CHAPTER – 1

Introduction to Indian retail industry

The sea of change can pull customers in many directions. It is our responsibility to light
the way and take care of them… before the competition does.

RETAILING Means “Re-tailing” to the customers so that they comeback.

The Indian retail story couldn't have been more different. India has approx 12 million
retail stores, more than rest of the world put together. But the per capita square feet
area under retail is just 2 sq.ft or 0.2 sq. meters with fragmented kirana stores being the
predominant players.

Retailing in India has remained in the unorganized sector and largely untouched by
corporate. The first decade of modern retail in India has been characterized by a shift
from traditional channels to new formats including department stores, hypermarkets,
supermarkets and specialty stores across a range of categories.

Modern retail formats have mushroomed in metros and mini-metros, in the last few
years modern retail has also established its presence in the second rung cities. Thus,
exposing the residents of these cities to shopping options, they have never experienced
before. It has been forecasted that the share of modern retail will increase from 2 per
cent currently, to about 15-20 per cent over the next decade. To begin with, retailers
today will have to support the large retail infrastructure in terms of Malls and
Superstores that are being created. The challenge for leading retailers shall therefore
shift from diverting demand to creating demand.
With all the modern stores offering convenience in terms of an assortment of products,
ambience, service and innovative products, the paradigm shall shift from competing with
the kirana stores to an in-house demand creation. Relevant experiences from consumer
goods companies, which have successfully crafted an explosion in demand in their
sectors, through innovation, consumer driven strategies, will be head runner. Times are
changing. With the GDP at an all time high and income levels shooting through the roof,
the average Indian consumer has never had it so good. The propensity to consume has
reached peaks that had never been scaled before. Credit cards are flashed with disdain
and shopping baskets are getting bigger all the time. Here are some factors that
indicate the potential of retail in India:

 At 271 million, one of the largest consuming base in the world, forming 27% of
the total population.
 A high spending community below 45 years comprises 81 percent of the
population.
 A young population with 54% population below 25 years
 Increased literacy from 44% in 1965 to 70% in 2003
 Increase in working women from 1.3 million in 1961 to 4.8 million in 1998.

The first decade of modern retail in India has been characterized by a shift from
traditional kirana shops to new formats including department stores, hypermarkets,
supermarkets and specialty stores across a range of categories. Modern retail formats
have mushroomed in metros and minimetros.

In the last few years, modern retail has also established its presence in the second-rung
cities, exposing residents to shopping options like never before. However, even as
modern retailers garner share from traditional channels, there is a larger role they would
be required to play in boosting consumption levels.Figures suggest that the total
turnover of the sector is around Rs 10 lakh crores, of which 4 percent is contributed by
the organised sector.

The retail sector in India is highly fragmented with organized retail contributing to only
2% of total retail sales. The retail sector in developed countries was also highly
fragmented at the beginning of the last century but emergence of large chains like Wall
Mart, Sears, and McDonald’s led to rapid growth of organized retail and growing
consolidation of the retail industry in the developed countries.
Organized retail is growing rapidly and we see the emergence of large organized retail
chains like Shopper’s Stop, Lifestyle, and Westside. We also find retail malls
mushrooming all over the country. The opportunities in retail industry in India will
increase since Indian retailing is on the threshold of a major change.
India retail industry is the largest industry in India, with an employment of around 8%
and contributing to over 10% of the country's GDP. Retail industry in India is expected
to rise 25% yearly being driven by strong income growth, changing lifestyles, and
favorable demographic patterns. It is expected that by 2016 modern retail industry in
India will be worth US$ 175- 200 billion. India retail industry is one of the fastest growing
industries with revenue expected in 2007 to amount US$ 320 billion and is increasing at
a rate of 5% yearly. A further increase of 7-8% is expected in the industry of retail in
India by growth in consumerism in urban areas, rising incomes, and a steep rise in rural
consumption. It has further been predicted that the retailing industry in India will amount
to US$ 21.5 billion by 2010 from the current size of US$ 7.5 billion.
Shopping in India have witnessed a revolution with the change in the consumer buying
behavior and the whole format of shopping also altering. Industry of retail in India which
have become modern can be seen from the fact that there are multi- stored malls, huge
shopping centers, and sprawling complexes which offer food, shopping, and
entertainment all under the same roof. India retail industry is expanding itself most
aggressively, as a result a great demand for real estate is being created.

