Course Material- Retail in India

Course Material

Retail in India

Retail Sector is the most booming sector in the Indian economy. Some of the biggest players of the world are going to enter the industry soon. It is on the threshold of bringing the next big revolution after the IT sector. Although organized retail market is not so strong as of now, it is expected to grow manifolds by the year 2010. The sector contributes 10% of the GDP, and is estimated to show 20% annual growth rate by the end of the decade as against the current growth rate of 8.5%. A CRISIL report says that the Indian retail market is the most fragmented in the world and that only 2% of the entire retailing business is in the organized sector. This suggests that the potential for growth is immense. There are about 300 new malls, 1500 supermarkets and 325 departmental stores currently being built in the cities across India.

Retail is clearly the sector that is poised to show the highest growth in the next five years. The sector is set for a revolution, as both the present players and new entrants are gearing up to explore the market. With around 12 million retail outlets pan India and an estimated size of around $450 billion, the retail sector perhaps remains one of the key contributors to India’s GDP.

Accounting for about 15-20% of employment opportunities in the country, this is one of the fastest evolving entities in the global retail market. There are about 300 new malls, 1500 supermarkets and 325 departmental stores currently under construction. Many players are coming up with huge investments, due to which the present 12 million mom-and-pop shops and kirana stores fear losing their business. At present around 93 percent of the industry is unorganized with major revenues raked in and employment opportunities generated from the following segments:

·         Fashion

·         Food

·         Music

·         Consumer Durables

·         Furniture

·         Health

·         Telecom

Leading Indian Retailers- Bata India Ltd, Big Bazaar, Crossword, Ebony Retail Holdings Ltd., Food Bazaar, Globus Stores Pvt. Ltd., Liberty shoes Ltd., Music World Entertainment Ltd., Pantaloon Retail India Ltd., Shoppers Stop, Subhiksha, Titan Industries, Trent and the new entrants penetrating the market soon will include Reliance Retail Ltd, Wal-Mart Stores, Carrefour, Tesco, Boots Group, etc.

Retail Industry in India- Present Scenario- The organized sector which accounts for approximately 7% at present reflects massive growth potential with increased penetration in the near future The food segment remains the key contributor, with the luxury market not lagging far behind by presently being pitched at USD 3.5 billion. Things are looking bright for the apparel market with demand for ready made garments growing at a rate of forty- forty five percent per year.

Reasons behind Success in India- As per the Global Retail Development Index 2012, the Indian retail industry is comfortably placed in the 5th position among the top thirty rising markets for retail. What more? The sector is estimated to grow manifold with employment opportunities shooting up in the near future. Let us find out the reasons behind the phenomenal success:

The increased spending power of Indians— As opposed to earlier times when shopping was only considered a necessity, now armed with a greater awareness about local and global brands and the power to spend Indians today are ready to spend big on luxury items thereby spurring fast revenues for this sector. Growth of online marketing has made things easier. Needless to mention here that the fastest emerging areas in this sector are apparel, e-commerce, grocery, lifestyle and fashion Consumerism has been effectively complimented by the retailers’ understanding of customer demands.

The growth of real estate in India has propelled emergence of shopping malls and mega malls spelling profits for organized retail business.

The Indian culture encompassing a range of rituals like marriages, pujas itself has been encouraging this sector for a long time.

The introduction of 100 percent FDI (Foreign Direct Investment) in multi-brand retail will be a major boost for cash constrained retailers in India. Shoppers Stop and Pantaloons Retail India etc are likely to benefit big time from this move.

Benefits of FDI in Retail Sector

·            Higher competition would lead to higher quality in products and services.

·            Better lifestyle as better products would be introduced.

·            Exports would increase due to greater sourcing of major players.

·            Investment in whole supply chain would increase.

·            Technology would be upgraded in terms of logistics, production, and distribution channels.

·            The markets of the sector would flourish and develop.

·            Employment would increase and skills & manpower will develop.

·            A strong retailing sector would promote tourism.

·            Economies of scale would help lower consumer prices and increase the purchasing power of the consumer.

·            In the long term it will be beneficial in the up-gradation of agriculture and small scale & medium scale industries.

Evolution of Retail Sector in India

The origins of retailing in India can be traced back to the emergence of Kirana stores and mom-and-pop stores. These stores used to cater to the local people. Eventually the government supported the rural retail and many indigenous franchise stores came up with the help of Khadi & Village Industries Commission. The economy began to open up in the 1980s resulting in the change of retailing. The first few companies to come up with retail chains were in textile sector, for example, Bombay Dyeing, S Kumar's, Raymonds, etc. Later Titan launched retail showrooms in the organized retail sector. With the passage of time new entrants moved on from manufacturing to pure retailing.

Retail outlets such as Food world in FMCG, Planet M and Music world in Music, Crossword in books entered the market before 1995. Shopping malls emerged in the urban areas giving a world-class experience to the customers. Eventually hypermarkets and supermarkets emerged. The evolution of the sector includes the continuous improvement in the supply chain management, distribution channels, technology, back-end operations, etc. this would finally lead to more of consolidation, mergers and acquisitions and huge investments.