middle class and almost its untapped retail industry.

Retail sector growth is diversified and beneficial to various sectors of Indian

economy. This sector has promising future. In future, the retail sector in India will

grow, support Indian economy, protect and promote welfare of Indian consumers and

make retail business ethical and consumer oriented as well as service oriented.3

1.2 MEANING OF RETAILING :

What is Retail?

In today’s competitive environment, retaining customer is a difficult task.

Customer should get the product at their doorstep, due to which many intermediaries

went on adding to the distribution channel. Distribution becomes narrower with the

innovation of the word “Retail”. Retail is defined as any business that directs its

marketing efforts towards satisfying the final consumers, based up on the organization

of selling goods and services as a means of distribution.

The word ‘retail’ is dried from the French word retailer, meaning ‘to cu a

piece off’ or ‘to break bulk’.

Who is a Retailer?


A Retailer is one who sells goods or commodities directly to consumers.

These items are purchased from the manufacturer or wholesaler and sold to the end

user at a marked up price.

A retailers is a person, agent, company, or organization which is instrumental

in reaching the goods, merchandise or services to the ultimate customer.

Retailers assume risks both on behalf of their customers and of the producers

and so have become an essential shock absorber in the economic system.

Meaning of Retailer.

Retailers are referred to as middlemen or intermediaries because they occupy a

middle position in the distribution channel. They receives goods from producers and

wholesalers and pass it on to customers. The retailers are able to accomplish this

through the store located at a convenient place and also by ensuring that the customer

is focal point for the selection and display of stock.4

Retailers are the emerging class of intermediaries who help manufacturers to

reach the masses of customers within a less period of time. They play an important

role in society. From the customer point of view, the retailer serves him by providing

the goods that he needs in the required assortment, at the required place and time.

From an economic standpoint, the role of a retailer is to provide real added value or

utility to the customer.

A retailer is a person, agent, agency, company, or organization which is

instrumental in making the goods, merchandise, or services to reach the ultimate

consumer. Retailer performs specific activities such as anticipating customer wants,

developing assortments of products, acquiring market information, and financing.

Meaning of “Retailing” :


Delivering the products is not an end job which a retailer does, today to be the

best he needs to deliver services associated with the product. The word Retailing is

defined as “The set of business activities that adds value to the products and

services sold to consumers for their personal or family use”.5 Retailing can be

referred to all activities involved in marketing and distribution of goods and services.

Retailing is defined as a conclusive set of activities or steps used to sell a

product or service to consumers for their personal or family use.6 It is responsible for

matching individual demands of the consumer with supplies of all manufacturers. A

common assumption is that retailing involves only the sale of products in stores.

However, it also includes the sale of services like those offered at a restaurant, or by

car rental agencies. The selling need not necessarily take place through store.

Retailing encompasses selling through the mail, the internet, door-to door visits, any

channel that could be used to approach the consumer, When a manufacturer like Dell

4 Computers sells directly to the consumer, they also perform the retailing function.

The trade introduces new ideas and educates the public. The trade also interprets the

customers’ needs to the suppliers.

Retailing involves a direct interface with the customer and co-ordination 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 services to the customer.7

Definition Of Retailing :

Retail comes from the French word retailer, which refers to "cutting off, clip

and divide" in terms of tailoring (1365). It first was recorded as a noun with the

meaning of a "sale in small quantities" in 1433 (French). Its literal meaning for retail

was to "cut off, shred, paring". Like the French, the word retail in both Dutch and

German (detailhandel and Einzelhandel respectively), also refers to the sale of small

quantities of items.

Some important definitions of Retailing are given below.


According to Philip Kotler- “Retailing includes all the activities involved in

selling goods or services to the final customers for personal, non- business

use.”

According to David Gilbert ―Any business that directs its marketing effort

towards satisfying the final consumer based upon the organization of selling

goods and services as a means of distribution.8

According to Chetan Bajaj ―Retailing is defined as a conclusive set of

activities or steps used to sell a product or a service to consumers for their

personal or family use. It is responsible for matching individual demands of

the consumers with supplies of all the manufacturers.9

In simple terms we can say that retailing means the sale of goods or

commodities in small quantities directly to consumers.

1.3 CHANNELS OF DISTRIBUTION :

All of these types of retail establishments that have been described are in the

channel of distribution of producers’ goods to consumers. The course followed by

merchandise from the time it is produced until it reaches the consumer is called its

channel of distribution. There are four patterns for distributing consumer goods, each

of which will be described briefly.

From Producer to Consumer –

In this type of channel of distribution, the manufacturer or grower sells his products

directly to consumers. Direct selling and manufacturers’ retail stores are examples of

this type of distribution.

From Producer to retailer –

Where the producer sells his products to some type of retail store, which in turn sells

to the consumers, another type of channeling may be observed. Much of the

merchandise offered for sale in department stores is produced through these channels,

with the department store buying goods directly from the manufacturer and selling


those goods directly to the consumer. With certain products, this type of distribution

is used by the small independent stores, the chain store, and the mail order houses.

The products most generally distributed in this manner are men’s and women’s

apparel and shoes.

From producer to wholesaler to retailer to consumer –

Today the chief source of merchandise sold in retail establishments is the wholesaler,

who procures that merchandise from the producer. Distribution through the

wholesaler is the most economical form of distribution of such merchandise as

hardware, groceries, drugs and drugs products, and other lines of convenience goods.

