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Chapter 4

CURRENT STATE OF RETAIL INDUSTRY

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4.1 Introduction

Retail in India is $300 billion industry. It contributes about 10% to the Gross Domestic Product,

the highest as compared to all other Indian Industries. This sector has contributed 8% to the total

employment of the country. The India Retail Report (2007) quoted the retail business to be

around Rs. 12, 00,000 crore ($270 billion) and the annual growth rate was 5.7% in 2007. Food

and grocery reported to be Rs. 7, 43,900 crore is the largest of the different types of retail

industries present in India.

There are around 15 million retail outlets in India having the highest retail outlet density in the

world. Indian Brand Equity Foundation projected the retail trade to be 12% of the GDP and

expected to approach 22 percent by 2010. McKinsey retail report on 'The rise of Indian

Consumer Market' foresees the Indian consumer market growing by four times by the year 2025.

Retail Sector's share in GDP is highest in India (12%) as compared to USA is 10% and in China

is 8%.

In India, 51% Foreign Direct Investment is permitted through single brand retailing and 100%

FDI is allowed under the automatic route for cash and carry wholesale business. This led multi-

brand multiple product retailers like Wal-Mart and Tesco to enter India by tie up with Indian

players through Indian Retail Market Strategic License Agreement (IRMSLA). A foreign player

could enter through this route by licensing agreement with a domestic retailer or partnering with

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Indian promoter owned companies. The 100% retailing is permitted in cash-and-carry wholesale

business. A foreign company could set up a distribution office in India and can supply products

to local retailers.

Franchisee outlets can also be set up through Franchisee Route. This entry route includes the

Master Franchise (MF) and the Regional Franchise (RF) routes. It is widely used where; several

international brands have set the presence in Indian manufacturing. A company could establish

its manufacturing unit in India along with stand-alone retailing outlets. Joint venture

international firms shall have agreements with domestic players to set up base in India. The share

of MNCs is limited to 49 percent in this route.

Retailing industry has been present since the felt of human inability to arrange all the goods and

services for their personal or non-business use. In India, this industry is identified as kirana

stores. These kirana stores have been in use since ages. The concept of organized retailing gained

momentum in 1980 when Mother’s Dairy introduced vegetables and milk at the retail outlets in

New Delhi. Later on Verka, Amul, Markfed have followed the concept and created cooperative

societies for seeds, pulses, milk and milk products (Neetu, 2007). The boom in organized

retailing came after liberalization in 1991.

According to CMIE report, the retail growth doubled from 1990 to 1999. In India, there were 15

million retailers operating as ‘mom and pop’ outlets spread over 100 million square feet area,

generated sales of Rs. 50,000 crore in 2007-08. The organized retailing which constituted 2% of

the retailing came up with new formats of retailing like supermarkets, hypermarkets, malls,

department stores, discount stores, specialty stores, convenience stores, kiosks and food court

counters (India Retail Report, 2007).

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China exports about $60 billion of goods whereas India exports less than $1 billion. Increasing

FDI shall increase India’s exports. FDI in India would add to the modern infrastructure that

would improve the productivity of the organized retail sector. On the other hand, FDI may

destroy the traditional retail sector, but it shall be compensated by creating jobs on a large scale

in manufacturing and retailing. The trends favoring retail in India are on rise in the purchasing

power of Indians.

The rise in the per capita income in the last few years was significant. This generated insatiable

wants of middle and upper class. Also, the demand of new as well as second-hand durables has

risen throughout the country, thus providing the incentive for taking up retailing. The organized

retailing has helped the farmers in removing the middlemen and has, thus, enhanced the payment

to them. This is a new revolution in the agricultural sector in India and shall go a long way in

amending the condition of agriculture. The major concerned barriers like restricting FDI in pure

retailing, limited franchisee arrangement, absence of global players, limited exposure to best

practices, lack of industry status and restricted availability of finance to this sector.

Over the past few years, the retail industry in India has witnessed rapid transformation in many

areas of business by setting scalable and profitable retail models across categories. The retail

formats such as departmental stores, hypermarkets, supermarkets, specialty stores and malls are

most prominent nowadays. The organized food and grocery retail market, on the other hand, was

a mere 0.5% of the total market in 2004. This organized segment has grown to just 0.8% in 2006,

valued at Rs. 5,000 crore at 2003-05 prices. It constitutes 11% of the Indian organized retail

market. The organized food and grocery retail sector grew at the rate of 35.6% in 2005 and

42.5% in 2006 over the previous years. The major players in this segment are: Fabmall,

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Foodworld, Spencer’s Retail, Food Bazaar, Trumart, Nilgiri’s, Arambagh Foodmart, Namdhari’s

Fresh, Reliance Fresh, and Trent (India Retail Report, 2007).

Finance minister Mr. Pranab Mukherjee projected GDP growth rate of at least 7% for the 2009-

10 fiscal, when mature economies such as the US were in recession. Post the April-May (2009)

general election Lakhan said, "There has been some serious improvement in consumer

sentiment. The economy has more or less revived and most of the companies are taking back pay

cuts that they had earlier announced. With the increase in sales the top line is improving, (and) at

the same time rentals have come down significantly. Sometimes, the commercial rentals have

fallen by 40% from the peak” (Hindustan Times, 2009a).

