FINAL FIELD WORK REPORT

ON

RETAIL STORES IN INDIA

SUBMITTED BY: SUBMITTED TO: Abhishek Anand Dr. Jyoti MishraAbhishek SinghAjinkya BalsareAlok BhargavAmit SharmaAnand MohanAnoop Mangal Anurag Tikku

TABLE OF CONTENT

1. Introduction 5

2. Objectives 7

3. Methodology 8

4. Company Profile 18

5. E-Retailing 21

6. Indian E-Retailing Scenario 24

7. Challenges of Retail sector in India 28

8. Conclusions 38

9. References 39

10. Questionnaire 40

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ACKNOWLEDGEMENT

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ABSTRACT

Retailing consists of all the activities involved in selling goods or services directly to the final consumers for personal non-business use. A Retailer or Retail Store is any business enterprise whose sales volume comes primarily from retailing

Any organization selling to final consumers-whether it is manufacturer, wholesaler or retailer-is doing retailing. It does not matter how the goods or services are sold (by person, mail, telephone, internet etc) or where they are sold (in store, on the street, or in consumer’s home).

Retailing is one of the pillars of the economy in India and accounts for 35% of GDP.The retail industry is divided into organised and unorganised sectors. Over 12 million outlets operate in the country and only 4% of them being larger than 500 sq ft in size. Organised retailing 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 and retail chains, and also the privately owned large retail businesses. Unorganised retailing, on the other hand, 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.1

India is like growing child in the field of organized retailing and marketing, almost all Major retail chain like-Big Bazaar, Reliance fresh, Shopper stop, Spencer’s, Fab-Mall and incoming big one Bharti-Wal-Mart are focusing their energy on developing the retail outlets to reach the customer and deliver the goods in better and faster and cheaper than its competitors.. So this project is about different marketing strategies which are used by retailers. The strategy like buyer behavior, mapping the market system, e-commerce, positioning & competitive advantage, promotion, pricing & distribution and service marketing.

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INTRODUCTION

Organized retail in India has the potential to add over Rs 2,00,000 crore ($45 billion) business by the Year 2010 generating employment for some 2.5 million people in various retail operations and over 10 million additional workforce in retail support activities including contract production & processing, supply chain & logistics, retail real estate development & management etc.

After leading the IT bandwagon, India is poised to grow as a Retail hub. It is imperative to sustain the modernization of the retail sector and dispel the myth that the game is big Vs small or traditional Vs modern or organized Vs unorganized or local Vs foreign. What is needed is to create an appropriate environment to propel retail where all benefit.

India's huge population, has the potential for mammoth consumption if given the power of spending and that is only possible through large scale development generating employment which is already happening with retail as the driving force. Talking about the key challenge areas for the retail growth the major concerns are over escalating real estate cost, scarcity of skilled workforce and structured supply of merchandise which could be tacked in co-operation with the retail industry and the support organizations. Organized sector accounted for Rs. 55,000 crore ($12.4 billion) business at current prices in the calendar year 2006 increasing its share to 4.6% of the total Indian Retail Value that stood at Rs. 12,00,000 crore ($270 billion).2 Moving forward, organized retailing is projected to grow at the rate of about 37 per cent in 2007 and 42 per cent in 2008. Going by the current growth trend and considering the fact that existing prominent players in organized retail have stepped up their expansion drive with Reliance announcing big plans and other Indian corporate houses too evincing keenness on investing heavily in this sector as also the inking of the joint-venture between the world's largest retailer Wal-Mart and Bharti – The organized retail in India has indeed gained top speed and is now on the verge of take-off. According to recent predictions, of the Rs.12, 00,000 crore retail market, food & grocery retail is by far the single largest block estimated to be worth a whopping Rs.7, 43,900 crore, but more than 99 per cent of this market is dominated by the neighborhood kirana stores. At present, India's retail sector is largely unorganized, with about 15 million tiny outlets catering to consumer needs across the country – it employs the second-largest number of people after agriculture. Organized retail is now focused primarily on the 300 million urban "middle classes'' and an additional 200 million rural rich, who form a consumer market worth more than US$100 billion. So, there is enough ground for the modern and the traditional formats to co-exist. The Indian economy is integrating with the world, and yet it simultaneously has its own dynamics, which cushion global shocks as in no other country. India had kept the retail sector largely closed to outsiders to safeguard the livelihood of nearly 15 million small storeowners and only allows 51 per cent foreign investment in single-brand retail with prior government permission. FDI is also allowed in the wholesale business. Single-brand retailers such as Louis Vuitton, Fendi, L Ladro, Nike and Toyota can operate now on their own. Metro is already operating through the cash-and-carry wholesale mode. “The growth of the Indian economy is now manifesting itself in the growing purchasing power of its citizens. A ten to twelve per cent increase in the economy's disposable income and a much higher one in urban areas are also reflecting itself in the way goods and services are bought and sold”.