These channels of distribution are used by many types of retail establishments today

in procuring merchandise for their stores.

From producer to agent to wholesaler or to retailer to consumer –

An agent middlemen is different from a wholesaler or a retailers, both of whom are

middlemen, in that the agent middleman does not have title to the merchandise he

handles. The agent middleman is important in channels of distribution of such

merchandise as canned goods, fruits and vegetable, flour, textile merchandise, lumber

and automotive equipment. This type of distribution is most economical when

markets are widely scattered and volume is small.

1.4 EVOLUTION OF INDIAN RETAIL SECTOR :

How has retailing developed into this wide assortment of stores and

merchandise, where the consumer can pick and choose the types of store in which

they wishes to buy and the kind of merchandise which meets their approval?

Retailing has been developing for thousands of years as is evidenced by the earliest

written records oF mankind. For almost every type of present day retail outlet, there


is a counterpart or forerunner in ancient and medieval civilization. Such retail outlets

have for centuries been serving people by procuring for them the necessities and

luxuries which they desired to own. As population increased and methods of

transportation and communication improved, retail stores expanded and grew

proportionately. The development of retailing was not a matter of physical growth

alone, for in contrast with the present day high standards and practices of progressive

retailers stand the fraudulent, dishonest methods of bartering practiced by the early

traders. Let us see how retailing has developed from a handful of adventurous traders

several thousand years ago to the 12 millions of retail establishments, of the present

day in India.

The Early Periods of Retailing –

The historians have found that trade existed even three or four thousand years

ago. In olden times there were no shops as we know them today. At this time people

lived in small, almost entirely self-supporting communities. These ancient traders

dealt in such commodities as salt, wheat, cloth and leather. Bartering was the trading

system where no money involved, goods and services were exchange with another

person. This type of exchange was relied upon by early civilization. For a long time,

most of the merchandise was sold at the marketplace or through the peddlers. As trade

expanded, one group of the ancient peoples, developed some of the business papers

still used today. Some of these are bank cheques, contracts, bills of sale, and

promissory notes. The early merchants and traders were responsible in a great

measure for procuring the goods which contributed to higher standards of living for

each succeeding generation. Such trade as existed was conducted at fairs held in the

villages and particularly on festivals. In addition there were regular markets held in

most towns, mainly for the sales of provisions.

The development of retailing in India –

The development of the retail trade has enabled it to meet the changing

demands of its customers and of the economy. The real face of retail business has

been visible in the form of the neighborhood grocery shops. India’s retailing scenario

includes a lot of small retail outlets which comprise of Kirana stores, General Stores,

Chemist shops, Corner paan beedi shops, bakeries and confectionary, electrical,

furniture, stationery, hardware, vegetable and fruit shops etc.


The Indian retailing scenario cannot be said to have evolved as in the process

of evolution one graduates and shifts gears from one stage to the next. It’s more of a

revolution than evolution. It is unique scenario. There is a retail revolution happening

with more and more formats being defined by the day, not only by the marketplace

but by the method of retail mediation with customers, by physical store

characteristics, by merchandise characteristics etc. At the same time, these newly

defined formats co-exist with most primitive ones. In fact, it is the store format that

creates a unique identity for retailers, enabling recall in the minds of customers.

The beginning of organized retailing in India can be traced to the pre-

independence time when many of the established textile business houses took to

retailing through company owned show rooms or franchisee outlets. There were also

many exclusive tailoring shops which slowly expanded their activities to become

leading regional fashion retailers. To quotes few names : In Mumbai- Charagh Din,

Kolkata –Burlington, Delhi – Mohanlal & sons. Broadly, the organized retail

evolution can be divided into four phases10 :

Initial Phase of Retailing:

This phase can be said to be the period before 1990 (or pre 1990). During this

phase, there were manufacturers who had established their own retail store, to quote

few name, Bombay Dyeing, The Raymond Group, Bata etc. Food world retail chain

outlets was the first from the RPG Group in the supermarket segment.

Conceptualization of Retail :

This phase can be said to be the period post liberalization i.e. between 1991-

2005. During this period, there were many organized retailers such as Shoppers Stop,

the Pantaloons etc who entered the retail market. There were also many international

organized retailers such as McDonald’s, Adidas, Nike, Reebok etc. who entered the

Indian retail market during this period.

Active Retail Expansion phase :

This phase is referred to that as the period of globalization from 2005-2010.

This period can be said to be very active phase in the retail industry with the entry of

many retailers with various retail formats. Many corporate houses, such as the

Reliances, Tata, Mahindra, Aditya Birlas etc. became retailers using different retail

formats. Seeing the success of these corporate retailers encouraged many global

retailers such Metro AG, Max Retail, Hypercity Shoprite, Carrefour, Tesco, Zara etc.


to become a part of the Indian retail industry. All these retailers are confident about

the potential and growth of the Indian retail industry and are keen be a part of it.

Consolidation and Growth Phase :

This is the period from the year 2010 onwards and we are presently in this

phase. The recession in the past few years was felt by the retail sector too which

witnessed an eleven per cent decline in sales in 2008. Of course, this economic

recession did drastically affect the European and USA economies but not to that

extent the Indian Markets. So the challenges faced by the industry during such times

had been to focus on consolidation, to cut costs and survive. Although since

consumers have been showing a willingness to purchase more goods and services

with a good disposable income in hand, the retail industry is trying out innovative

ways to woo the final consumers.