However, analysts as well as the KPMG report cautioned that it would take at least 12-18 months

beginning April for retailers to return to the growth they enjoyed in the years preceding the

slowdown. The segment grew about 50% between fiscal 2006 and 2008, but fell to 15% growth

in fiscal 2009. "The 2009 slowdown was expected to last for 12-18 months conditional on

government incentives in increasing spends on infrastructure, development initiatives and other

activities to stimulate (the) economy," KPMG said. The distribution continues to improve, but it

remained a major inefficiency. Poor quality of infrastructure and high inventory levels coupled

with poor quality of the distribution sector resulted in logistics costs that were very high as a

proportion of GDP. Distribution and marketing is a huge cost in Indian consumer markets. It’s

lot easier to cut manufacturing costs than to cut distribution and marketing costs.

During the 1990s, many manufacturers and service providers collaborated with their strategic

suppliers to upgrade traditional supply and materials management functions and integrate them

as part of corporate strategy. Correspondingly, many wholesalers and retailers also integrated

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their logistic functions with other functional areas to enhance CA. Eventually, these two

traditional supporting functions of corporate strategy evolved and merged into a holistic and

strategic approach to materials and logistics management, commonly known as SCM.

The performance measurement system may be unique to each individual organization, or unit

within an organization reflecting its fundamental purpose and its environment. It has also been

argued that performance measurement must evolve to performance management, where the

organizations develop, appropriate organizational structure and the ability to use performance

measurement results actually to bring about change in the organization. Elements of these efforts

are central to total quality and continuous improvement programs. Where, performance

measurement is critical to any organization in managing their operations. Performance

measurement has many uses including the determination of the efficiency and effectiveness of an

existing system or to compare competing alternative systems. Performance measurement is

typically used to plan, design, implement and monitor proposed systems.

4.2 Modern Retail Formats in India

The retailing in India is a dynamic business. The various retail players projected the products in

different formats. Some of the important formats are as hereunder:

4.2.1 Departmental Stores

A department store is the retail outlet that stocks a wide variety of products in the range of toys,

apparel, cosmetics, jewellery, appliances and furniture. These formats generally sell products at

fixed rates with guarantee and return options. These stores are generally supported by knowledge

staff to guide and convince the customers. The first departmental store, Bon Marche was set up

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in Paris (1938) by Aristide Boucicault. In India major players in this format are: Pantaloons,

Westside, Lifestyle, Globus, Pyramid and Ebony (Indian Retail Report, 2007).

4.2.2 Supermarkets

This format is departmentalized into self-service stores. It serves a range of food and household

items. They generally offer products at lower prices and are generally located near residential

areas with large space for parking. The first supermarket was opened by Michael J. Cullen in

New York in 1930 called King Kullen. In India first supermarket was opened by Nilgiri’s at

Bangalore in 1905. The major players offering this format are: Food Bazaar, Fabmall and

Arambagh Food Mart, etc.

4.2.3 Hypermarket

This format represents the features of both supermarkets and departmental store. These are

generally located at the outskirts of major towns and cities. These stores are very large set-ups

with extensive parking lots. Here, products ranging from jewellery, hardware, books, consumer

durables, electronic equipment clothes and fresh groceries are offered with heavy discounts. The

first hypermarket, Fred Meyer chain was opened in 1931 at Portland, Oregon in USA. The major

players in India in this segment are Big Bazaar, HyperCity, Reliance, Haryali and ITC, etc

(Indian Retail Report, 2007).

4.2.4 Discount Stores

It is also a type of departmental store that offers products at the lowest rate. It deals in wide

variety of goods ranging from jewellery, electrical appliances and food items. The first discount

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store was Wal-Mart opened in USA (1962). Many discount stores in India are The Loot, My

Dollar Store and Max Retail, etc. (Indian Retail Report, 2007).

4.2.5 Specialty Stores

These stores focus on single category and offer a large range of selection within a single

merchandise category. They attract customers with predefined mindset and lead to impulsive

sales too. The major stores in this range are Planet M, Music World, Crosswords and Kids

Kemp, etc. (Indian Retail Report, 2007).

4.2.6 Convenience Stores

These stores open 24x7 and are set close to residential areas. They offer wide variety of beauty

products, grocery and packaged foods. Some players in this segment are My Mart, In & Out, Red

Shop, DHL Servicepoints, UPS and AFL Touchworld, etc. (Indian Retail Report, 2007).

4.2.7 Kiosks and Food Court Counters

The retail formats are open to all sides and offer snacks, edibles, lifestyle products, fashion

accessories, entertainment products, newspapers, and magazines etc. The major players in this

arena are Mr. Orange, Banana Leaf, Brownie Cottage, King Corn, Corn Man, Cookies Man,

Kidz on Wheel, Hourglass Essential, Shiv Sagar, Pizza Corner and Baskin Robbins, etc. (Indian

Retail Report, 2007).

4.2.8 Malls

A shopping mall or shopping center is a building or set of buildings that contain retail units and a

multiplex with interconnecting walkways enabling visitors to walk easily from unit to unit,

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offering diverse brands and utilities at the same place. There has been a spiraling growth in the

number of shopping malls in India from none in 2000 to nearly 100 within five years; most of the

malls are located at Mumbai and Delhi NCR, with 360 malls anticipated across India by 2007

and rose to 600 malls by the end of 2009. A single format will not be successful at all the

locations hence retailers do the critical analysis of the location, customer base and their financial

health. This analysis helps to select suitable format for organized retailing. A brief picture of the

formats is shown in Table 4.1 as hereunder:

Table 4.1

Comparison of major retail formats

Format Description The Value Proposition

Branded Stores These are exclusive showrooms either owned by manufacturer or franchised out.

Complete range of products are available for a given brand of certified product quality

Specialty Stores

Here, the focus is on a specific customer needs. They carry most of the brands available for them.

The customers have greater choice and can compare brands.

Department Stores

These are large stores having wide variety of products, organized into different departments as clothing, house wares, furniture, appliances, toys, books, etc.

