Global Retailing Scenario and the Indian Retail

GLOBAL RETAILING SCENARIO AND THE INDIAN RETAIL Introduction Retail means selling goods and services in small quantities directly to customers. Retailing consists of all activities involved in marketing of goods and services directly  to consumer for their personal, family and household use. The Indian retailing industry is becoming intensely competitive, as more and more players are vying for the same set of customers. Although still at a nascent stage, organized retailing in India is witnessing a radical transformation. The increase in the number of retail chains across the country is an indication that organized retailing is emerging as an industry and will boom in a big way in the near future. Retailing is one of the biggest sectors and it is witnessing a revolution in India. The new entrant in retailing in India signifies the beginning of retail revolution. The  Windows of Opportunity shows that Retailing in India was at opening stage in 1995 and now it is in peaking stage in 2006. India shows a retail market of US$330 billion that is expected to grow 10% a year, with modern retailing just beginning.

The Indian Retail Scene India is a country having one of the most unorganized retail markets. Traditionally it is a family¶s livelihood, with their shop in the front and house at the back, while they  run the retail business. More than 99% retailers function in less than 500 square feet of shopping space. The Indian retail sector is estimated at around Rs 900,000 crore, of which the organized sector accounts for a mere 2 per cent indicating a huge potential market opportunity that is lying in the waiting for the consumer-savvy  organized retailer. Purchasing power of Indian urban consumer is growing and

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of R etailing in India In India the R etailing industr y has a long wa y to go, and to become a truly f lourishing industr y, retailing needs to cross the follow ing hurdles. * The f irst challenge facing the organi ed retail sector is the competition from unorgani ed sector. * In retail sector, A utomatic approval is not allow ed for foreign in v estment. * Taxation, w hich favours small retail businesses. * De v eloped supply chain and integrated IT management is a bsent in retail sector. * Lac of trained work force. * Low sk ill le v el for retailing management. * Intrinsic complexity of retailing- rapid price changes, threat of product o bsolescence and low margins. Grow th driv ers

in India for retail sector o R ising incomes and improv ements in infrastructure are enlarging consumer mark ets and accelerating the con v ergence of consumer tastes. o Liberali ation of the Indian economy  o Increase in spending Per capita Income. o Adv ent of dual income families also helps in the grow th of retail sector. o Shif t in consumer demand to foreign brands lik e McDonalds, Sony, Panasonic, etc. o Consumer pref erence for shopping in ne w en v irons o The Internet re volution is mak ing the Indian consumer more accessible to the grow ing inf luences of domestic and foreign retail chains. R each of satellite T.V. channels is helping in creating awareness a bout glo bal products for local mark ets. o A   bout 47% of India's population is under the age of 20; and this w ill increase to 55% by 2015. This y oung population, w hich is technolog y -savv   y, watch more than 50 T V satellite channels, and displa y the highest propensity to spend, w ill immensely  contribute to the grow th of the retail sector in the countr y. o Availa bility of quality real estate and mall management practices o Foreign companies' attraction to India is the billion-plus population. Diff erent Forms of R etailing: Emergence of ne w formats of retailing in India Popular Formats o H y per marts o Large supermark et o Mini supermark ets o Con v enience store o Discount/shopping list grocer o Traditional retailers tr ying to rein v ent by introducing self-serv ice formats as w ell as

 value-added serv ices such as credit, free home deli v er y etc. RE  AILI G FOR M A  I

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Malls:

The largest form of organi ed retailing toda y. It is located mainly in metro cities, in proximity to ur ban outsk irts. Ranges from 60,000 sq f t to 7,00,000 sq f t and a bov e. They lend an ideal shopping experience w ith an amalgamation of product, serv ice and entertainment, all under a common roof . Examples include Shoppers Stop, Piramy d, and Pantaloon. Specialty Stores: Chains such as the Bangalore based K ids K emp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specif ic mark et segments and hav e esta blished themsel v es strongly in their sectors. iscount tores:  As the name suggests, discount stores or factor y outlets, off er discounts on the MRP through selling in bulk reaching economies of scale or excess stock lef t ov er at the season. The product categor y can range from a variety of perisha ble/ non-perisha ble goods. epartment

tores:

Large stores ranging from 20000-50000 sq. f t, catering to a variety of consumer needs. It is f urther classif ied into locali ed departments such as clothing, to y s, home, groceries, etc. Departmental Stores are expected to tak e ov er the apparel business from exclusi v e  brand showrooms. A mong these, the biggest success is K Raheja's Shoppers Stop,  w hich started in Mumbai and now has more than se v en large stores (ov er 30,000 sq . f t) across India and e v en has its ow n in store brand for clothes called Stop.  yper marts/ upermarkets: Large self-serv ice outlets, catering to varied shopper needs are termed as Supermark ets. These are located in or near residential high streets. These stores toda y contribute to 30% of all food & grocer y organi ed retail sales. Super Mark ets can f urther be classif ied in to mini supermark ets ty pically 1,000 sq f t to 2,000 sq f t and large supermark ets ranging from of 3,500 sq f t to 5,000 sq f t. hav ing a strong focus on food & grocer y and personal sales. onv enience tores:

These are relati v ely small stores 400-2,000 sq. f eet located near residential areas. They stock a limited range of high-turnov er con v enience products and are usually  open for extended periods during the da y, se v en da y s a w eek . Prices are slightly  higher due to the con v enience premium MBO:

Multi Brand outlets, also k now n as Categor y K illers, off er se v eral brands across a single product categor y. These usually do w ell in bus y mark et places and Metros.