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REVIEW OF LITERATURE

Indian retail industry is the largest industry in India, with an employment of around 8% and contributing to over 10% of the country GDP .Retail industry in India is expected to rise 25% yearly being driven by strong income growth, changing life styles, and favorable demographic patterns.The network of retailer has reached every nook and corner of the country, so any product produce anywhere in the country can be easily accessed by the buyers from any location. Thus, the spatial convenience of Indian retailers is very high. According to ORG-MARG, the total number of all kind of retail outlets in India was 51,30,000 during 1996-1997. This means that one retail outlets exists against an average of almost 190 persons. Shopping in India has witness a revolution with the change in the consumer buying behavior and also alteration in the whole format of shopping .Indian retail is dominated by a large number of small retailers consisting of the local kirana shop, owner-manned general stores, chemists, footwear shops , apparel shops , paan and beedi shops, hand cart hawkers, pavement vendors etc. Which together make up the so called “unorganized retail” or traditional retail.

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OBJECTIVES:-

To understand Retail Industries of India

To study the perception of unorganized retail over organized retail store.

To study the effect of organized retail store over unorganized retail store.

To do SWOT analysis of unorganized retail store.

Hypothesis

H1. There is a significant difference in effect of organized retail store on unorganized retail store. (i.e., unorganized retail type specific)

H2. There is an association between class of people and preference in retail choice (organized or unorganized)

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RESEARCH METHODOLGY:

Type of Research: Exploratory or Formulative Research

The research has been conducted within the data and information available to gain new insight

into Retail Industries and for the area specified i.e. ascertaining the factors which have a bearing

on setting up of a Retail chain in India.

The current scenario is observed and an attempt has been done to relate the various variables.

Data collection process: The data collected is through secondary data.

The Secondary data was collected from various magazines, journals and visiting various

websites.

LIMITATION OF THE STUDY:

The scope of the topic chosen in very wide.

No primary research.

Time and money constraints.

Unavailability of data as Retail Industries is a new concept for Indian organized retail

market.

TABLE1: Unorganized retail share in different country

CountryShare of unorganized trade (per cent) (2005)

India 47

China 37

Poland 60

Indonesia 50

Russia 43

Brazil 35

Thailand 40

Malaysia 55

USA 25

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More about Indian Retail :

Hypermarkets to be the preferred format for the international retailers entering India Malls to move beyond the metros, increase presence in tier II cities Organized retail penetration highest across footwear, clothing segment.

Franchising gaining steam with retailers.3

Retail sales in India amounted to be about Rs.7400 billion in 2002, expanded at an average annual rate of 7% during 1999-2002. With the upsurge in economic growth during 2003, retail sales are also expected to expand at a higher pace of nearly 10%. Across the country, retail sales in real terms are predicted to rise more rapidly than consumer expenditure during 2003-08. The forecast growth in real retail sales during 2003- 2008 is 8.3% per year, compared with 7.1% for consumer expenditure.

Modernization of the Indian retail sector will be reflected in rapid growth in sales of supermarkets, departmental stores and hypermarts. Sales from these large-format stores are set to expand at growth rates ranging from 24% to 49% per year during 2003-2008, according to a report by Euromonitor International, a leading provider of global consumer-market intelligence.

Table 2:

Retail Trade

2005 2006 2007 2008 2009 2010

Retail Sales (Rs Bn)

15,409 17,360 19,465 21,715 24,215 27,107

Retail sales (Us $bn)

349.4 385.8 421.3 467.0 516.3 564.7

Retail Sales volume growth (%)

6.0 7.5 7.7 6.9 6.8 7.3

Retail sales US$ Value growth (%)

13.6 10.4 9.2 10.8 10.6 9.4

Source: EIU

The trends that are driving the growth of retail sector in India are:

Low share of organized retailing Falling real estate prices Increase in disposable income and customer aspiration Increase in expenditure for luxury items

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Table 3: INDIA RETAIL: 2006

Retail Segments

India Retail Value (Rs.Crore)

Organised Retail (Rs.Crore)

% Organised in 2006

Clothing, Textiles & Fashion Accessories

113,500 21,400 18.9

Jewellery 60,200 1,680 2.8

Watches 3,950 1,800 45.6

Footwear 13,750 5,200 37.8

Health & Beauty care services

3,800 400 10.6

Pharmaceuticals 42,200 1,100 2.6

Consumer Durables, Home Appliances/equipments

48,100 5,000 10.4

Mobile handsets. Accessories & Services

21,650 1,740 8.0

Furnishings, Utensils, Furniture-Home & Office

40,650 3,700 9.1

Food & Grocery 743,900 5,800 0.8

Catering Services (F & B)

57,000 3,940 6.9

Books, Music & Gifts 13,300 1,680 12.6

Entertainment 38,000 1,560 4.1

  US$ 270 Billion

US$ 12.4 Billion

 

Source: IMAGES F&R Research

Quick Stats of Indian Retail

Markets

Market size (total) 2006: US$ 300 bn/annum Market size (total) 2010: US$ 427 bn/annum Market size (total) 2015: US$ 637 bn/annum Market size (modern retail) 2006: US$ 9-12 bn/annum

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Market size (modern retail) 2011: US$ 60 bn/annum Annual rate of growth (modern retail): 35% Penetration (modern retail) 2006: 3 to 4% Penetration (modern retail) 2010: 10%

Investment

New Investment by 2011: US$ 30 billion

Employment

No. of persons employed (total): 21 mn No. of new jobs in next two years: 2 mn.