1.1 Traditional Convenience Stores:

Traditional convenience stores are too well established in India than to be wiped out
and besides there is uniqueness in the traditional items that represent the sub-
continent. The retail stores in India are essentially dominated by the unorganized sector
or traditional stores. Infact the traditional stores have taken up 98 percent of the Indian
retail market. Now stores run by families are primarily food based and the set up is as
Kirana or the 'corner grocer' stores. Basically they provide high service with low prices.
If the stores are not food based then the type of retail items available are local in nature.
The traditional family run convenience stores can take pride in the fact that the Kirana is
the most common outlet forms for the consumers. The tough competition for
convenience stores are coming from organized retail stores dealing in food items, like:
 Apna Bazaar
 Canteen stores
 Food World
  Subhiksha
 Food Bazaar

Convenience Stores are open for long hours and is one of the formats of the Indian
retail stores that cater to basic needs of the consumer. These stores are found in both
residential as well as commercial markets. The food products of traditional family run
convenience stores are comprised of branded as well as non-branded items. The
benefit of family run convenience stores is that they give importance to:
 Personal touch
 Facilities of credit
 Quick home delivery
 Non-food based stock comprises of multiple and varieties of local brands.

The future of such stores as they face competition from organized sector, would depend
on the following particulars:
 Place and capacity
 Diligent area coverage
 Disciplined work schedule
 Managing turnover
 Revenue from assets
 Customer service and satisfaction

The traditional family run convenience stores serves the purpose of the housewives
who definitely wants to avoid traveling long distances to purchase daily needs. The
convenience factor in terms of items, among people in general can be highlighted as
below:
 Groceries
 Fruits
 Drug Store
 Necessary stationery

As such traditional family run convenience stores are here to stay and cannot be
oversized by the organized retail sector besides, it represents the variety of India.
1.2 Indian organized retail market:

Indian organized retail market is growing at a fast pace due to the boom in the India
retail industry. In 2005, the retail industry in India amounted to Rs 10,000 billion
accounting for about 10% to the country's GDP. The organized retail market in India out
of this total market accounted for Rs 350 billion which is about 3.5% of the total
revenues.

Retail market in the Indian organized sector is expected to cross Rs 1000 billion by
2010. Traditionally the retail industry in India was largely unorganized, comprising of
drug stores, medium, and small grocery stores. Most of the organized retailing in India
have started recently and is concentrating mainly in metropolitan cities. The growth in
the Indian organized retail market is mainly due to the change in the consumers
behavior. This change has come in the consumer due to increased income, changing
lifestyles, and patterns of demography which are favorable. Now the consumer wants to
shop at a place where he can get food, entertainment, and shopping all under one roof.
This has given Indian organized retail market a major boost.

Retail market in the organized sector in India is growing can be seen from the fact that
1500 supermarkets, 325 departmental stores, and 300 new malls are being built. Many
Indian companies are entering the Indian retail market which is giving Indian organized
retail market a boost. One such company is the Reliance Industries Limited. It plans to
invest US$ 6 billion in the Indian retail market by opening 1000 hypermarkets and 1500
supermarkets. Pantaloons is another Indian company which plans to increase its retail
space to 30 million square feet with an investment of US$ 1 billion. Bharti Telecoms an
Indian company is in talks with Tesco a global giant for a £ 750 million joint venture. A
number of global retail giants such as Walmart, Carrefour, and Metro AG are also
planning to set up shop in India. Indian organized retail market will definitely grow as a
result of all this investments
Classifying Indian retail:
(A)Modern Format retailers
1) Supermarkets (Foodworld)
2) Hypermarkets (Big Bazaar)
3) Department Stores (Shoppers Stop)
4) Specialty Chains (Ikea)
5) Company Owned Company Operated (BP)
(B)Traditional Format Retailers:
1) Kiranas: Traditional Mom and Pop Stores
2) Kiosks
3) Street Markets
4) Exclusive /Multiple Brand Outlets
 (C)Large Indian retailers
I. Hypermarket
1) Big Bazaar
2) Giants
4) Star
II. Department store
1) Lifestyle
2) Pantaloons
3) Piramyds
III. Entertainment
1) Fame Adlabs
2) Fun Republic
3) PVR