One stop shop catering to varied/ customer needs.

Supermarkets These are extremely large self-service retail outlets with vast variety.

One stop shop catering to varied customer needs.

Discount Stores

These stores offer discounts on the retail price. By selling high volumes they reap economies of scale.

Offer low prices.

Hyper- mart These are larger than a supermarket, sometimes with a warehouse appearance, generally located in quieter parts of the city.

They offer low prices; vast choice is available including services such as cafeterias.

Convenience stores

These are small self-service formats located in crowded and close to residential areas.

They have convenient location and extended operating hours.

Shopping Malls

An enclosure having different formats of in-store retailers, all under one roof.

Vat variety of shops and products are available under a roof.

(Source: http://en.wikipedia.org)

4.3 Retail Players

The organized retail accommodated many major players after 1990. There were just three

shopping malls in 1990 i.e. Spencer Plaza in Chennai, Ansal Plaza in New Delhi and Cross

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Roads in Mumbai (Neetu, 2007). The number of retail formats has risen to many hundreds by the

end of 2007. The major retail players in this industry are as follows:

4.3.1 Reliance Retail Limited

Reliance Retail Limited (RRL) was incorporated on March, 17, 1998. It has grown into an

organization that caters to millions of customers, thousands of farmers and vendors. The

company made rapid progress towards building and integrating entire value chain starting from

the farmers to the end consumers. In the year (2009-10), felt its presence in more than 900 stores

in 80 cities across 14 states in India. The company has added new formats to its spectrum in the

last year. The company operates, formats such as Reliance Fresh (neighborhood store), Reliance

Mart (all under one roof supermarket) & Reliance Super (mini-mart), which offer a range of

products for daily household usage.

It also has specialty formats, such as Reliance Digital (consumer durables & information

technology), Reliance Trends (apparel & accessories), Reliance Wellness (health, wellness &

beauty), iStore (Apple products), Reliance Footprint (footwear), Reliance Jewels (jewellery),

Reliance TimeOut (books, music & entertainment), Reliance AutoZone (automotive products &

services) and Reliance Living (home-ware, furniture, modular kitchens, furnishings). RRL has

forged strategic partnerships with world-class companies such as Marks and Spencer (apparel

and accessories), Office Depot (office stationery), Pearle Europe (optical products) and Hamleys

(toys).

It has a direct engagement with over 5 million customers following a loyalty program 'Reliance

One' which was offered from the first day of its operation. During the year, it continued to

bolster its agribusiness & dairy value chain to support its rapidly expanding store footprint. By

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sourcing directly at the farmer's doorstep, it ensures fair and timely payments to the farmers,

reduction in spoilage through its state-of- the art supply chain and logistics network and high

quality produce to its customers.

The company is also committed to foster relationships with partners that will create new avenues

of value enhancement for its customers. Reliance Retail Limited (RRL) is a subsidiary of

Reliance Industries Limited entered food and grocery business in 2006. Currently, it operates

Reliance Fresh, Reliance Select, Reliance Value, Reliance Super, and Reliance Mart. The

Reliance Fresh, Reliance Select, and Reliance Value are conveniently-located supermarkets

offering wide range of food and grocery, bakery products, kitchen utensils and personal care

products.

The Reliance Super offers fresh products, processed foods, FMCG, apparels, accessories,

beverages, confectioneries and wellness products etc. Reliance Mart is a hypermarket and carries

over 30,000 products of family need. Today, there are 634 Reliance Fresh, Reliance Value and

Reliance Select Stores spread over 6,000 sq ft area. The company has 15 Reliance Super stores

over 25,000 sq ft area. Also it has 8 Reliance Mart spreading over 25,000 sq ft. The financial

highlights of the company are shown in Table 4.2 hereunder:

Table 4.2

Reliance Retail Limited financial highlights

2009-10 2009-08 2008-07 2007-06 2006-05

Turnover (Rs Crore) - 146,328 139,269 118,354 89,124

Total Income (Rs Crore) - 148,388 144,898 118,832 89,807

Retail Income (Rs Crore) 290.72 622.31, 1486.15, 259.85, 215.05

(Source: http://www.rel.com/html/aboutus/rilretail.html)

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4.3.2 RPG Retail

The RPG was the first to enter into the business of organized retailing in India. RPG Enterprises,

established in 1979, is one of India’s fastest growing business groups with a turnover touching

Rs. 17,000 cr. The group has more than sixteen companies managing diverse business interests

in the areas of Power, Tyres, Infrastructure, IT, Retail, Entertainment, Carbon Black and

Specialty. It has added Foodworld which is a division of Spencer & Co. in 1996 and opened its

first supermarket in Chennai. Later on in 1999 Foodworld was hived off as a separate company.

In 1997, RPG launched Health and Glow in pharmacy and health care business. In 2000, Spencer

entered into JV with DFI to operate cash and carry stores across the country where the later was

to invest $4 million for 49% stake in new company to be called Great Wholesale Club Ltd.

(GWSCL). Later, the tie was broken with DFI. In 2003 RPG launched Music World. The group

had 7 Spencer’s Hyper, 90 stores across Spencer’s Super/Daily/Fresh/Express formats and 265

Music World outlets, covering about 8 Lac sq ft retail space in March, 2007. The Supermarket,

Super Store, Express Stores and Gourmet Store were extended to 200 by 2009.

