Assignment

MBM (4rth Semester)

Topic: Problems & Prospects of Retail
Management in India
Subject: Retail Management [OPMKT401(2)]
Group members:
Anjushree Dey (Roll no: 9)
Farha Khan Chowdhury (Roll no: 24)
Debashish Maity (Roll no: 21)

Problems & prospects of retail management in

India
Retail in India: Industry Structure
The retail industry in India is highly fragmented and unorganised. Earlier on
retailing in India was mostly done through family-owned small stores with
limited merchandise, popularly known as kirana or mom-and-pop stores. In
those times, food and grocery were shopped from clusters of open kiosks and
stalls called mandis. There were also occasional fairs and festivals where
people went to shop. In the twentieth century, infusion of western concepts
brought about changes in the structure of retailing. There were some
traditional retail chains like Nilgiri and Akbarallys that were set up on the
lines of western retail concepts of supermarkets. The government set up the
public distribution system (PDS) outlets to sell subsidised food and started
the Khadi Gram Udyog to sell clothes made of cotton fabric. During this time,
high streets like Linking Road and Fashion Street emerged in Mumbai. Some
manufacturers like Bombay Dyeing started forward integrating to sell their
own merchandise. Shopping centres or complex came into existence, which
was a primitive form of todays malls.
Since liberalisation in early 1990s, many Indian players like Shoppers Stop,
Pantaloon Retail India Ltd (PRIL), Spencer Retail ventured into the organised
retail sector and have grown by many folds since then. These were the
pioneers of the organised Indian retail formats. With the opening up of
foreign direct investment in single-brand retail and cashand-carry formats, a
new chapter unfolded in the retail space. Many single-brand retailers like
Louis Vuitton and Tommy Hilfiger took advantage of this opportunity. The
cash-and-carry format has proved to be an entry route for global
multichannel retailing giants like Metro, Wal-Mart and Tesco.

RETAILING FORMAT 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.

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.
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.
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.
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.
Hyper marts/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.
Convenience Stores:
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
MBOs:
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.

PROBLEMS:
1. The organized retail industry in India is faced with stiff competition from
the unorganized sector.
2. There is a shortage of quality real estate and
infrastructure requirements in our country.
3. Opposition to Foreign Direct Investment from small traders affects
retail industry.
4. Very high stamp duties on transfer of property affects the industry.
5. Shortage of retail space in central and downtown locations also hinders
the growth of retail industry.
6. Presence of strong Pro-tenancy laws makes it difficult to evict tenants
and this is posing problems.
7. Land-use conversion is time consuming and becoming complex.
8. For settling property disputes, it consumes lot of time.
9. Rigid building laws makes procurement of retail space difficult.
10. Non residents are not allowed to own property except they are of Indian
origin.
11. Prohibition of Foreign investment in real estate business.
12. Customs duties are levied on import of goods in India.

Prospects:
1) Rising disposable income of Indian middle-class
The Indian middle-class can be categorised into seekers and strivers, which
is the consuming class and the prime target segment for retailers in India. In
2005, these two categories together constituted around 6.4% of total
households in India but accounted for 20% of the disposable income. By
2015, the middle class is expected to constitute around 25% of total
households and account for 44% of the total disposable income, and by
2025, the respective figures are likely to go up to 46% and 58%. The Indian
middle-class population and their growing disposable income levels will drive
the future growth of organised retail in India.
2) Changing consumer preferences and shopping habits
The prime reason for a paradigm shift in the shopping attitude of the Indian
consumer is the change in their preferences and tastes. Due to the
increasing use of IT and telecom, Indian consumers have become aware of
brands and shops for lifestyle and value brands according to the need and
occasion. Consumers will continue to drive the growth in the organised retail
by expanding the market and compelling retailers to widen their offerings in
terms of brands and in terms of variety.
3) Changing demographics
India is one of the youngest and largest consumer markets in the world with
a median age of around 25 years, which is the lowest as compared with
other countries. According to estimates, Indias median age would be 28 by
2020. It is expected that over 53% of the population will be under the age of
30 by 2020, which means that the potential for the Indian retail segment will
be enormous. Another plus about this population is that they will be more
dynamic than the previous generations because their consumption is driven
by wants rather than needs. Thus, the organised retailing, which thrives on
lifestyle products, is expected to receive a boost because of the young
population by 2020.
4) Increase in working population
India is the second-largest country in the world in terms of population, and is
the largestconsumer markets in the world owing to its favourable
demographics. In 2008 Indias working population (in the 15-49 years age
group) constituted around 53% of the population as compared with 48.6% in