It may seem a long way from a large department store or modern self service

sop- the one with its many services, its skilled display and vast choice of goods, the

other with minimum service but with a clean efficient layout – to stone age man

bartering with his neighbor, but the line is clear, because at each step the same

fundamental economic needs were met. Without distribution there would be no

civilized life.

1.5 STRUCTURE OF THE RETAIL INDUSTRY IN INDIA:

The fundamental purpose of the retail trade is to supply the needs of the

public. When one considers the almost infinite range of wants of an ordinary family-

from food to amusement, garden tools to needles, and clothes to carpets – it is not

surprising that there are a host of shops of every kind, and not only shops but barrows,

newspaper stands, markets, trading clubs, mail order warehouses, door to door

salesmen and so on. All these means of distributing goods are known collectively as

Retail outlets. They have all developed along their own lines to meet the demands of

the people.


The term retailing refers to all forms of selling to the ultimate user, generally

called the consumer. At least three distinct types of retailing are carried on in India :

1. Selling in the retail store, where under one roof is assembled a variety of

merchandise for sale to consumers; there are two forms of it one is organized

sector and the other is unorganized sector.

2. E-Commerce – mail order selling in which all forms of goods are attractively

portrayed in internet and the resultant orders filled by mail, express, parcel

post or freight ;

3. House to house selling, in which sales men call at the homes of consumers and

obtain orders for merchandise for present or future delivery.

The principal purpose of this study is to discuss the first, the most important

type of retailing , particularly unorganized sector.

The task of describing the structure of retail trade in India is no easy one. One

of the principal obstacles is the overwhelming complexity of organization resulting

from the enormous number of independent units. Before it is possible to proceed,

therefore, it is necessary to make some tentative attempt to enumerate and classify

these and to discover any representative patterns of organization which may exist

among them, in order to have some concept of the order of magnitude in the real

world of each of those factors of which we have been considering the theoretical

aspects.

India’s Retail sector has two broad components. These are organized retailing

and unorganized retailing. There is no standard definition to describe the terms

organized and unorganized retailing.

The unorganized retailing dominates the total retailing activity in India

particularly in the rural and semi-urban areas. Kirana stores are also popular in big

cities and metros. The unorganized sector includes thousands of small retail shops

(kirana shops and general stores) spread over the entire geographical area of the

country. In every village, one or more retail shops also called conventional or

convenience stores exist to meet the daily needs of local people. Unorganized

retailing has a long history in India. Unorganized retailing activity is an integral


aspect of our social and economic life. It covers more than 90% of total retailing in

India. The popularity of unorganized retailing is due to special benefits offered by

small unorganized retailers. The growth of unorganized retailing per annum is nearly

10 percent.

The organized retailing is comparatively recent development in India. The

malls, chain shops, large department stores etc. are the examples of organized

retailing. It refers to corporate based retail chains and hypermarkets and privately

owned large retail shops. Organized retailing is becoming popular in urban areas and

metros. The mall culture is spreading with fast speed. The share of organized

retailing in total retail business may be 6 to 10% percent or even more. This suggests

that organized retail has tremendous growth potential in the fast expanding Indian

economy.11

Retail trade is conducted with the use of different formats. Format is the

structure or style of functioning, which creates a unique identity for retailers. There is

retail revolution taking place with more formats coming in the picture.

A) Traditional Format :

Weekly Bazaars’ and Fair –

The merchants and traders were permitted to set up a fair at the meeting place.

Here were sold the wares that would be needed on the long, strenuous journey ahead.

Later, fairs became annual events and merchants from far and near exhibited and sold

of grocery, utensils, spices, grain, clothing, handmade items, cosmetics and small

consumer durables. As fairs became increasingly popular with both the people urban

and rural people and other forms of entertainment became associated with them. As a

result in the eighteenth and nineteenth centuries fairs were principally places of

amusement with ornaments and gadgets becoming the principal articles sold. Today,

fairs are still annual events in many communities, particularly rural areas. Along with


various forms of entertainment, these fair have become exhibit places for the finest

products of the farms in the area. In cities, fairs are often sponsored by large

industries to exhibit the latest products. Haats, Mandis and Melas, are still very

important segment of the Indian life as it brings all essentials and trade in various

areas of the country.

Kirana stores –

As villages became more densely populated and began to expand into cities,

some general stores started to carry only one line of merchandise, such as groceries,

dry goods or shoes. In small towns and cities alike there began to appear small retail

stores. Many of these were small family stores where parents and often their children

worked. In the same manner, many small retail stores are established and operated

today. They are also known as Convenience stores or Mom and Pop Store.

Hawkers-

Hawker an individual seller who carrying wares through the streets and

attracting attention calling the people by using placards, signs or disclosing

merchandise in a public place.

Peddlers-

Peddler is a retailer who do have fixed place for conducting his business but

still he regularly carries the goods for sale with himself from place to place.

Street vendors-

Street Vendors who sale goods in a market found in large enclosed spaces

instead of on a street particular days of the week.

B) Established Formats –

Public Distribution System –

PDS is the largest single retail chain in the country. These makes available

food grains at a fair price to the economically backward class of people. Now these

PDS has changes from typical rationing system to a social safety system with


improved quality of food grains and keep a check on the speculative tendencies in the

market.

Canteen Stores Department and the Post Offices –

CSD and PO are also very significant outlets in Indian retail market. They are

in large number in the market.