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Indian retail sector can  be broadl y classified into: a) Food R etailers  b) Health and beauty Products c) Clothing and Foot w ear d) Home Furniture & Household goods e) Dura ble goods f ) Leisure & Personal Goods Malls in India: O v er the last 2-3 years, the Indian consumer mark et has seen a signif icant grow th in the number of modern-da y shopping centres, popularly k now n as µmalls¶. There is an increased demand for quality retail space from a varied segment of large -format retailers and brands, w hich include food and apparel chains, consumer dura bles and multiplex operators. R etail as an Employment Generator The retail sector can generate huge emplo yment opportunities, and can lead to jo b led economic grow th. In most ma jor economies, µserv ices¶ form the largest sector for creating emplo yment. The retail sector in India emplo y s nearly 21 million people, accounting for roughly 6.7% of the total emplo yment. How e v er, emplo yment in organi ed retailing is still v er y low , because of the small sh are of organi ed retail  business in the total Indian retail trade. The share of organi ed retailing in India, at around 2%, is a by smally low , compared to 80% in the USA , 40% in Thailand, or 20% in China, thus leav ing the huge mark et potential largely untap ped. A modern retail/retail serv ices sector has the potential of creating ov er 2 million ne w (direct)  jo bs w ithin the next 6 years in the countr y (assuming only 8 -10% share of organi ed retailing), according to Arv ind Singhal, CMD, KSA Technopak . R etail ca n create as many ne w  jo bs as the BPO/ITES sector in India. A strong retail front -end can also prov ide the necessar y f illip to agriculture & food processing, handicraf ts, and small & medium manufacturing enterprises, creating millions of ne w  jo bs indirectly. Through its strong linkages w ith sectors lik e tourism and hospitality, retail has the potential of creating jo bs in these sectors also.

The Glo bal

R etail cenario R etail has pla yed a ma jor role world ov er in increasing producti v ity across a w ide range of consumer goods and serv ices .The impact can be best seen in countries lik e U.S. A ., U.K ., Mexico, Thailand and more recently China. Economies of countries lik e Singapore, Mala y sia, Hong Kong, Sri Lanka and Dubai are also heav ily assisted by  the retail sector. R etail is the second-largest industr y in the United States both in number of esta blishments and number of emplo yees. It is also one of the largest  world-w ide. The retail industr y emplo y s more than 22 million A mericans and generates more than $3 trillion in retail sale annually. R etailing is a U.S. $7 trillion sector. Wal-Mart is the world¶s largest retailer. A lread y the world¶s largest emplo yer  w ith ov er 1million associates, Wal-Mart displaced oil giant Exxon Mo bil as the  world¶s largest Company w hen it posted $21  billion in sales for f iscal 2001. Wal-Mart has become the most successf ul retail brand in the world due its a bility to le v erage si e, mark et clout, and eff iciency to create mark et dominance. Wal-Mart heads Fortune magazine list of top 500 companies in the world. For bes A nnual List of Billionaires has the largest number (45/497) from the retail business.

Glo bal

R etail V/s Indian R etail Large format retail businesses dominate the retail landscape in the United States and across Europe, in terms of retail space, categories, range, brands, and volumes. Indian retail industr y cannot hope to learn much by merely look ing at the W estern success stories in retail. Their scales of operations are v er y huge, the prof it margins that they earn are also much higher and they operate in multiple formats lik e discount stores, warehouses, supermark ets, departmental stores, hy per-mark ets, con v enience stores and specialty stores. The economy and lif estyle of the W est is not in line w ith that of India and hence th e retailing scene in India has not e vol v ed in the same format as the W est nor can w e learn valua ble lessons from their style of  operations. In retailing, the con v entional w isdom used to be, that, the critical success factor was location. But precise location no longer matters and geo-demographics are increasingly  becoming irrele vant. The leading multiple chain retailers, superstores and malls create their ow n centres of grav ity, attracting customers by car, bus, train or e v en by plane to w here v er they are located. The follow ing factors still pose a challenge for the Indian retailers: Geographic saturation

The end of the nineties has signif ied a turning tide of retailer pow er. The limit to retail ambition is geographic saturation. Many retailers hav e started postponing their store expansion plans. The track record of some of their international store expansions is also not promising. ategor y k iller competition

The threat of saturation is accompanied by a ne w competition from the low cost categor y k illers. Specialist competition is eating awa y at the mark et share and forcing dow n the prices and gross margins of the multiple chains.  A lternativ e shopping channels The internet w hich is the ne w est retail format is show ing grow th and is more frightening for retailers than for consumers. The potential for on-line shopping  w hich is grow ing questions retailers¶ in v estments in more phy sical sites and stores and mak es it imperati v e that they too explore the ne w agenda of µE -retailing¶ or µetailing¶. onclusion Many agencies hav e estimated diff erently a bout the size of organized retail mark et in 2010. The one thing that is common amongst these estimates is that Indian organized retail mark et w ill be v er y  big in 2010.The current need of the hour in Indian R etail is de v eloping a sound distribution channel and infrastructure. The status of the retail industr y w ill depend mostly on external factors lik e Gov ernment regulations and policies and real estate prices. Besides the acti v ities of retailers, demands of the customers w ill also impact the retail industr y. By k eeping these  various parameters, it can be surely predicted that in the upcoming years, India w ill  be the place to watch out for!! .