The RPG owned retail arm Spencer’s Retail entered the F&G retail in 1996. It operates

Spencer’s Hypermarkets, Spencer’s Super, Spencer’s Daily and Spencer’s Express in Mumbai,

Gurgaon, Ghaziabad, Lucknow, Hyderabad, Calicut, Vizag, Vijayawada, Aurangabad, Durgapur

and Kolkata. Spencer’s Express has 400 retail outlets spread over 1.2 million sq ft area offering

food and grocery items. Spencer’s Hyper is spread over 25,000 ft sq and Spencer’s Super is

spread over 15,000 sq ft. The company is planning to add 300 new such stores in next year.

Spencer's Retail

Spencer's Retail Limited is one of India's largest and fastest growing multi-format retailers with

220 stores including 30 large format stores across 35 cities in India. Spencer's focuses on

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verticals like fresh fruit and vegetables, food and grocery, personal care, garments and fashion

accessories, home and office essentials, electrical and electronics. Established in 1996, Spencer's

has become a popular destination for shoppers in India with hypermarkets and convenient stores

catering to various shopping needs of its large consumer base. Spencer's has retail footage of

about 1 million square feet and over 220 Spencer's stores in 35 cities. The company operates

through the following formats:

• The Spencer's Hyper stores are destination stores, of more than 15,000 sq. ft in size. They

offer everything under one roof. The merchandise ranges from fruits & vegetables, processed

foods, groceries, meat, chicken, fish, bakery, chilled and frozen foods, garments and fashion

accessories, consumer electronics & electrical products, home decor and needs, office stationery,

soft toys. On an average, a Spencer's hyper stocks 70,000 SKUs across 35,000 items.

• The Spencer's stores are neighborhood stores ranging from 1500 less than 15000 sq. ft.

These stores stock the necessary range and assortment in fruit and vegetables, FMCG food and

non-food, staples and frozen foods and cater to the daily and weekly top-up shopping needs of

the consumer. The major Spencer’s brands are as follows:

1. Spencer’s Smart Choice: FMCG food and non-food items.

2. Tasty Wonders Fabulous Foods: FMCG foods in cereals, snacks and savouries.

3. Maroon: Home essentials.

4. Clean Home: Home cleaning products.

5. Collage Studio the stationery zone: Range of stationery range.

6. Asankhya: Ethnic wear for women.

7. Island Monks: Casual wear for men, women and kids.

8. Mark Nicolas: Formal wear and footwear for men and women.

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9. Scorez: Sportwear for men and women.

10. La Bonita: Footwear for all.

11. UnI: Fashion Accessories.

Au Bon Pain Spencer’s Retail Limited

It is a tie up with Au Bon Pain, the Boston-based fast casual dining and bakery café chain with

more than 200 outlets in the USA, South Korea, Taiwan and Thailand. A joint venture was

formed between Spencer’s Retail Limited and Varin Narula which is a Master Franchisee of Au

Bon Pain in India. Mr. Varin is the Director and Promoter of Au Bon Pain, Thailand. The outlets

offer the choicest of healthy and nutritious food, bakery products and beverages in a relaxed and

casual environment.

Beverly Hills Polo Club Spencer’s

Spencer’s has signed an exclusive tie-up with the renowned apparel brand Beverly Hills Polo

Club. Beverly Hills Polo Club® evokes casual, relaxed yet affluent and elegant Southern

Californian lifestyle. It presents product categories in tune with its image viz. T-Shirts, polo’s,

sweat shirt & sweat pants, causal shirt & trousers, denims, winter wear, eyewear and watches for

men and women. Formal shirts & trousers are an added category in the men’s wear segment. It is

strategically developed by Spencer’s for the Indian market with fine product attributes that

makes fashion affordable.

Music World

Music World is India's largest chain of music stores retailing the widest range of music & home

video products (International and Indian). It operates under different store formats. Music

World's product portfolio comprises of audio CDs, DVDs and VCDs, CD-ROMs, gaming

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consoles & software of all the leading brands and other music accessories. The company is an

important player in the home video market. It has successfully forayed into high end 'personal

audio' gadgets of several top brands. The company also offers DVD players, home theatre

systems, speakers and headphones. Music downloads is also available at select stores. The

company now provides recharge vouchers of all telecom service providers, DTH service

providers & world calling cards.

4.3.3 Raheja Group

The Mumbai based K Raheja Corp Group launched Shoppers’ Stop (Departmental Store),

Crossword (Book & Music Retail), HyperCity (Hypermarket), and Pantaloon (Ready-made

garments) retail formats in India. The Shoppers’ Stop tied up with Mothercare, the global brand

for infants and children and, tied up with MAC for high end beauty and cosmetic products. The

company has also beverage outlets such as Café Brio and Desi Café within its outlets.

Pantaloon Retail Pantaloon Retail (India) Limited is India’s leading retailer that operates multiple retail formats in

both the value and lifestyle segment of the Indian consumer marker. The company operates in

over 7 million square feet of retail space for 1000 stores. It has felt its presence across 51 cities in

India and employs over 24,000 people. The company’s leading formats include Pantaloons-a

chain of fashion outlets; Big Bazaar-an uniquely Indian hypermarket chain; Food Bazaar-a

supermarket chain, blends the look, touch and think of Indian bazaars with aspects of modern

retail like choice, convenience and quality and Central-a chain of seamless destination malls. It

has also introduced the formats like, Depot, Shoe Factory, Brand Factory, Blue Sky, Fashion

Station, aLL, Top 10, mBazaar and Star and Sitara. A subsidiary company of Home Solutions

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Retail (India) Limited operates Home Town, a large-format home solutions store, Collection I,

selling home furniture products and E-Zone focused on catering to the consumer electronics

segment. The financial parameters of this company are shown in Table 4.3 as hereunder:

Table 4.3

Pantaloon Retail: key financial parameters (Rs. Crores)

Jun-06 Jun-07 Jun-08 Jun-09 Jun-10

Total Revenue 1,871.97 3,328.77 5,052.67 6,347.76 6,019.00

Profit Before Interest, Tax and Depreciation

149.64 307.63 464.28 674.50 676.70

Profit After Tax 64.16 119.99 125.97 140.58 179.56

Cash Profit 99.85 184.78 246.64 328.88 342.70

(Source: http://www.pentaloonretail.in/annual-report-2009-2010.pdf.)