Khadi and Villiage Industries Commission (KVIC)-

It is government backed outlets in India. Today KVIC has more than 7000

stores in all over the nation. There is huge change in terms of its size and functioning

of KVIC. The emerging of multi level shopping stores with parking facility. S.

Kumar’s Bombay Dyeing, Raymonds were among few companies to come up with

retail chains in textile sector.

Department Stores-

Department stores began to develop in the last half of the nineteenth century,

many of them as outgrowth of dry goods stores which added other lines such as shoes,

and men’s clothing. A department store is a store offering a wide variety of goods

under one roof. As a convenience to their customers, some of the specialty stores

began to carry a related line in a separate section of the store. A department store is a

retail store that handles many different lines of merchandise such as piece goods,

small wares, women’s ready to wear and accessories, men’s and boy’s wear, and

house furnishing. It is structured into separate units for purposes of promotion,

service, accounting and control. The department stores have a number of distinct

characteristics. It is usually located in the busiest shopping district of a city or its

suburbs. Because of the many lines of merchandise the department store carries, it

appeals to a large number of people; also through the various services it offers in

addition to its wares, it seeks to attract people and to develop in them the habit of

coming into the store.

Consumer co-operative stores –

There are two types of consumer co-operative stores: the city or urban co-

operative store and the rural or farm co-operative. The city co-operative stores have

been the result of a group of people- while collar workers and middle income groups

mainly attempting to combat high prices of merchandise through profit elimination.

Another factor contributing to the development of urban co-operative stores was the


desire to establish standards of pertinent facts about merchandise, and to eliminate

advertising based on emotional appeals rather than facts.

Table 1.5.1 : No. of PDS/CSD/PO/KVIC

Sr.No. Types of outlets No. of outlets

1 Public Distribution System 463000

2 Canteen Stores Department 3400

3 Post Offices 160000

4 Khadi and Village Industries

Commission

7000

Source : Sudarshan R. (2007), Retail Management- Principles & practices,

New Century Publication, Pg.No.31-32

From the above table, it can be seen that retail trade is conducted with the use of

different established formats which creates a unique identity for retailers. The number

of outlets of Public Distribution system is more than the other established retail

formats in India. The government of India supported Public Distribution System

outlets, Khadi Stores, Cooperative etc. provided alternative distribution system

against the private sector.

C. Emerging formats :

Two factors brought about the development of today’s retailing. The first is

the growing domestic demand which cause a store to expand into a group of small

shops under one roof. Demand growth in retail sector has been rising due to rising

incomes, growing purchasing power and increasing urbanization, implying higher

consumption at retail level. A second factor is the supply factors which is due to

increase in discretionary spending among people, increase in proportion of working

women and increase number of foreign retailers setting up in India in the recent past.

Exclusive retail outlets –

Today India has a host of both small and large formats with exclusive stores

having national and international brands under one roof catering to all sections of the

society.

Super-markets –


Supermarkets have been a fairly recent development in the field of retailing.

These are large food stores carrying a variety of merchandise that the small and even

medium- sized grocery store cannot approximate. They are attractively arranged and

present almost the appearance of a department store. In many cities, corporate chain

organizations are closing their smaller units and building larger supermarkets to take

their places.

Hypermarkets -

Hypermarkets is a store that combines a supermarket and a department stores.

It provides wide range of exclusive merchandise at low profit margins under one roof

including fresh groceries and apparel. Therefore, their operating cost is

comparatively less than other retail formats. When planned, constructed and executed

correctly, hyper mart caters to routine weekly shopping needs in one trip. E.g. Dmart,

Big Bazaar, Star Bazaar etc.

Internal retail –

As time passed, the new retail players moved on from manufacturing to pure

retailing. Retail outlets such as Food world in FMCG, Crossword in books, Music

world and Planet M in Music, entered the market during mid 1995.

Malls—

It has a range of retail shops at a single outlet, endow with products, food and

entertainment under a roof. They are located mainly in metro cities, in proximity to

urban outskirts ranging from 60,000 sq. ft. to 7,00,000 sq. ft. and above. E.g. Inorbit

Mall, Metro Mall etc.

Specialty Malls –

Specialty malls are frequently operated by independent retailers. These stores

make their appeal on the basis of a single line or closely allied lines of goods.

Because these shops specialize in a limited filed, they are able to offer a wide

assortment of goods, an extensive range in sizes, and the newest styles. Since their

buyers can concentrate on a few lines, their knowledge of these lines is more

complete than that of a buyer for many different lines. Specialty stores offer an

opportunity to practice salesmanship of a high order, and salespeople in these stores


are frequently paid larger salaries than are those in other stores. A large amount of

the retail trade of wealthy people in the larger cities goes to specialty stores. E.g. if a

customer visits a Reebok store then they find just Reebok products in the stores.

Multiplexes –

When a group of shops all selling the same thing are brought together under

one management they become a multiplexes. The multiplexes can afford to employ

experts in buying, accounting, advertising and other functions of retailing.