Wealth

No. of dollar designated millionaires in India (2006) 100,015

Retail Space

Typical space per outlet: 100 to 500 sq. ft. Space occupied (modern retail): 35 mn sq. ft. Operating Malls 2007: 114 (35 mn sq. ft.) New Malls under construction: 361 (117 mn sq. ft.) New space distribution: 65% (top 7 cities), 35% (tier II & III cities) New space distribution (among top 7 cities): NCR 34%, Mumbai 23%, Rest 43%

The size of the opportunity

Research done by the Tata Strategic Management Group (TSMG) indicates that over the next 10 years, the total retail market in India is likely to grow at a compounded annual growth rate (CAGR) of 5.5 per cent (at constant prices) to USD374 billion (Rs 16,77,000 crore) in 2015. The organised retail market is expected to grow much faster, at a CAGR of 21.8 per cent to USD55 billion (Rs 246,000 crore) in the same time frame, garnering around 15 per cent of overall retail sales. Based on our projections, the top five organised retail categories by 2015 would be food, grocery and general merchandise; apparel; durables; food service; and home improvement. (Table 3).

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Table 3: Organised retail market in India (Rs crore)

Where is the opportunity?

Retailers inspired by the Wal-Mart story of growth in small town America are tempted to focus on smaller towns and villages in India. However, a careful analysis of the town strata-wise population, population growth, migration trends and consumer spend analysis reveals a very different picture for India.

As per our estimates, the share of the 35 towns with a present population of greater than 1 million in India's total population would grow much faster than their smaller counterparts, from 10.2 per cent today to reach 14.4 per cent by 2025. Simultaneously, the share of these towns in the overall retail market would grow from 21 per cent today to 40 per cent by 2025.

Within these top 35 towns, an estimated 70 to 80 per cent of retail trade could be in the organised sector. This is similar to the experience in China, where in cities like Shanghai and Beijing, the

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organised sector accounts for 70 to 80 per cent of overall retail trade in certain categories. Retailers should therefore focus on the top 37 towns in the next decade, as the opportunity in smaller towns and rural India would be smaller and more fragmented, compared to the larger towns.

Table 3: Organised retail market in India

There are a few key trends that one observes in international markets that have a bearing on India.

CATEGORIES OF INDIAN RETAIL

Corporate Houses Tatas: Tata Trent RPG group: Food World, Health and Glow, etc ITC: Wills Life Style Rahejas (Shoppers Stop), Hiranandani (Haiko), DLF (DT cinemas) etc.

Dedicated brand outlets Nike, Reebok, Zodiac etc

Multi-brand outlets Vijay Sales, Viveks etc

Manufacturers/ Exporters Pantaloons, Bata, Weekender

Classifying Indian retailModern Format retailers

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Supermarkets (Food world) Hypermarkets (Big Bazaar) Department Stores (S Stop) Specialty Chains (Ikea) Company Owned Company Operated

Traditional Format Retailers Kiranas: Traditional Mom and Pop Stores Kiosks Street Markets Exclusive /Multiple Brand Outlets

RETAILING FORMATS IN INDIA

Malls:The largest form of organized retailing today. Located mainly in metro cities, in proximity to urban outskirts. Ranges from 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. Examples include Shoppers Stop, Piramyd, and Pantaloon.

Department Stores:Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, which started in Mumbai and now has more than seven large stores (over 30,000 sq. ft) across India and even has its own in store brand for clothes called Stop!.

Specialty Stores:Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors.

Hypermarkets/Supermarkets:Large self service outlets, catering to varied shopper needs are termed as Supermarkets. 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 of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales.

Discount Stores: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

Convenience Stores:

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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.

Department Stores:

Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. Further classified into localized departments such as clothing, toys, home, groceries, etc.

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.

Large Indian retailers

Hypermarket: Big Bazaar, Giants, Shoprite, StarDepartment store: Lifestyle, Pantaloons, Piramyd, Shoppers Stop, TrentEntertainment: Fame Adlabs , Fun Republic, Inox, PVR

Why is Retailing Important?

As the final link between consumers and manufacturers, retailers are a vital part of the business world.  Retailers add value to products by making it easier for manufactures to sell and consumers to buy.  It would be very costly and time consuming for you to locate, contact and make a purchase from the manufacturer every time you wanted to buy a candy bar, a sweater or a bar of soap. Similarly, it would be very costly for the manufactures of these products to locate and distribute them to consumers individually.  By bringing multitudes of manufacturers and consumers together at a single point, retailers make it possible for products to be sold, and, consequently, business to be done.  Retailers also provide services that make it less risky and more fun to buy products.   They have salespeople on hand who can answer questions, may offer credit, and display products so that consumers know what is available and can see it before buying.  In addition, retailers may provide many extra services, from personal shopping to gift wrapping to delivery, that increase the value of products and services to consumers. According to the National Retail Federation, 1 in 5 American workers are employed in the retail industry.  The Department of Labor estimates that since 1990, 700,000 new jobs have been created in the retail sector.  That's 13% of all new jobs in the United States.   At present, more jobs are provided in retailing than the entire U.S. manufacturing sector. 

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RETAIL: PROCESS FLOW

The Process Flow of retail starts from the Manufacturer, manufactures is the one who produces the items for selling into the market. It can be a farmer, tailor or any other mass producer. From manufacturer items are sending to the retailer through wholesaler or vendor.Finally retailers sell the products to the customers through retail outlets.Different Retailing companies adopt different process flows for their business. Some acquire products directly from the manufacturer, thus making the job of the wholesalers or vendor redundant while others use more than one channel to offer services to their customers.