The Food Bazaar was launched in 2002 and today it has 138 strong chains of supermarkets.

Another format serving F&G need was launched in 2007 named KB Fair Price. It is spread over

1,600 sq ft selling over 300 essential commodities. The company has 120 stores across Delhi,

Mumbai and Banglore with plans to open 1,400 outlets by next 15 months.

4.3.4 The Tata Group

The Tata group established retail arm, Trent in 1989. The company also signed a JV with

Woolworths for its subsidiary Infiniti Retail that launched Croma, a multi brand outlet for

consumer durable in Mumbai. The company has also signed JV with Westside and Star India

Bazaar. Trent acquired 76% stake in book and music retailer Landmark. Trent also entered into

agreement Delhi based DLF Universal (India’s largest real estate developers). During 2005-06

Trent achieved a turnover of Rs.346cr from its JV with Westside and Star India Bazaar. The

Landmark contributed Rs.57cr during 2005-06. Titan Watches Limited (JV between Tata Group

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and Tamil Nadu Industrial Development Corporation) diversified into Jewellery business under

the brand Tanishq. Titan operates more than 200 World of Titan showrooms spread across 109

cities and reported sales of Rs. 665 crore in FY 2005-06.The Tata Trent ventured into the

hypermarket business in 2004 with Star Bazaar. Star Bazaar opened four stores located in

Ahmadabad, Mumbai and Banglore in 2004 and planned to open 50 stores by 2010. Trent also

entered into an exclusive franchise agreement with TESCO a leading UK retailer for cash and

carry business. The financial highlights for Trent are as hereunder (Table 4.4):

Table 4.4

Trent: sales turnover (Rs Crores)

Year-> 2005-06 2006-07 2007-08 2008-09 2009-10

Sales Turnover 338.93 443.80 499.31 496.37 542.60

(Source: http://www.tata.com)

4.3.5 Piramyd Retail

Piramyd launched Crossroads (Mall), Piramyd Mega store (Lifestyle Department Store), Jammin

(Family entertainment centre) and Piramyd Supermarket. The company has 4 lakh sq ft of retail

space and is planning to spread over 2mn sq ft space in the next 5 years.

4.3.6 Nilgiris’

Mr. Chenniappan established Nilgiris as a modest store carrying Nilgiris' own products, mostly

dairy and bakery. This chain has now blossomed to cover a vast region in South India with 26

outlets and annual sales of about Rs.2300 million in 2007. The company has crossed 32 stores

present in south India with strongholds in Banglore, Chennai and Coimbatore. It plans to expand

the retail network to 500 stores by 2011. Nilgiris is South India’s leading chain of retail stores

providing consumers a shopping experience that hinges around freshness of produce, superior

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quality and better value. From humble beginnings in the hills around Ooty and Coonoor at the

turn of the twentieth century, Nilgiris has grown from being a Dairy Farm specializing in butter

to a supermarket chain of over 90 stores spread across India’s southern states. It is the only

supermarket chain that lays special emphasis on its own products, sold under the brand name of

Nilgiris 1905. With in-house capabilities centering on Bakery and Dairy products, Nilgiris has

grown to become a household name in the south with consumers spanning successive

generations.

Nilgiris is one of India’s pioneering champions of organized retail and has ushered in the age

where consumers now seek more value in their shopping experience than before. Beginning with

a single store on Brigade Road in Bangalore with butter as its mainstay, Nilgiris has scripted a

story of success with multiple stores across cities each delivering unmatched value in terms of

range and shopping experience to the consumer offering a wide range of grocery, general

merchandise and personal care products. With the mission of constantly improving and

upgrading capacities to satisfy consumers through a wide range of food products and service

offered at the right quality, quantity and price supported by innovative solutions, Nilgiris is all

set to embrace emerging technologies and also recognized for its integrity, customer focus and

commitment to quality.

4.3.7 SPAR

SPAR International is $37billion Dutch Retail giant tied with Landmark Group in 1998. SPAR

rolled its first hypermarket in Banglore spread over 75,000 sq ft in 2007 followed by

supermarket expansion across 30,000 sq ft in 2008. It added 7 more stores by end of 2009.

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4.3.8 Vishal Group

The Vishal Mega Mart, a Delhi based company operates more than 55 large stores in 45 cities

dealing with ready-made garments, grocery and liquor. It has sales over Rs 1,013 crore in 2007-

08. There are 137 Vishal Mega Mart stores across 89 cities in 20 states covering 2.44 million sq

ft. The stores offer fashion, grocery, fresh foods and general merchandize at lower costs. The

company has recently forayed into small convenient store format under the banner of Vishal

Daily Mart. The company plans to open 2000 stores by 2010. The glory of Vishal Group’s

success is the assent, it has come to accomplish in manufacturing and retailing of readymade

garments.

The credit for this radiance goes to the dynamics of directors Mr. Ram Chandra Aggarwal &

Mrs. Uma Aggarwal, who transformed their foresightedness into an unending saga of growth.