Table 1.5.2 : Development of Retail Formats in India

Traditional formats Established formats Emerging formats

Itinerant salesman Convenience/

Department Stores

Exclusive retail outlets

Haats Company/Multi Brand

Showrooms

Hypermarkets

Moles PDS/Fair Price Shops Internal retail

Mandis, etc. Co-operative stores Malls/Specialty Malls

Kirana shops Pan/beedi shops Multiplexes

(Source : Gilbert David (2008), Retail Marketing Management, Pearson Press,

Delhi)

From the table No.1.5.2, we can gain idea of the various retail formats in

India. Today India has a host of both small and large formats with exclusive stores

having national and international brands under one roof catering to all sections of the

society. These new retail formats such as super markets and hyper markets are

constantly trying to provide the customer with the 3 V’s (Variety, Value, and

Volumn). Over the last couple of years, Indian retail industry has witnessed a

ridiculous growth rate due to the entry of various international quality formats to suit

the Indian Middle Class, by offering affordable merchandise under great width and

depth. Today Indian retail industry is the second largest employer in the country with

almost over 12 million retail stores in India. Although the retail sector is still


dominated by unorganized retail sector, organized retailing is growing fast at almost

25-30% per annum.12

Table No. 1.5.3 - No. of Outlets in various modes of stores in food and grocery retail

Type No. of Outlets

Overall organized retailers 5689

Convenience Stores 933

Hypermarkets 419

Traditional retailers 12,360,327

Source : India Retail Report 2013, KPMG analysis, CRISIL Report,

November, 2013; Euro monitor report, July 2013

The Table 1.5.3 reveals that more than 12 million outlets are running by the

traditional retailers. It clearly shows that the traditional retail outlets are spread over

throughout the length and breadth of the country.

Table No. 1.5.4 : Growth rates in various modes of Stores in grocery retail

Type Growth rate in percentage

Overall organized retailers 3.30%

Convenience Stores 19.10%

Hypermarkets 28%

Traditional retailers 0.70%

Source : India Retail Report 2013, KPMG analysis, CRISIL Report,

November, 2013; Euro monitor report, July 2013

The data presented in table No. 1.5.4 shows the growth in various mode of

stores. It clearly shows that the growth of traditional retailing is only 0.7 per cent

leaving 49.1 per cent to convenience stores. The changing economic conditions

during the last two decades provided the right kind of foundation for the development

of organized retailing.

Over the last couple of years, Indian retail industry has witnessed a ridiculous

growth rate due to the entry of various international quality formats to suit the Indian

Middle Class, by offering affordable merchandise under great width and depth.

Today Indian retail industry is the second largest employer in the country with almost


over 12 million retail stores in India. Although the retail sector is still dominated by

unorganized retail sector, organized retailing is growing fast at almost 25-30% per

annum and is believed to touch a figure of Rs.150000 crore by 2010. The Indian

economy is projected to grow between 10-11 % in 2007-2008 having grown at a

stable rate of around 6-7% over the last decade.13

1.6 THE CHANGING TRENDS IN RETAILING DUE TO

GLOBALIZATION: The provisional estimate of the relative importance of the different types of

retail organization with which is concerned could hardly be said to present a picture of

long-established and stable conditions, but rather one of a branch of commerce, in a

state of rapid development. It is a comparatively easy task to catalogue the various

types of retail organization and trading policy, and even to estimate their relative

importance, it is a much more difficult one to attempt to interpret contemporary trends

which are making for change. But the problems of retail trading both those which are

presented to the retailer himself and those which are solution adopted presents to the

whole economy, cannot be understood except by their light.

Some of the changes are obvious and need no elaborate description. Principal

among these is the steady growth during the last decade in the relative importance of

organized retailing movement appear to have been advancing.

What of the unorganized retailers? Has he been vanishing before the

onslaught of the organized retailing? To this point we return later, after having

investigated the factors of the utmost importance to the retail market.

India’s new economic model known as Liberalization, Privatization and

Globalization was to make the Indian economy one the fastest growing economies in

the world. The impact of globalization has been highly positive in almost all spheres

of economic and social life. Globalization is increasing the integration of national

markets and the interdependence of countries worldwide for a wide range of goods,

services and commodities. The Retail sector has played an important role throughout

the world in increasing productivity of consumer goods and services. The Indian

retail industry is going through a period of golden sunshine. The emerging trends in


the Indian organized retail sector are also adding up to the development of the Indian

retail sector.

In India retail is accounted for over 10% of GDP and 8% of employment.

(Kearney report). Retail is the fastest growing sector in Indian economy with

compounded annual growth rate of 46.4& for the past 3 year 2009.7

It is the fifth largest retail destination globally. At Kearney, the renowned

consulting company, ranked India as the most attractive and emerging market for

investment in retail sector, in the Global Retail Development Index (GRDI). Retail

sector today leading with the compounded annual growth rate of 46.4% for the past 3

years. Growth of organized retail is expected to the of $ 427 billion in 2010 and 637

billion in 2015. According to study in Indian Council for Research on International

Economic Relations (ICRIER), Retail sector is expected to contribute 22% of India’s

GDP by 2010.14

Over the last decade there has been a significant evolution in the Indian

consumers. It is because of globalization, new opportunities, rising income, exposure

to media, change in consumer behavior. Today it’s the consumer who is driving the

market. Changing lifestyles and values, growing number of nuclear families, working

women has lighted the growth of organized retailing in India. With consumers now

enjoying a wide variety of products and services to choose from the concept of value

for money is fast catching on an Indian retailing. Consumers are merging as emperors

of retailing in India with their discerning buying attitude and their ever increasing

purchasing power.15

Now, quite clearly, the changes in habitation and mobility outlined above will

have altered the costs of retail distribution and the appropriate number of retail

outlets. And the growth of organized retailing will, quite certainly, have deprived the

small retailer of custom wherever it has taken place. The appropriate question,

therefore, is, Have those shops in the centers of towns whose customers have moved

the organized retail markets, those shops everywhere whose custom has been

decreased by the competition of the larger organizations, and those rural shops whose

customers have been decanted into urban markets, tended to go out of business? If

they have not, then in view of the high proportion of retail costs which are overheads,

it appears probable that retail margins have been widening during the period. There

will be strong grounds for suspecting this to have happened if we find that the total


number of shops have been increasing more rapidly than the changes in habit and

habitat appear to warrant.