TYPES OF RETAIL

Retailing can be broadly divided into two categories-Store and Non-Store Retailing.

Non-Store retailing falls into four main categories:

Direct Selling: followed by companies and banks like Amway, Eureka Forbes, and Tupperware etc.

Direct Marketing (includes telemarketing and internet selling) followed by catalog marketers like Otto-Burlington, Amazaon.com, Indiatimes.com

Automatic Vending: is used to sell products like milk, beverages, and magazines and to dispense money (ATMs)

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Buying Service: is a store less retailer serving a specific clientele-usually employees of large organizations

There are three major types of retailing.

Market: A physical location where buyers and sellers converge. Usually this is done on town squares, sidewalks or designated streets and may involve the construction of temporary structures (market stalls).

Shop or Store Trading: Some shops use counter-service, where goods are out of reach of buyers, and must be obtained from the seller. This type of retail is common for small expensive items (e.g. jewelry) and controlled items like medicine and liquor. Self-service, where goods may be handled and examined prior to purchase, has become more common since the Twentieth Century.

Virtual retail: where products are ordered via mail, telephone or online without having been examined physically but instead in a catalog, on television or on a website. Sometimes this kind of retailing replicates existing retail types such as online shops or virtual marketplaces such as eBay or Amazon.Buildings for retail have changed considerably over time. Market halls were constructed in the middle Ages, which were essentially just covered marketplaces. The first shops in the modern sense used to deal with just one type of article, and usually adjoined the producer (baker, tailor, and cobbler). In the nineteenth century, in France, arcades were invented, which were a street of several different shops, roofed over. From this there soon developed, still in France, the notion of a large store of one ownership with many counters, each dealing with a different kind of article was invented; it was called a department store. One of the novelties of the department store was the introduction of fixed prices, making haggling unnecessary and browsing more enjoyable. This is commonly considered the birth of consumerism. In cities, these were multi-story buildings which pioneered the escalator.

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Company Profile

Pantaloon Retail India Ltd.

Pantaloon Retail (India) Limited, is India’s leading retailer that operates multiple retail formats in both the value and lifestyle segment of the Indian consumer market. Headquartered in Mumbai (Bombay), the company operates over 7 million square feet of retail space, has over 1000 stores across 51 cities in India and employs over 25,000 people.

The company’s leading formats include Pantaloons, a chain of fashion outlets,  Big Bazaar, a uniquely Indian hypermarket chain, Food Bazaar, a supermarket chain, blends the look, touch and feel of Indian bazaars with aspects of modern retail like choice, convenience and quality and Central, a chain of seamless destination malls. Some of its other formats include, Depot, Shoe Factory, Brand Factory, Blue Sky, Fashion Station, aLL, Top 10, mBazaar and Star and Sitara. The company also operates an online portal, futurebazaar.com.

A subsidiary company, Home Solutions Retail (India) Limited, operates Home Town, a large-format home solutions store, Collection i, selling home furniture products and E-Zone focused on catering to the consumer electronics segment.

Pantaloon Retail was recently awarded the International Retailer of the Year 2007 by the US-based National Retail Federation (NRF) and the Emerging Market Retailer of the Year 2007 at the World Retail Congress held in Barcelona.

List of pantaloon retail brand

FASHION: Pantaloons, Central Big Bazaar and Fashion Station

FOOD: Food Bazaar

GENERAL MERCHANDISE: Central Malls and Big Bazaar

SPECIALITY RETAILING: All , Blue Sky

HOME: Home Town, E-Zone, Furniture Bazaar, Electronics Bazaar, Collection I and Mela

BOOKS AND STORES: Depot

COMMUNICATIONS: M- Zone and Converge M

WELLESS: Star and Sitara

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E-TAILING: Futurebazaar.Com

FOOTWEAR: Show Factory

Competitors of Pantaloon Retail

RPG Retail-Formats: Music World, Books & Beyond, Spencer’s Hyper, Spencer’s Super, Daily & Fresh

The Tata Group-Formats: Westside, Star India Bazaar, Steeljunction, Landmark, Titan Industries with World of Titans showrooms, Tanishq outlets, Chroma.

Raheja Corp Group-Formats: Shoppers’ Stop, Crossword, Hyper City, Inorbit Lifestyle International-Lifestyle, Home Centre, Max, Fun City and International

Franchise brand stores. Pyramid Retail-Formats: Pyramid Megastore, TruMart Nilgiri’s-Formats: Nilgiris’ supermarket chain Subhiksha-Formats: Subhiksha supermarket pharmacy and telecom discount chain. Trinethra- Formats: Fabmall supermarket chain and Fabcity hypermarket chain Vishal Retail Group-Formats: Vishal Mega Mart BPCL-Formats: In & Out Reliance Retail-Formats: Reliance Fresh Reliance ADAG Retail-Format: Reliance World German Metro Cash & Carry Shoprite Holdings-Formats: Shoprite Hyper

Success factor of pantaloon retail

The following factors have helped Pantaloon emerge as a leading domestic retailer:

Brand equity and early mover advantage; Entrepreneur led, professionally managed and experienced team; Strong projects and operations capabilities; Vast range of lifestyle and value retailing products and services; Strong focus on systems and processes; Strong distribution and logistics network and supply chain; and Large base of loyal customer

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Financial of Pantaloon Retail

Brief Financials (in Rs. Mn.)  Period ending (months) 31-Dec-2007(6) 30-Jun-2007 (12) 30-Jun-2006 (12)Net sales 23131.90 32371.20 18677.71Other Income 20.50 24.30 40.41Total Income 23152.40 32395.50 18718.11Cost of goods sold 21079.60 30115.70 17156.99OPBDIT 2072.80 2279.80 1561.12PAT 613.40 1200.40 641.58Gross Block - 7670.70 3660.05Equity capital 301.50 293.50 268.85EPS (Rs.) - 8.18 23.86DPS (Rs.) - 0.51 2.50BV (Rs.) - 74.42 195.99P/E range (x) - 44.62 – 290.71 46.31 - 87.59Debt / Equity (x) - 1.19 1.14Operating margin (% of OI) 9.0 7.0 8.3Net margin (% of OI) 2.6 3.7 3.4

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E-Retailing

E-tailing is the selling of retail goods on the Internet. Short for "electronic retailing," e-tailing is synonymous with business-to-consumer (B2C) transaction. The focus of e-tailing is on consumer shopping, not business-to-business commerce. The intent of e-tailing is to provide a customer value proposition that is different from real space stores. This value proposition often includes: Cheaper prices, Increased flexibility, Convenience and Consumer Empowerment of the shopping process. E-tailing has can also be advantageous for the E-tailers who can target wider customer base, moreover they don’t have to spend on real estate and brick and mortar which saves a large amount of money for them which e-tailers can pass on to the customers in the form of discounts and offers-tailing is in nascent stage in India. Though there are some multinational players that are setting up their operation in metro cities of India but still there is a lack of enthusiasm in local players. E-tailing can revolutionize the entire retail industry. Several organized retail companies like Pantaloons and Futures group have made ambitious plans to enter the e-tail market but still a huge market remains untapped. Besides, a new population of customers called netizens is emerging, who are spending more time in front of their PCs. This new genre of customers is the harbinger of huge profits that e-tailers can earn by foraying into this sunrise industry.

like Pantaloons and Futures group have made ambitious plans to enter the e-tail market but still a huge market remains untapped. Besides, a new population of customers called netizens is emerging, who are spending more time in front of their PCs. This new genre of customers is the harbinger of huge profits that e-tailors can earn by foraying into this sunrise industry.

TYPES OF E-RETAILERS

E-tailing companies can be of two types:

Pure-click Companies

Brick and click Companies

Pure-click Companies: Those which have launched a website without any previous existence as a firm ,like search engines, commerce sites selling books,music,stocks etc.Eg-amazon.com,e-bay.in,rediff.com etc.

Brick-and-click Companies: Existing companies that have added and online site for information and/or e-commerce. Eg-fabmall.com, futurebazaar.com.

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ADVANTAGES/DISADVANTAGES OF E-RETAILING.

ADVANTAGES (CONSUMER PERSPECTIVE)

E-retailing reduces the physical pain of going out to supermarkets and other retail outlets. (Especially in bad weather conditions).

E-retailing helps consumers in saving time by providing them convenient accessibility, one touch accessibility.

E-retailing also helps consumers to seek out the lowest prices or best deal available for items and services.

It also provides access to infinite variety of products available online as consumers can browse through products that are made all round the world.

DISADVANTAGES (CONSUMER PERSPECTIVE)

E-tailing lags touch and feel factor, demonstration of the products is not available. E-shopping can be very risky and insecure as the sensitive information like credit card

details is involved in the transaction and hackers can fraudulently acquire it. Quality of the product may not be the same as prescribed on the net. Many shoppers enjoy shopping with friends; this enjoyment is lost in e-shopping. Consumer must be knowledgeable about the use of internet, moreover an internet

connection and computer is must for online shopping.

ADVANTAGES (RETAILERS PERSPECTIVE)

Retailers can target large number of consumers as geographical constraints are reduced.

Retailers can leverage a lot of Cost Advantage as cost of retail space is reduced.

Transportation cost from manufacturer to retailer is reduced, which can be passed on to Customers or towards more margins.

As there is no constraint of space, more products can be provided and displayed, which help in diversifying portfolio.

DISADVANTAGES (RETAILERS PERSPECTIVE)

Retailers have to build in a lot of trust due to intangibility of products and have to spend heavily for the same.

Retailers have to maintain a sound distribution system for proper delivery mechanism E-retailing may lead to Channel Conflict to avoid it integration between Online and Offline channels are required. Fraudulent purchases from customer end can also create problem for the retailers

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REQUISITES FOR ONLINE RETAILERS FOR BETTER CUSTOMER EXPERIENCE

Brand Leverage A developed Brand recognition and trust will have lower consumer acquisition costs and higher conversion rates in case of browsers to buyers.

Induce Customers online by creating incentives

As the cost of serving customer online is less, some of the funds should be diverted for encouraging the consumers to use e-retailing facilities.

Making most of customer information and relationships

The rich knowledge base and strong relationship that retail player may have developed over the years should be used to anticipate consumer needs and preferences.