Identifying the immense market in fashion garment for the masses, the Group has actually

established benchmarks that many others are inspired to follow. Not resting on its laurels, the

Group is busy identifying new avenues of growth and its companies are busy implementing the

expansion plans to cash in on emerging potentials in the changing business environment of the

modern India’s enterprise. The jewel in Vishal Group’s crown is its flagship company Vishal

Retail Ltd. It is engaged in hyper market stores with an average area of 25,000 sq ft through an

impressive chain of 172 fully integrated stores spread over the area of more than 24,000,000 sq ft

in around 110 cities across India in 24 cities.

The turnover of the company for 2009-10 was 1105 crore. Maintaining the highest standards in

quality and design, these stores offer the finest fashion garments down-to-earth price structure. A

fact that is better visible in the constant flow of shoppers all through the year. Under the title of

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Vishal Mega Mart, these stores have emerged as the regular hunts for the bargain-hunters and

fashion enthusiasts alike. The saga of Vishal Group dates back to 2001, when its directors

foresaw the emerging potentials in the retail industry which is indeed the largest sector in global

economy. Imbibing its concepts and techniques, the Group identified the vast scope of growth in

retailing for common man. Its stores have gained the enviable prominence as being the ideal

store for the common man where an extensive variety and quality is offered at a very reasonable

price structure. The Group’s expertise in retail marketing over the years and its focus on regions,

cities and exact customer preferences have earned the Group an undisputed leadership status to

Vishal Group.

4.3.9 Namdhari’s Fresh

Namdhari's Fresh, a unit of Namdhari Seeds started in 2000 at Bangalore to export fresh

vegetables of premium quality for domestic customers. It is a market leader in Indian Vegetable

Seed Industry and a leading Exporter of Vegetables and Flower Seeds. The company cultivates

more than 40 different vegetables and fruits at various productions centers across the country.

The different agro-climatic zones enable them to produce most vegetables all round the year.

Namdhari's Fresh handles more than thousand tons of fresh vegetables and fruits at domestic and

International market- mainly destined to Europe, Australia and the Middle East. After the

success in seed world, Namdhari’s have diversified into the production, distribution and export

of fresh vegetables & fruits under the name ‘Namdhari's Fresh’. Namdhari's Fresh is also

involved in natural farming to produce and supply Organic Vegetables and Fruits in the

International market. Namdhari's Fresh grows most vegetables throughout the year. Using the

knowledge acquired in our seed company produce is grown on Namdhari's Fresh, own field

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farms and in our green houses (5 hectare). For outsourcing, Namdhari has more than 2000

growers available.

4.3.10 Mother’s Dairy

It is a subsidiary of National Dairy Development Board (NDDB) of India. It markets and sells

dairy products, vegetable oils, juices, frozen vegetables, fresh fruits and vegetables. It markets

about 2.8 million liters of milk daily in Delhi, Mumbai, Saurashtra and Hyderabad. The company

markets its products under the brand named Safal through a chain of 400+ own fruits and

vegetable shops and has more than 20,000 retail outlets in various parts of the country.

4.3.11 Big Apple

It is Express Retail Services Pvt. Ltd owned Delhi-based food and grocery retail chain felt its

presence in 65 retail outlets in Delhi. Rs.125 crore company has tie-up with farmers in Rajasthan,

Haryana, Himachal Pradesh and Uttar Pradesh and spread over 1,10,500 sq. ft. area. The

company plans to open 35 more stores by 2010.

4.3.12 Easy Day

Bharti Enterprises, one of the leading business groups of India has recently forayed into retail

business. It has launched retail stores under the name of Easy Day in Punjab. In 2009 there were

seven operational stores in Ludhiana, Jalandhar and Patiala spread over 25, 00 to 45, 00 sq. ft.

The company has B2B joint venture with Wal-Mart for wholesale cash-and-carry business and

plans to open 50 more retail outlets by 2011.

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4.3.13 LM 365

It is a food and grocery retail venture of Delhi based Shri Lal Mahal a quality rice exporter. The

first store was opened in February, 2008 and the number rose to 18 by December, 2008 spread

over 15,200 sq. ft. and offering household, homecare, grocery and food items. Currently the

company has 75 stores and plans to open 180 stores and 350 outlets by 2011.

4.3.14 Aditya Birla Retail

The Group’s foray into the retail sector began in December 2006 when it acquired Trinethra, the

chain of stores based in south India. May 2007 saw Aditya Birla Retail Limited (ABRL) launch

their own brand of stores called 'More.' The company has its own label food brands under more;

Feasters, Kitchen's Promise, and Best of India. It also has home and personal care brands More;

Enriche, 110%, Pestex, Paradise, and Germex. Till end-September 2009, the company had set up

640 supermarkets and five hypermarkets. All the supermarkets are branded ‘More’ and the

hypermarkets are branded ‘More Megastore’. The company has around 11,000 employees and

has a pan-India presence. More supermarkets are neighbourhood stores with the core proposition

of offering value, convenience and trust to the customers and averaging 2,500 sq. ft. area.

The hypermarkets are self-service superstores offering value and range in food and non-food

products and services at a single location. Hypermarkets are located in large catchment areas and

encourage mass consumption with discount prices and substantial depth of assortment with an

average store size of 55,000 sq. ft. shopping area. In May 2009, Aditya Birla Retail introduced a

value proposition for its supermarkets and encapsulated it into a promise of giving its customers

“Hamesha Extra” which has resonated with the consumer. “Hamesha Extra” is the core essence

of More.

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It means customers will always think that they have got something extra while shopping at More.