Retail organizations are scaling up operations rapidly to minimize cost and

increase margins in the following ways so that they can sustain or expand their

business. This would help in the consideration of retail growth.

Indian retail network is getting organized and corporatized and spreading

across the country. Indian retail corporate are using multi-formats, e.g.

Pantaloons etc.

Indian retailers are also becoming media players in indoor retail, e.g. Stop-

Fash Media, Pantaloon – Future Media.

Retail companies are increasingly spending on both the environment and

fixtures and fittings emphatic lightings and digital signage and are all in for an

international appeal and inviting feel so that they are selling an experience and

not just goods.

The retail business is an early adopter of I.T. and various levels of usage are

emerging such as data warehousing/mining, supply chain management,

scanner data, bar-coding, etc.

The latest fad for fragrance retailing is now enamoring the great Indian retail

dream, so also the emergence of private labels.

Loyalty schemes and reward points are being extensively used to retain and

reward customers, e.g. First Citizen (Shoppers Stop), Green Card

(Pantaloons).

Store design is becoming international, e.g. Hypercity has partnered with JAP

of London for its store design.

The emergence of retail brands e.g. Stop, Fresh &Pure etc.

The number of outlets in India have increase 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.16 India is being seen as a potential goldmine

for foreign as well as domestic retail players, as it is an emerging retail market and

has the highest retail density in the world. The following tables showing the domestic

as well as foreign retail players in Indian retail market with their investment plans.


Table No. 1.6.1 : Key Indian Players in the Indian Retail Market are as follows :

Players Investment details

Pantaloon Retail Ltd

(Future Group venture)

Over 2 million sq ft of retail space spread over 35

cities with 65 stores and 21 factory outlets

Shoppers Stop

(K Raheja Group

venture)

Over 3.21 million sq ft of retail space spread over 23

cities with 51 stores

Spencers Retail

(part of RP-SG Group)

Retail footage of close to 1 million sq ft across 45

cities with 200 stores

Lifestyle Retail

(Landmark Group

venture)

Approximately 15 lifestyle and eight Home Centre

stores

Bharti Retail 74 Easy day stores with plans to invest about 2.5

billion USD over the next five years to add about 10

million sq ft of retail space in the country

Reliance Retail 700 stores with a revenue of 7,600 crore INR

Aditya Birla ‘More’ 575 stores with approximate revenue of

2,000 crore INR. Recently, purchased stake in

Pantaloon Retail

Tata Trent 59 Westside stores, 13 Starbazaar hypermarkets and

26 Landmark bookstores

Source: Media reports, company website

http://www.pwc.in/en_IN/in/assets/pdfs/industries/retail-and-consumer/retail-report-

300812.pdf

http://www.pwc.in/en_IN/in/assets/pdfs/industries/retail-and-consumer/retail-


Table No. 1.6.2 : Key foreign Players in the Indian Retail Market are as follows :

Players Investment details

IKEA IKEA, the global retailer in home furnishing space,

has bagged the approval of Indian government for

investing INR 105 billion for setting up home

furnishing stores in india in May 2013. IKEA plans

to open 10 stores in Indian in the first 10 years.

Decathlon French sports goods retailer planning to enter the

Indian retail space through single brand stores. It is

already present in india through the cash and carry

format.

Richemont Luxury player Compagnie Fianciere Richemont SA

is also planning to enter India and has applied for

approval in January, 2014. Planto invest INR 30.54

cores in first phase of entry in India.

Pavers England Pavers England, the UK Based footwear retailer was

one of the first player to enter India with plans to

invest INR 982.6 million in India.

Fossil Inc. US based accessories retailer plans to invest around

INR 20 cores in India.

Le Cresset The French cookware retailer, plan to open shop in

shops in hypermarkets and department stores, and

franchisee operations across India.

Forever 21 The US apparel retailer plans to invest INR 305.42

crores over the next few years.

Source :News articles, KPMG website


1.7 THE ORGANIZED AND UNORGANIZED RETAILING

POTENTIAL IN INDIA: The position of importance occupied by the unorganized retailer may be

gathered from the fact that from the numerical standpoint they account for 93% in

2012. While it is admitted that many of these units are small, and the actual turnover

low, taken in the mass the results are of first class importance in the economy of the

nation. Owing to their local character they are frequently in a better position to satisfy

local demands; supervision is comparatively easy, and they are saved the costs and

time expended by the larger departmental stores and kindred organizations by the

elimination of routine procedure common to these. Then we have the undoubted

advantage of the personal touch especially in a family business, where also decisions

relating to general policy, buying etc. can be quickly made as occasions arise.

Due to changes in the socio economic factors and changing market trends, the

excellent opportunities are available for the growth of organized retailing in India.

The growth of organized retailing in India in driven by the two main factors – rapid

urbanization and benefits of conveniences which the consumers cannot resist.