Efficient use of distribution infrastructure

Distribution infrastructure is the most important part of online retailing. All the cost advantage and convenience will be lost if a company does not possess a proper distribution channel to serve the consumer needs.

Exploit Opportunities for partnering

Partnering can speed execution give access to critical skills, and generate additional equity from incumbents assets.

Managing channel conflicts

Moving online can trigger conflicts between channels. Online players need to find creative ways to avoid conflict within the company and its supply chain.

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THE INDIAN E-RETAIL SCENERIO

A lot of water has flown into the river Ganges since the dotcom bubble burst in 1999 and e-commerce has shown many interesting trends since then . Sensex is touching magical 12000 mark and GDP is growing at 9% which makes Indian customers rich by causing an increase in its disposable income. This new generation of rich Indian customers is ready to spend more money for its convenience and is becoming more teachsavvy. This has acted as a panacea which was once ailing in the early 2000.Now E-commerce is growing at a rapid pace in India. The value of online consumer purchases doubled to about Rs11.8bn in fiscal year 2005/06 compared to the previous fiscal year, according to estimates from the Internet & Mobile Association of

India (IAMAI).

5.9

11.8

0

2

4

6

8

10

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FY2003-04 FY2005-06

ONLINE PURCHASES(Rs.Billion)

FIGURE-II

Low-value products such as travel and ticketing, electronic gadgets, clothes, music and books dominate retail e-commerce transactions in India Certain online services like matrimonial matchmaking, job searching, auctions, share trading and banking are also becoming increasingly popular. The most interesting trend in B2C e-commerce is that the travel industry has emerged as the fastest-growing category. IDC expects the travel space to grow at a CAGR of 140 percent to reach Rs 1,430 crore in 2006. With the launch of online ticketing by the Indian Railways, and almost all the domestic airlines, growth in this space is expected to take off very soon.

According to IDC, which closely follows market swings in the B2C segment, estimates that the total Indian market size was Rs 126.9 crore for 2001, Rs 238.3 crore for 2002, it rose to Rs 570

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crore in 2004-05 and further to Rs 2300 crore in 2006-07[DNA Jul 06]with a (CAGR) of 79 %.

In 2005-06, Indian consumers spent Rs11.80 billion on Fabmall, Rediff, India times and Sify. Online purchases have nearly quadrupled, from 200,000 in 2002-03 to 790,000 in 2005-06. According to IDC, online B2C e- commerce is growing at 80 percent every year. Apart from this there is 125 % growth in the online travel sphere (60 percent of the total e-commerce pie) Annual online consumer purchasing reached approximately US$130 million in 2004-2005

INDIAN E-TAIL MARKET

126.9 238.3570

2300

0

500

1000

1500

2000

2500

2000-01 2001-02 2004-05 2006-07(estimsted)

Rs.c

rore

FIGURE-III

INTERNATIOANL RETAILERS IN INDIA

The world's largest retailer by sales, Wal-Mart Stores Inc and Sunil Mittal's Bharti Enterprises have entered into a joint venture agreement and

they are planning to open 10 to 15 cash-and-carry facilities over seven years. The first of the stores, which will sell groceries, consumer appliances and fruits and vegetables to retailers and small businesses, is slated to open in north India by the end of 2008. Carrefour, the world’s second largest retailer by sales, is planning to setup two business entities in the country one for its cash-and-carry business and the other a master franchisee which will lend its banner, technical services and know how to an Indian company for direct-to-consumer retail.

The world’s fifth largest retailer by sales, Costco Wholesale Corp (Costco) known for its warehouse club model is also interested in coming to India and waiting for the right opportunity.

Opposition to the retailers' plans have argued that livelihoods of small scale and rural vendors would be threatened. However, studies have found that only a limited number of small vendors will be affected and that the benefits of market expansion far outweigh the impact of the new stores.

How international players are present:

Franchise International company gives name and technology to local partner. Gets royalty in

return In case master franchise is appointed for region or country, he has right to appoint

local franchisees Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer, Mango

25

Manufacturing Company sets up Indian arm for production

Bata India. It also has right to retail in India

Distribution International company sets up local distribution office Supply products to Indian retailers to sell Also set up franchised outlets for brand

Swarovski, Hugo Boss Wholesale trading

Cash and Carry operations 100% FDI permitted

Metro Cash n Carry

RECENT TRENDS

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.

26

FUTURE DIRECTIONS

POSITIVES:

AT Kearney has estimated India’s total retail market at US$ 286 bn* which is expected to grow at a compounded 30 per cent over the next five years.

With the organized retail segment growing at the rate of 25-30 per cent per annum, revenues from the sector are expected to triple from the current US$ 7.7 billion to US$ 24 billion by 2010.

The share of modern retail is likely to grow from its current 2 per cent to 15-20 percent over the next decade

Over next two years India will see several Indian retail businesses attaining a critical mass as growth in the industry picks up momentum driven by two key factors:

Availability of quality real estate and mall management practicesConsumer preference for shopping in new environments

Wal-Mart: huge plans for India. Moving a senior official from its headquarters in Bentonville, Arkansas, to head its market research and business development functions pertaining to its retail plans in India.

New York-based high-end fashion retailer Saks Fifth Avenue has tied up with realty major DLF Properties to set up shop in a mall in New Delhi.

