1.1.

Introduction:

There are two divisions of the Indian Retail sector: 1) Organized 2) Unorganized Organized retailing means the trading activities that are undertaken by those retailers who are registered for sales tax, income tax, etc. These include the hypermarkets which are backed by big corporate, retail chains, and also the private retail businesses. On the other hand unorganized retailing, refers to the traditional formats for example, the local kirana shops, general stores that are owned and run by their owners, paan/beedishops, convenience stores and the road side vendors. 1 Indias retail sector is wearing new clothes and with a three-year compounded annual growth rate of 46.64 per cent, retail is the fastest growing sector in the Indian economy. Traditional markets are making way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. Western-style malls have begun appearing in metros and second-rung cities alike, introducing the Indian consumer to an unparalleled shopping experience The structure of the retail sector in India is highly fragmented. 97 per cent of its business is being run by the unorganized retailers like the traditional family run stores and corner stores. On the other hand, the organized retail is at a very embryonic stage. But attempts are being made to increase its proportion to 9-10 per cent by the year 2010. This would bring in a huge occasion for potential new players. Agriculture in India is the largest sector, and Retail has come up to becoming the second largest source of employment. This sector has entered into the rural India as well and has been successful in generating more than 10 per cent of Indias GDP.

1. 2.

Ganguly, Saby, Retailing Industry in India, www.indiaonestop.com http://www.cci.in/pdf/surveys_reports/indias_retail_sector.pdf

Graph 1.1 Comparative Penetration of Organized Retail (in %)

The sales from retail in India are floating around 33-35 per cent of GDP, over the past few years. The table gives the picture of Indias retail trade in comparison with the US and China.

RETAIL TRADE IN CHINA, INDIA AND U.S Trade (US$ billion) INDIA CHINA US 180-394 360 3800 7 12 12.6-16 Employment (%) 12 2.7 15.3 Shops (million) Organized share ( %) 2-3 20 80 sector

(Source: Ernst & Young, The Great Indian Retail Story, 2006) Table 1.1 Retail Trade in China, India, US

The key reasons why there has been an immense growth in this sector over the last few years are:3 1) changing consumer profile and demographics, 2) easy availability of many international brands in the Indian market, 3) economic implications of the Government, 4) increasing urbanization, 5) Factors governing credit availability, 6) Infrastructure improvement, 7) escalating investments in technology and real estate 8) Constructing a good shopping environment for the consumers.

3.

Singhal, Arvind, Technopak Projections, 1999, Changing Retail Landscape, www.ksa-technopak.com.

1.1.2

Current Status

Indias retail industry accounts for 10 percent of its GDP and 8 percent of the employment to reach $17 billion by 2010. The Indian retail market is estimated at US$ 350 Billion. But organized retail is estimated at only US$ 8 billion. However, the opportunity is huge-by 2010, organized retail is expected to grow at 6 per cent by 2010 and touch retail business of $ 17 billion as against its current growth level of 3 per cent which at present is estimated to be $ 6 billion, according to the Study undertaken by The Associated Chambers of Commerce and Industry of India (ASSOCHAM). Indian retailing is clearly at a tipping point. India is currently the ninth largest retail market in the world. It is anticipated that it will cross the $650-billion mark by 2011, with an estimated investment of around $421 billion for the next four years.4

Graph 1.2 Organized Retail Penetration across Categories (%)

4.

Presentation to FICCI by Alan Rosling (Chairman, Jardine Matheson Group): International Experience on Policy Issues. Iyengar, Jayanthi, China, India Confront the Wal-Marts, Online Asia Times, www.atimes.com, January

1.1.3 The Emerging Consumer Behavior Groups

a) The young and the restless: The maximum part of the population in India constitutes the youth. This means that there are lots of young people in different income segments and locations who are willing to spend even much beyond their capacity.

b) Teen riches, Dudes and Dudettes: This constitutes of youngsters who mainly hail from affluent families. They all have new modern choices. Because of the growing competition, they prefer a luxurious kind of lifestyle. Price is not a concern for them and they generally go with the latest trend.