the UK, 49% in the US, and 53% in Russia. Further, the increase in the
number of working women has fuelled the growth in sales of discretionary
items. There has been a 20% increase in the number of working women in
the last decade.
5) Spurt in urbanisation
Historically cities and towns have been the driving force of overall economic
and social development. Currently over 335 million people of India reside in
cities and towns, which translates to around 30% of the total population. The
rapid growth in urbanisation has facilitated organised retailing in India, and
has caused the speedy migration of population into major tier I and tier II
cities, which have a significant share in the retail sales of the country. The
urban populations contribution in Indias GDP shot up from 29% in 1951 to
60% in 2001 and is expected to increase to 70% by 2018, as migration to
cities and towns grows rapidly in anticipation of higher income opportunities
provided by these epicentres. Moreover, the continuous development in
urban areas has invariably attracted substantial inflows of capital both from
domestic and foreign investments have led to the transition of urban areas.
As the Indian organised retail is mainly concentrated in the urban areas, its
growth (urban areas) is imperative for the organised retail in the country.
Furthermore, due to the rapid infrastructure development in major tier I, II
and III cities, many rural inhabitants are attracted to cities, which increase
the urban per capita income and in turn offers unbound opportunities for the
organised retail segment. Increased globalisation has also played a big role
in the development of urban areas.
6) Rise in MPCE(monthly per capita expenditure) level in urban
areas
The aggregate urban consumption in India has been growing steadily over
the past few years as the economy has been continuously flourishing during
this period, owing to a rise in urban population as well as a rapid per capita
income growth. In FY05, 56.0% of the urban population was below the MPCE
level of Rs 930, while in FY07 the percentage of population under the MPCE
level of Rs 930 decreased to 46.1%.
7) Organised retail concentration in tier II and III cities
Initially the retail revolution began in the big tier I cities in India; however, as
tier I cities are relatively saturated now, retailers, especially value retailers,
are finding their way to smaller tier II and tier III cities as well. The changing

landscape of the Indian retail segment and the increasing competition has
also forced retailers to tap growth opportunities in tier II and III cities in India.
8) Internet drives awareness and online purchases
There has been a substantial increase in the number of Indians who use the
Internet and a concomitant increase in the number of online purchases.
Indians have started using the Internet not only for increasing awareness but
also to shop online, which has opened a whole new channel of retailing in the
Indian retail scenario. Online retailing offers consumers the convenience of
ordering merchandise to their doorstep. Recently, Future Group, which owns
Pantaloon, has initiated a measure to capitalise on the online opportunity
through futurebazaar.com. A similar venture flipkart.com is also proving the
new channel to be highly viable, especially since it eliminates the biggest
cost of the physical store.
9) Easy credit availability a boon for organised retail
The higher penetration of credit cards in India has also boosted the growth of
the organised retail sector; in fact, the young populations increasing fancy
for plastic money has further fuelled their purchasing power. Even though
the organised retail sector is at a nascent stage (constituted 5.9% of the
total retail industry in 2007), it is growing at a rapid pace. Moreover, the
spurt in issuance of credit cards and loans by both Indian as well as foreign
banks has further boosted the segments growth. According to the RBI, as on
FY09, the total number of outstanding credit and debit cards in India was
24.7 million and 137.4 million respectively.
10)

Retail investment

Investments in the retail sector have improved since FDI has been allowed in
single-brand and cash-and-carry formats. According to the Technopak
estimates, investments in the organised retail will touch US$ 35 billion in the
next five years or so. Investments allow organised players in retail to expand
at a very high rate. All key retailers in India have expansion plans over the
next 3-4 years; for instance, Pantaloon has an ambitious expansion plan to
take its retail space up to 30 million square feet by 2011. Likewise, Vishal
Retail is expected to take its total store count to 500 with an estimated retail
space of around 10 million square feet by 2011.

GROWTH OF RETAIL SECTOR IN INDIA

Retail and real estate are the two booming sectors of India in the present
times. And if industry experts are to be believed, the prospects of both the
sectors are mutually dependent on each other. Retail, one of Indias
largest industries, has presently emerged as one of the most dynamic and
fast paced industries of our times with several players entering the market.
Accounting for over 10 per cent of the country GDP and around eight per
cent of the employment retailing in India is gradually inching its way toward
becoming the next boom industry.