Tommy Hilfiger, retailer of apparels, expects to open one store each in Delhi, Ahmadabad, Luck now and Bangalore in the next four months.

CONCERNS

70 million square feet of mall space is expected to be available by end of 2008, which might lead to over-capacity of malls

Lack of differentiation among the malls that are coming up. One option may be to look at specialization.

Poor inventory turns and stock availability measures - retailers clearly need to augment their operations.

Operations of retailers and suppliers are not integrated. Efficient replenishment practices practiced in the Indian auto and auto-component industry can be leveraged to implement efficient supply chain management techniques.

Supplier maturity, in terms of adherence to delivery schedules and delivering the quantity ordered, is an issue

Sales tax laws - lead to retailers having state-level procurement and storage leads to Indian retailers having higher inventories. VAT has helped alleviate this a bit.

Increased adoption of IT and shrinkage management will be a critical area.

27

Supply chain and customer relations followed by merchandising, facilities management and vendor development are areas which have significant gaps and proactive training is a key imperative for overcoming these.

INDIA Vs WORLD

Indian retail is fragmented with over 12 million outlets operating in the country. This is in comparison to 0.9 million outlets in USA, catering to more than 13 times of the total retail market size as compared to India

India has the highest number of outlets per capita in the world - widely spread retail network but with the lowest per capita retail space (@ 2 sq. ft. per person)

Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is higher than the size of Indian retail industry. Almost 100 times more than the turnover of HLL (India's largest FMCG Company).

Wal-Mart - over 4,800 stores (over 47 million square meters) where as none of India's large format store (Shoppers' Stop, Westside, Lifestyle) can compare.

The sales per hour of $22 million are incomparable to any retailer in the world. Number of employees in Wal-Mart is about 1.3 million where as the entire Indian retail industry employs about three million people.

One-day sales record at Wal-Mart (11/23/01) $1.25 billion - roughly two third of HLL's annual turnover.

Developed economies like the U.S. employ between 10 and 11 percent of their workforce in retailing (against 7 percent employed in India today).

60% of retailers in India feel that the multiple format approach will be successful here whereas in US 34 of the fastest-growing 50 retailers have just one format

Inventory turns ratio: measures efficiency of operations. The U.S. retail sector has an average inventory turns ratio of about 18. Many Indian retailers KPMG surveyed have inventory turns levels between 4 and 10.

Global best-practice retailers can achieve more than 95 percent availability of all SKUs on the retail shelves (translating into a stock-out level of less than 5 %).The stock-out levels among Indian retailers surveyed ranged from 5 to 15 percent.

CHALLENGES OF RETAIL IN INDIA

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 favors small retail businesses. Absence of developed supply chain and integrated IT management. Lack of trained work force. Low skill level for retailing management. Intrinsic complexity of retailing – rapid price changes, constant threat of product

obsolescence and low margins.

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DATA ANALYSIS AND INTERPRETATION

29

1. People would prefer to go to organized retail store regularly?

Interpretation:

Out of 200 retailers , 40% of retailers strongly agreed that most of the customers prefer organized sector, there were only 30% of retailers who were normal towards their opinion, and 10% of retailers hardly believe it.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

strongly agree

agree normal dis-agree

Series1

30

2. The organized retail market is affecting our earlier tradition(i.e selling of branded product)?

Interpretation:

Out of 200 retailers , most of the retailers thinks that organized sector is affecting our earlier tradition , 30% of them are agree while 15% are normal and 10% are dis-agree.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

strongly agree agree normal dis-agree

Series1

31

323. Organised retail store provide facility like shopping ambiance, friendly outlet and single point of purchase, did it effect your business?

Interpretation:

Out of 200 tretailers , most of them (i.e, 75% of retailers ) said that due to purchase purchase facilities provided by the organized retailers they get affected while rest of them (i.e, 25%) are dis-agreed with the statement.

0%

10%

20%

30%

40%

50%

60%

70%

80%

yes no

Series1

4. Global brands like Spencers, Reliance Fresh, Wal-mart and More are acquiring your market?

Interpretation:

Out of 200 retailers, 60% of retailers believe that their business is largly effected with the introduction of organized retail store while 10-10% of retailers are normal and disagreed with the statement.

0%

10%

20%

30%

40%

50%

60%

70%

Strongly agree Agree Normal Dis-agree

Series1

Series2

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5. Which class of people generally visit to your store ?

Interpretation:(out of 200 retailers),

Lower-30% Middle-40% Upper-5%

Above two-15% All-10%

Lower

Middle

Upper

Above two

All

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6. Do you have benefit of providing credit facility to your customer?

Interpretation:

Out of 200 retailers , 90 retailers have a positive impact of providing credit facilities to their customer while 110 retailer says that most of the customers did not pay their dues as they used to be cheated wish the customer .

Yes

No

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FOR TESTING HYPOTHESIS AND OBJECTIVE WE HAVE USED SPSS SOFTWARE

QUESTION1

Frequency Percent

Valid 1 36 18.0

2 23 11.5

3 23 11.5

4 36 18.0

5 15 7.5

6 21 10.5

7 24 12.0

8 22 11.0

Total 200 100.0

Interpretation

Out of 200 frequency there are 36 local kirana shop and general store .24 are apparel shop ,

23 are paan and beedi, and chemist shop . hand craft hawker are with the least (i.e 15)

QUS2

Frequency Percent

Valid 1 157 78.5

2 43 21.5

Total 200 100.0

Interpretation

Most of the population having a retails shop, there are few number of wholesaler. Thus, retail

sector is mostly effected by the organized retail store i.e.78.5%.