Within a short span of less than three years, ‘More’ has more than 1.6 million members as part of

its loyalty program. More has also launched a huge range of private labels in food and grocery,

staples and apparel which have already obtained a significant share of category as well as

salience with the consumer. The More has two formats as supermarket and hypermarket these

are as hereunder:

Supermarket

More supermarkets cater to the daily, weekly and monthly shopping needs of consumers. The

product offerings include a wide range of fresh fruits & vegetables, groceries, personal care,

home care, general merchandise & a basic range of apparels. Currently, there are over 600 more

supermarkets across the country.

Hypermarket

More Megastore is a one-stop shopping destination for the entire family. It offers a large range of

products across fruits & vegetables, groceries, and FMCG products. It also has a strong emphasis

on general merchandise, apparels & CDIT. Currently, eight hypermarkets operate under the

brand More MEGASTORE: Mysore, Vadodara, Aurangabad, Indore, Bengaluru, Mumbai, New

Delhi and Hyderabad.

4.3.15 ITC Group

ITC has market capitalization of nearly US $18 billion and has turnover of more than US$1.8

billion. It has diversified presence in cigarettes, hotels, paperboard and specialty papers,

packaging, agribusiness, packaged foods and confectionery, information technology, branded

apparel, personal care, stationery, safety matches and other FMCG products. The company also

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has launched e-choupal in 2000 to enhance agriculture business in rural retail. The e-choupal

business today reached out to over 4 million farmers growing crops like soyabean, coffee, wheat,

rice, pulses, and shrimp in more than 40,000 villages through more than 65,00 kiosks across 10

states: Haryana, Madhya Pradesh, Uttarakhand, Karnataka, Andhra Pradesh, Uttar Pradesh,

Maharashtra, Rajasthan, Kerala, and Tamil Nadu. The company has ITC Choupal Sagars facility

centers and Choupal Fresh outlets. The former provides one-stop solution to farmers and later

outlets are situated in mini metros to offer fresh fruits and vegetables directly sourced from the

farmers.

4.3.16 Subhiksha Trading Services Limited

Subhiksha is among the largest discount supermarkets, pharmacy and telecom chain. It started as

a single store in south Chennai in 1977 and now the company has national presence with 1530

outlets spread over 100 cities and is spread over 350,000 sq. ft. area. It has strong presence in

Delhi, UP, Punjab, Haryana, Gujarat, Maharashtra, Andhra Pradesh, Karnataka, and Tamil Nadu.

Recently Azim Premji bought a 10% stake in Subhiksha through his personal investment arm for

about Rs 230 crore valuing the retailers at Rs 2,300 crore from ICICI venture. The company

plans consumer durables in Tier-II and III towns in the country with estimated coverage of 2

million sq. ft. space.

4.3.17 V-Mart Retail Limited

It was launched by Mr. Lalit Aggarwal in 2002. The company made its foray into retail business

in October 2003 by opening its maiden showroom in Ahmadabad. The company focused on tier-

II and tier-III cities. It currently operates in more than 42 stores across North and South Western

regions of India. It provides products ranging from clothes, accessories & footwear for men,

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women and kids, cosmetics, luggage, toys, games, home accessories furnishing. They also

provide a wide range of food, non-food and staple items in kirana bazaar section.

4.3.18 Rural Retailing Players

Retail sector also offers opportunities to explore and invest in the rural areas. India's largely rural

population has caught the eye of retailers looking for new areas of growth. Many corporates and

entrepreneurs have made investments in rural areas. ITC has launched the country's first rural

mall Choupal Sagar. It offers large and diverse product range from FMCG to electronics

appliance to automobiles, attempting to provide farmers a one-stop destination for their all needs.

DCM Sriram Group launched Haryali Bazaar that has initially started to provide farm related

inputs and services but plans to introduce the complete shopping basket in near future. Escorts

and Tata Chemicals set up Tata Kisan Sansar in the form of agri-stores to provide

products/services targeted at the farmer to tap the vast rural market. Godrej group has launched

rural retailing outlets under the name Aadhar a part of Godrej Agrovet Limited with 70% share

holding of Future group. The other companies of Godrej are Godrej Lifespace for home and

interiors and Gourmet food retailing called Natures Basket are independent companies.

4.3.19 Wholesale Trading

Wholesale trading also holds huge potential in Indian market. German giant Metro AG and

South African Shoprite Holdings have already stepped in this segment. They set up stores selling

merchandise on a wholesale basis in Bangalore and Mumbai. These cash-and-carry stores have

attracted large volumes from a sizeable number of retailers in India. In modern retailing, the key

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strategic choice is the selection of a format to take competitive CA for better OP. The formats

adopted by key players are shown in the Table 4.5 as follows:

Table 4.5

Formats of leading players in India

Retailer Original formats Later Formats

RPG Retail Supermarket (Foodworld) Hypermarket (Spencer's) Specialty Store (Health and Glow)

Piramal's Department Store (Piramyd Megastore) Discount Store (TruMart)

Pantaloon Retail Small format outlets (Shoppe) Department Store (Pantaloon)

Supermarket (Food Bazaar) Hypermarket (Big Bazaar) Mall (Central)

K Raheja Group Department Store (shopper's stop) Specialty Store (Crossword)

Supermarket (TBA) Hypermarket (TBA)

Tata/ Trent Department Store (Westside) Hypermarket (Star India Bazaar)

Landmark Group Department Store (Lifestyle) Hypermarket (TBA)

Others Discount Store (Subhiksha, Margin Free, Apna Bazaar), Supermarket (Nilgiri's), Specialty Electronics

(Source: http://en.wikipedia.org)

4.4 Retail Market Segment Growth in India

In the land of 15 million retailers, most of them owning small mom-n-pop outlets the organized

retail flourished never before. The organized retail market size and growth by segments is shown

in Table 4.6. In 2007, the clothing, textile and fashion accessories touched the retail trade to the

tune of Rs 131, 300 crore and organized retail accounted for Rs 29, 800 crore with growth of