The retail pie is large enough for everyone to get a slice. Though organized

retail will grow at much faster rate of 20% plus rate, but the unorganized retailing is

the backbone of the trade, it will also see a very good growth in terms of value.

Table -1.7.1 :Share of Retail trade in Gross Domestic Product (G.D.P.)

Year Share of Retail Sector in percentage

2007 8%

2009 12%

2011 22%

Source : At Kearney

Table 1.7.1 reveals that in India, the share of Retail trade in Gross Domestic

Product (G.D.P.) is continuously increasing from time to time i.e. in the year 2007 it

was 8 per cent, and in 2011 it was 22 per cent of its GDP. Retailing is an important


segment of any country, both in relation to GDP Contribution as well in share in total

employment.

The Indian retail industry has been growing in a steady pace with a strong

CAGR of 18.1 percent over 2013-17, fuelled by factors like changing lifestyle, rising

disposable income, favorable demographics, and easy credit availability. The retail

sector contributes to 23% of the GDP, which is driven by an increasing Private Final

Consumption Expenditure (PFCE) over the last few years growing from INR 19 Lakh

Crores in 2005 to around INR 51 lakhs crores in 2012.

Table No. 1.7.2 : Indian Retail Industry Market size (INR trillion) and

share of organized retail using CAGR of 2012-2017

Year Share of Retail Sector Retail Market Size

(Amount in INR

Trillion)

Unorganised Organised

2012 93 7 23.99

2013 92 8 28.33

2014 92 8 33.46

2015 91 9 39.51

2016 90 10 16.66

2017 89 11 55.10

Source : India Retail Report 2013, KPMG Analysis

Retailing in India is one of the important pillars of its economy. Efficient,

economical conduct of retail stores, therefore, plays an important part in the entire

economic system. It generates employment opportunity to about 40 million Indian

from 1.2 billion people population (3.3% of Indian Population).17 The following

tables describes the share of employment in different segments of retail industry.


Table No.1.7.3 : Share of employment in the Indian retail industry

Retail Sector Share of employment

Unorganised 93%

Organised 7%

Source : Industry Interaction; KPMG in India analysis

Table No. 1.7.3 reveals that the organized retail is still in the stages of finding

its feet in India even now which also reveals that the relative underdevelopment of the

organized retail industry in India.

Table No. 1.7.4 : Share of employment in various segment of Indian retail

industry

Segment %

Food & Grocery 31%

Entertainment & leisure 1%

Health & Personal Care 3%

Gems and Jewelry 25%

Lifestyle 7%

Home Improvement 7%

Auto and Auto Components 26%

Source : Industry Interaction; KPMG in India analysis

Table No. 1.7.4 shows that the share of employment in the Indian retail

industry, segment of food and grocery employs 31 per cent people whereas the Auto

and Auto components 26 per cent people employs. After these two segments, in

Gems and Jewelry 25 per cent of people employs. Though these numbers translate to

approximately 8 percent of the workforce of the country.

Demographic characteristic of retail sector. This segment has the least educated

workforce amongst all segments

Table No. 1.7.5 : Educational profile of grocery retail sector

Education profile of grocery retail sector %

Secondary and below 83%

Higher Secondary 10%


Diploma/Certificate 0%

Graduate 6%

Post Graduate 1%

Total 100%

Source : NSS 68th round survey, MOSPI website, KPMG analysis

Table No. 1.7.6 : Market size of Indian retail industry :

The total market size was US$ 490billion in 2013.

Year Market Size in US $ (Billion)

1998 201

2000 204

2002 238

2004 278

2006 321

2008 368

2010 424

2012 518

2013 490

Source : http://www.ibef.org/industry/retail-india

Table No. 1.7.7 : Indian retail industry break-up by revenues in 2013

Segment Revenue in Percent

Food & Grocery 69

Apparel 8

Jewellery 6

Consumer durable and IT 6

Pharmacy 2

Furniture and furnishing 2

Foot ware 1

Other 6

Source : http://www.ibef.org/industry/retail-india

1.8 FOREIGN DIRECT INVESTMENT IN RETAILING :

http://www.ibef.org/industry/retail-india

http://www.ibef.org/industry/retail-india


Foreign investment is investment in an Indian enterprise by a foreign players

which can be involved equity capital or re-investment of returns or earnings. In 1991,

the economic reform of India had brought technically a tremendous changes in every

sectors of Indian economy with the hold of liberalization, privatization and

globalization.

There are two different kind of foreign investment :

1. Foreign Direct Investment (FDI) and

2. Foreign Portfolio Investment.

Indian companies can receive Foreign Direct Investment under two routes :

1. Automatic route- In this there is no requirement of prior permission of the

government or Reserve Bank of India for investment to all the sector for the

trading activities except the provisions of consolidated FDI policy paragraphs

as entry route for investment issued by government of India.

2. Government Route – In this there is requirement of prior approval of the

government for investment in the capital of Indian companies by the foreign

investors from FIPB, Ministry of Finance or SIA, DIPP.

In India, there have been many changes taking place in Foreign Direct

Investment from time to time. It was around 1990,when the modern retailing process

slowly commenced, and in 1991 Government of Indian was took initiatives by

liberalizing Indian economy including FDI. In the following ways FDI gradually

entered in Indian retail business.

1995 - General Agreement on trade in services which include

retailing services, in World Trade Organization came into effect.