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Cross tabs 

Case Processing Summary

Cases

Valid Missing Total

N Percent N Percent N Percent

QUS3 * QUS7 199 99.5% 1 .5% 200 100.0%

Interpretations

In the cases of Question 3 & 7 is showing the class of the people in which class of people have

more perception about the organized and unorganized stores. There are many high class of

people which are demanded for the quality of product and service.

QUS3 * QUS7 Cross Tabulation

Count

QUS7

Total1 2 3 4 5

QUS3 1 8 5 6 4 11 34

2 14 23 9 9 32 87

3 10 24 7 5 21 67

4 0 3 2 3 3 11

Total 32 55 24 21 67 199

Interpretations

People will preferred to organized retail store because they are providing variety as well as

quality of product. Class of the people generally visit to store because they belong to lower and

middle class.

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Chi-Square Tests

Value Df Asymp. Sig. (2-sided)

Pearson Chi-Square 12.383a 12 .415

Likelihood Ratio 13.330 12 .345

Linear-by-Linear Association

.000 1 .998

N of Valid Cases 199

Interpretations

From above table researcher can conclude that there is no association between the organized and

unorganized sectors (as value=0.415 which greater than0.01) further reasearcher can conclude

that there is no difference between organized and unorganized retail stores from the view of

unorganized retail stores owners .

One way

Descriptives

VAR00001

N Mean

1 36 7.44

2 23 7.39

3 23 7.74

4 36 7.08

5 15 7.40

6 21 8.14

7 24 7.54

8 22 7.77

Total 200 7.52

Interpretation

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Means: Apparel shop is the highest mean (i.e. 8.14) in unorganized retail sector .footwear shop

is the second highest with (7.77) and the third highest is the paan and beedi shop with (7.74).

Fourth is the General store shop with (7.54) followed by pavement vendor is the least mean with

(7.08).

ANOVA

VAR00001

Sum of Squares df

Mean Square F Sig.

Between Groups 18.330 7 2.619 1.438 192

Within Groups 349.545 192 1.821

Total 367.875 199

Interpretation:Since the affect of organized sector, we have to check the hypothesis 2 that is, There is an association between class of people and preference in retail choice (organized or unorganized). Than restrain apply one way ANOVA from the table it can seen in the mean. Since mean is the effect of our on unorganized with the highest mean that is apparel shop but it is not statically significant.

39

CONCLUSION

• Based on the in depth study across the selected samples with a fair representation of the population there is a reasonable market potential for retail sector across the pune .

• More countries were found favoring the Indian retail structure then competitor’s products.

• Also the flexibility in the product price contributed a lot increasing its potential.

• More consumers of upper class prefer to buy product from organized retail store. On the other hand , middle and lower class people depend on unorganized sector.

• Moreover to some extent organized retail sector is hampering the unorganized retail sector.

40

REFERENCES

(1) [http://www.ksa-technopak.com/pdf/irf-9sept2006.pdf Impending Economic Impact of A Resurgent Indian Retail Sector]

(2) ICRIER Survey of Indian Retail Sector - Indian Realty News

(3) Economic and financial indicators 27th Oct 2007

(4) India's Retail Revolution - CNN Money

(5) www.google.com

(6) www.economictimes.indiatimes.com

(7) www.businessworld.in

(8) www.economist.com

(9) www.wikipidia.org

(10) www.kpmg.com

(11) www.ey.com

Questionnaire

41

Name of the shop…………………………………………………Location……………………………………………………………

1. In which type of business you are engaged in? Local kirana shop ( ) Hand-craft hawker ( )Paan and beedi ( ) Pavement vendor ( ) Chemists ( ) Apparel shop ( ) General store ( ) Footwear shop ( )

2. Are you,

Retailer ( ) wholesaler ( )

3. People would always prefer to go to organized retail store regularly?

Strongly agree ( ) Agree ( )Normal ( ) Dis-agree ( )

4. Organized retail store provide facility like shopping ambience, friendly outlet, single point of purchase did it effect your business? Yes ( ) No ( )

5. Global brands like Spencer, Reliance Fresh, Wall-mart and More are acquiring your market?

Strongly agree ( ) Agree ( ) Normal ( ) Dis-agree ( )

6. Which class of people generally visit to your store? Lower ( ) Middle ( ) Upper ( ) Above two ( ) All ( )

7. Do you provide variety of choices in products to customer? Yes ( ) No ( )

8. Do you have benefit of providing credit facilities to your loyal customer? Yes ( ) No ( )

42

9. Do you think that the home delivery service provided by you attracts more customer rather than buying products from retail shop? ……………………………………………………………………………. 10. Do you think that the discount facility provided by organized retail shop will Attract more customers? Yes ( ) No ( )

11. Which type of product provides you more profit in your shop? …………………………………………………………………………….

12. Express your opinion towards organized retail shop? …………………………………………………………………………….

THANK YOU

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