39.3%. The food and grocery retail accounted for Rs 792,000 crore which is the second

maximum as compare to other segments of the business. It contributed Rs 9, 000 crore to the

organized retailing in the same year and showed growth of 55.2%. It was followed by out-of-

home food (catering) services which accounts for Rs 71, 300crore and organized retail

contribution to the tune of Rs. 5,700 crore and grew at the rate of 44.7%. The fourth important

segment was jewellery which contributed to retail Rs. 69, 4000 and organized retail is accounted

for Rs. 2, 300 crore and touched the growth rate of 36.9%. The fifth retail segment was consumer

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durable, home appliances/equipments which account for Rs. 57, 500 crore and the organized

retail was accounted for Rs. 7, 100 crore and progressed at the rate of 42.0%.

Table 4.6

Organized retail market size and growth by segments

Retail Segment Indian Retail Market (Rs Crores) Organized Retail (Rs Crores) Growth Rank in

2007 2006 2007 Growth

07>06(%) 2006 2007 Growth

07>06(%) Clothing, Textile & Fashion Accessories

113,5000 131,3000 15.7 21,400 29,800 39.3 8

Jewellery 60,200 69,400 15.3 1,680 2,300 36.9 9 Watches 3,950 4,400 11.4 1,800 2,150 19.4 12 Footwear 13,750 16,000 16.4 5,200 7,750 49.0 4 Health and Beauty Care Services 3,800 4,600 21.1 400 660 65.0 1 Pharmaceuticals 42,200 48,800 15.6 1,100 1,540 40.0 7 Consumer Durables, Home Appliances/ equipments

48,100 57,500 19.5 5,000 7,100 42.0 6

Mobile, Accessories and Services 21,650 27,200 25.6 1,740 2,700 55.2 2 Furnishings, Utensils, Furniture-Home & Offices

40,650 45,500 11.9 3,700 5,000 35.1 10

Food and Grocery 743,900 792,200 6.5 5,800 9,000 55.2 2 Out-of-home food (Catering) services

57,000 71,300 25.1 3,940 5,700 44.7 5

Books, Music & Gifts 13,300 16,400 23.3 1,680 2,200 30.9 11 Entertainment 38,000 45,600 20.0 1,560 2,400 53.8 3 Total 1,200,000 1,330,000 10.8 55,000 78,300 42.4

(Source: India Retail Report, 2009, p.76)

These indicators show that the future of organized food and grocery retailing in bright as it is the

third largest growing segments. The organized retail growth trade results are shown in Table 4.7.

The total organized retail grew from 3.0% in 2004 to 5.9% in 2007. The clothing, textile and

fashion accessories experienced the growth of 13.6% in 2004 to 22.7% in 2007.

The jewellery segment rose from 2.0% in 2004 to 3.3% in 2007. The watches segment kept the

speed from 39.6% in 2004 to 48.9% in 2007. The footwear segment rose from 25.0% in 2004 to

48.4% in 2007. The health and beauty care experienced more than double rise from 6.0% in 2004

to 14.3% in 2007. The pharmaceutical segment also approached nearly same speed from 1.8% in

2004 to 3.2% in 2007. The consumer durables, home appliances/equipments rose from 7.8% in

2004 to 12.3% in 2007. The mobile handsets, accessories and services moved from 6.5% in 2004

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to 9.9% in 2007. The furnishing, utensils, furniture-home and office rose from 6.7% in 2004 to

11.0% in 2007.

Table 4.7

Share of organized retail to total market

Retail Segment %Organized Retail

2004 2005 2006 2007 Clothing, Textile & Fashion Accessories 13.6 15.8 18.9 22.7 Jewellery 2.0 2.3 2.8 3.3 Watches 39.6 43.5 45.6 48.9 Footwear 25.0 30.3 37.8 48.4 Health and Beauty Care Services 6.0 7.6 10.6 14.3 Pharmaceuticals 1.8 2.2 2.6 3.2 Consumer Durables, Home Appliances/equipments 7.8 8.8 10.4 12.3 Mobile handsets, Accessories and Services 6.5 7.0 8.0 9.9 Furnishings, Utensils, Furniture-Home & Offices 6.7 7.6 9.1 11.0 Food and Grocery 0.5 0.6 0.8 1.1 Out-of-home food (Catering) services 5.7 5.8 6.9 8.0 Books, Music & Gifts 9.8 11.7 12.6 13.4 Entertainment 2.6 3.3 4.1 5.3 Total 3.0 3.6 4.6 5.9

(Source: IMAGES F&R Research in Retail Report 2009, p.79)

The food and grocery segments sale doubled during 2004 to 2007 also the total organized retail

doubled from 3.0% in 2004 to 5.9% in 2007. The total retail and organized retail projections are

shown in Table 4.8. The organized retail trade has arisen from 3.0% in 2004 to 4.6% in 2006. It

is expected to rise 15.5% in the end of 2010.

Table 4.8

Total retail and organized retail sale projections (Rs crores)

2004 2005 2006 2007 2008 2009 2010

Organized Retail 28,000 35,600 47,500 66,500 96,500 140,000 203,000

Retail Market 930,000 980,500 1,036,000 1,098,000 1,164,000 1,234,000 1,308,000

Organized % 3.0% 3.6% 4.6% 6.1% 8.3% 11.3% 15.5%

(Source: India Retail Report, 2009, p. 78)

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This part of the study helped us to identify key players, their sales and retail formats adopted by

them in the Indian organized retail sector. Also, based on the information we have selected

respondents for the rest part of the study.