c) Call Centre Boomers: This majorly includes the new income earners who have just entered into their jobs and are at a position never heard of. They are basically the youth working in the IT Sectors and are hence formally located in the IT- Savvy cities like Bangalore. Since their work timings differ from those of the rest of the working crowd, they shop when generally the others dont. So it is essential to cater to their special needs.

d) The Bold and the Bountiful This is the nouveau riche class which is not afraid to show their true position in the society.

e) The Yeppies (Young Entrepreneurial Professionals): These are the truly self made individuals who have a decent kind of need and options. They are generally the weekend shoppers and can afford weekend romantic dinners! f) The Raffles ( Rural Affluent Farm Folk): This is the newly emerged farmer who has shed off the ancient image of himself and is all set to enter the new modern city life. They have needs that have a specific choice that

an MBA might not even dream of. He has a desire to keep up with the city folks and hence wants the best of everything

g) The Golden Folks in High Spirits: This is the retired group with married kids. Most of them have a dream life. And since they also have the resources to carry on, they are constantly in search of a society and companionable neighbours.

Understanding the above mentioned new emerging Consumer Behaviours will enable in learning about how different consumers behave and how they need to be catered to.

5.

http://www.cci.in/pdf/surveys_reports/indias_retail_sector.pdf

1.1.5 Retail Formats in India

MONO EXCLUSIVE BRANDED RETAIL SHOPS EXCLUSIVE SHOWROOMS EITHER OWNED OR FRANCHISED MULTI BRANDED RETAIL SHOPS FOCUS ON PARTICULAR PRODUCT CATEGORY WITH ALL BRANDS POSSIBLE

CONVERGENCE RETAIL OUTLETS MANY PRODUCT LINES OF DIFFERENT BRANDS

Graph 1.4 Types of Retail Formats in India

However, Kiranas still have an upper edge over the modern retail formats. This is primarily due to the fact that they are more convenient. The organized segment is no more about only stocking the goods and selling them but is about the following: 6 1) A large number of retailers, 2) Better enforcement of taxation mechanisms, 3) Better system to monitor labor law, 4) Competent supply chain management, 5) Developing retailer-vendor relationship 6) High-quality quality customer service, 7) Proficient visual merchandising 8) Effective promotional campaigns.

The modern retail formats are encouraging these initiatives for ensuring efficient movement of goods which will save time and cost. The existing Retail formats, their current formats and the new formats they are trying to experiment with in the Indian market are shown in the following table: Existing Retail Formats, Current Category and new entrans Retailer Current Format New Experimenting with Shoppers Stop Ebony Department Store Department Store Quasi-mall Quasi-mall, smaller outlets, adding food retail Crossword Pyramid Pantaloon Subhiksha Large Bookstore Department Store Own Brand Store Supermarket Corner shops Quasi-mall, food retail Hypermarket Considering moving to selfservice Vitan Supermarket Suburban discount store Formats,

Foodworld

Food Supermarket

Hypermarket, express

Food

world

Globus Bombay Bazaar e-Food Mart Metro S. Kumar

Department Store

Small fashion stores Aggregation of Kiranas Aggregation of Kiranas Cash and Carry Discount Store

Table 1.2 Existing Retail Formats, Current Category and new entrans

6.

http://www.cci.in/pdf/surveys_reports/indias_retail_sector.pdf

1.1.6 The Potential of The Indian Retail Sector The following reasons will fuel the predicted growth of the retail industry: More and more of the Indian population is shifting to the high economic zones Urbanization is on the rise Consumer attitudes are rapidly changing. E.g.; The increasing use of credit cards The growth of the population mostly in the age group of 20 to 49 years

There is retail opportunity in most product categories and for all types of formats Food and Grocery: The largest and fast growing category Home Improvement and Consumer Durables: It is estimated that it will cover over 20 per cent p.a. CAGR in the next 10 years Apparel and Eat- Outs : 13 per cent p.a. CAGR projected over 10 year

1.1.7 Merger & Acquisitions:

India witnessed a record number of M&A deals in the first quarter of 2006, collectively worth US $25.6bn. The table below shows some of the recent deals that have taken place in the Indian retail sector.

Table 1.3 Types of Retail Formats

7.

PricewaterhouseCoopers, Asia-Pacific M&A bulletin