1997 - 100% rights in Foreign direct investment in cash and carry

(wholesale trade ) brought under the government approval route.


2006 - Foreign direct investment in cash and carry (wholesale trade )

brought under the automatic route and permitted upto 51% investment

in a single brand retail outlet.

2011 – 100% - Foreign direct investment in single brand retail

permitted.

2012 - Foreign players have entered in to the Indian retail market with

$500 however with uncertainty of entry rules which kept them away.

Regulation in FDI allow 100% FDI with 30% local sourcing and 51%

FDI with no sourcing requirements. 51%FDI permitted in multi brand

retailing with the condition where population is >1Mn in cities, 30%

souring from small local business, dependent of approval by

individual state with only 18-20 cities with > 1Mn population and cash

& carry.18

Table No. 1.8.1 : Status of Multi Brand FDI in different states

Status of Multi Brand FDI in different States

Allows FDI in Retail Doesn’t Allows FDI in Retail

Andhra Pradesh West Bengal

Assam Gujrarat

Haryana Bihar

Jammu and Kashmir Tamil Nadu

Maharashtra Kerala

Manipur Madhya Pradesh

Uttarakhand Tripura

Daman & Diu Odisha

Dadra& Nagar Haveli Delhi

Karnataka Rajasthan


Source: India Retail Report 2013, KPMG analysis, State wise location

of retail stores, Business Standard website

FDI in Thane District –

The government of India has permitted 51%FDI in multi brand retail trade

with the condition of that Retail sales outlets may be set up only in cities with a

population of more than 10 lakh as per 2011 census. And as per the Census of 2011,

in three talukas of Thane District – Thane, Kalyan and Bhiwandi are having more

than 1 million population. The Central government has promise the thane district will

be house of big retail business by allowing foreign supermarket chain to open shop

here as well as by qualifying the organized retail sector.

The another condition of 51% FDI in multi brand is that the organized retailers

source the 30 percent of its goods from small local market. Thane district is most

populous district with a unique mix of tribal, rural and urban population. This district

is one of the biggest cultivators of many variety of farm produce vegetables. This

condition will give the advantages to the framers and the allied industry. There are

chances that these chains will open procurement centres which eliminate middlemen

and farmers also will get their payment on the spot.

There are few retail chain i.e. Reliance and More who have already made an

arrangement with the farmers of Narayangaon in Pune District of Maharashtra State

for selling their produce at a mutually pre-decided rate. To maintain the quality of the

perishable product, Government of Maharashtra would help by created a web cold

storage chains and go downs.

Thane is an industrial belt and with availability of good infrastructure facilities

there is high scope for the enhancement of the organized retail sector.


Citation :

1 Dr. Gopalan (Apr-Sept 2011), “Retail Service Quality: A Customer Perception

Study”, FOCUS The International Journal of Management Digest, ISSN : 097-

9165, VOL.7 No. 1 pp. 07-2.

2 Vaz Michael, Services Sector, (2013), Mumbai, Manan Prakashan, Second

Edition, pp 67, ISBN 978-93-82032-67-0

3 N.G.Kale, M.Ahmed (2012), Mumbai,Vipul Publication, Third Revised

Edition, pp 288-289.

4 Nair Suja R, Retail Management (2011), Mumbai, Himalaya Publishing

House, First Edition, pp.4.


5 Makhija Jia, Retail Management, (2010), Mumbai, Vipul Prakashan, First

Edition, pp 3.

6 Bajaj, Tuli, Srivastave (2005), “ Retail Management”, Oxford University press

ISBN No. 0-19—5666986-X.

7 Gibson Vedamanil (2003), “Retail Management- Functional Principles &

Practices”, Jaico Publishing House, ISBN No. 81-7992-151-4.

8 David Gilbert ‗Retail Marketing Management‘ 2nd edition, Pearson

Education.

9 Chetan Bajaj, Rajnish Tuli, Nidhi V Srivastava, ‗Retail Management‟, Oxford

University Press, 2005,

10 Nair Suja R, Retail Management (2011), Mumbai, Himalaya Publishing

House, First Edition, pp.20-22.

11 N.G.Kale, M.Ahmed (2012), Mumbai,Vipul Publication, Third Revised

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12 Gilbert David (2008), Retail Marketing Management, Pearson Press, Delhi)

13 Singh D.H. (2009), Retail Management – A Global Perspective (first ed.),

New Delhi, S.Chand.

14 Dr.Gopalan (Apr-Sept 2011)”Retail Service Quality: A Customer Perception

Study”, FOCUS the International Journal of Management Digest, ISSN 097-

9165, vol 7. No.1, pp.7-20.

15 Dinodia, Panka (2012),”Indian Retail Industry”, Dinodia Capital Advisors.

16 Bhatia Mukesh,(2011) “Retail Management – Concepts and Techniques”

Regal Publications ,New Delhi, pp.23 ISBN - 978-81-8484-120-6


17 Gibson Vedamanil (2003), “Retail Management-Functional Principles &

Practices”, Jaico Publishing House, ISBN No. 81-7992-151-4.

18 www.cci.in/pdfs/surveys-reports /Retail-Sector-In-India.pdf.

19 www. thehindubusinessline.com

20 http://theglobaljournals.com/paripex/file.php?val=NjI2

http://www.cci.in/pdfs/surveys-reports%20/Retail-Sector-In-India.pdf



http://theglobaljournals.com/paripex/file.php?val=NjI2

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