Khar Education Society

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Future and Challenges in Retail Business

Presented By:

ANKIT SHAH S-320

FARAZ QURESHI S-318

KAPIL JAIN S-308NISHANT KARMAVAT S-310

RAVI PANDEY S-314

Project report submitted in fulfillment of the requirements for third

year of Bachelor of Management Studies

KHAR EDUCATION SOCIETY


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RETAIL

MANAGEMENT


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Declaration

We, FARAZ QUIRESHI, ANKIT SHAH, RAVI PANDEY, KAPIL JAIN,

NISHANT KARMAVAT Students of Khar Education Societys College of

Commerce and Economic of T.Y.B.M.S. (SEMESTER VI) hereby declare

that we have completed this project on FUTURE AND CHALLENGES IN

RETAIL BUSINESS in the academic year 2011-2012. The information

submitted is true and original to the best of my knowledge.

(SIGNATURE OF THE STUDENTS)


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ACKNOWLEDGEMENT

It is the matter of great pleasure and privilege to be able to present this

project report on FUTURE AND CHALLENGES IN RETAIL BUSINESS.

The compilation of the project is a milestone in the life of the management

students and its execution is inevitable with the co-operation of the project guide.

We wish to record a deep sense of respect and gratitude to our project guide, Prof.

Kishore Dave for his encouragement to course of our work. It is due to the

enduring effort and guidance of our guide that ultimately made it success.

We also take this opportunity to express our deep regards and gratitude to

the Principle Dr.Nandini Deshmukh mam and would like to thank the head of

B.M.S. department Prof. Jaya Dudani who gave us guidance to take up and pursue

the project.


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Table Of Contents

1. Introduction2. Retail Marketing3. Types of Retail Format4. THE INDIAN RETAIL SCENE5. STRATEGIES, TRENDS AND OPPORTUNITIES6. PROBLEMS FACED ININDIA7. Recent Trends8. CHALLENGES & OPPORTUNITIES9. CONCLUSION10.


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INTRODUCTION

The India Retail Industry is the largest among all the industries, accounting for

over 10 per cent of the countrys GDP and around 8 per cent of the employment.

The Retail Industry in India has come forth as one of the most dynamic and fast

paced industries with several players entering the market. But all of them have

not yet tasted success because of the heavy initial investments that are required

to break even with other companies and compete with them. The India Retail

Industry is gradually inching its way towards becoming the next boom industry.

The total concept and idea of shopping has undergone an attention drawing

change in terms of format and consumer buying behavior, ushering in arevolution in shopping in India. Modern retailing has entered into the Retail

market in India as is observed in the form of bustling shopping centers, multi-

storied malls and the huge complexes that offer shopping, entertainment and

food all under one roof.

A large young working population with median age of 24 years, nuclear families in

urban areas, along with increasing workingwomen population and emerging

opportunities in the services sector are going to be the key factors in the growthof the organized Retail sector in India. The growth pattern in organized retailing

and in the consumption made by the Indian population will follow a rising graph

helping the newer businessmen to enter the India Retail Industry.

In India the vast middle class and its almost untapped retail industry are the key

attractive forces for global retail giants wanting to enter into newer markets,

which in turn will help the India Retail Industry to grow faster. Indian retail is

expected to grow 25 per cent annually. Modern retail in India could be worth US$

175-200 billion by 2016. The Food Retail Industry in India dominates the shopping

basket. The Mobile phone Retail Industry in India is already a US$ 16.7 billion

business, growing at over 20 per cent per year. The future of the India Retail

Industry looks promising with the growing of the market, with the government


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policies becoming more favorable and the emerging technologies facilitating

operations.


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RetailMarketing

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THE INDIAN RETAIL SCENE

India is the country having the most unorganized retail market. Traditionally it is a

familys 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 squarefeet of shopping space .Global retail consultants KSA Technopak have estimated

that organized retailing in India is expected to touch Rs:35,000 crore in the year

2005-06. 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 branded merchandise

in categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and evenJewellery, are slowly becoming lifestyle products that are widely accepted by the

urban Indian consumer. Indian retailers need to advantage of this growth and

aiming to grow, diversify and introduce new formats have to pay more attention

to the brand building process. The emphasis here is on retail as a brand rather

than retailers selling brands. The focus should be on branding the retail business

itself. In their preparation to face fierce competitive pressure, Indian retailers

must come to recognize the value of building their own stores as brands to

reinforce their marketing positioning, to communicate quality as well as value for

money. Sustainable competitive advantage will be dependent on translating corevalues combining products, image and reputation into a coherent retail brand

strategy.

There is no doubt that the Indian retail scene is booming. A number of large

corporate houses like Tatas, Rahejas, Piramalss, Goenkas have already made

their foray into this arena, with beauty and health stores, supermarkets, self-

service music stores, new age book stores, every-day-low-price stores, computers

and peripherals stores, office equipment stores and home/building construction

stores. Today the organized players have attacked every retail category. TheIndian retail scene has witnessed too many players in too short a time, crowding

several categories without looking at their core competencies, or having a well

thought out branding strategy.


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STRATEGIES, TRENDS AND OPPORTUNITIES 2007

Retailing in India is gradually inching its way toward becoming the next boomindustry. The whole concept of shopping has altered in terms of format and

consumer buying behavior, ushering in a revolution in shopping in India. Modern

retail has entered India as seen in sprawling shopping centers, multi-storied malls

and huge complexes offer shopping, entertainment and food all under one roof.

The Indian retailing sector is at an inflexion point where the growth of organized

retailing and growth in the consumption by the Indian population is going to take

a higher growth trajectory. The Indian population is witnessing a significant

change in its demographics. A large young working population with median age of

24 years, nuclear families in urban areas, along with increasing workingwomenpopulation and emerging opportunities in the services sector are going to be the

key growth drivers of the organized retail sector in India.

Growth over 1997-2010

India in 1997 allowed foreign direct investment (FDI) in cash and carry wholesale.

Then, it required government approval. The approval requirement was relaxed,

and automatic permission was granted in 2006.Between 2000 to 2010, Indian

retail attracted about $1.8 billion in foreign direct investment, representing a very

small 1.5% of total investment flow into India.

Single brand retailing attracted 94 proposals between 2006 and 2010, of which 57

were approved and implemented. For a country of 1.2 billion people, this is a very

small number. Some claim one of the primary restraints inhibiting better

participation was that India required single brand retailers to limit their

ownership in Indian outlets to 51%. China in contrast allows 100% ownership by

foreign companies in both single brand and multi-brand retail presence.

Indian retail has experienced limited growth, and its spoilage of food harvest is

amongst the highest in the world, because of very limited integrated cold-chainand other infrastructure. India has only 5386 stand-alone cold storages, having a

total capacity of 23.6 million metric tons. However, 80 percent of this storage is

used only for potatoes. The remaining infrastructure capacity is less than 1% of

the annual farm output of India and grossly inadequate during peak harvest


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seasons. This leads to about 30% losses in certain perishable agricultural output in

India, on average, every year

Indian laws already allow foreign direct investment in cold-chain infrastructure to

the extent of 100 percent. There has been no interest in foreign direct investment

in cold storage infrastructure build out. Experts claim that cold storage

infrastructure will become economically viable only when there is strong and

contractually-binding demand from organized retail. The risk of cold storing

perishable food, without an assured way to move and sell it, puts the economic

viability of expensive cold storage in doubt. In the absence of organized retail

competition and with a ban on foreign direct investment in multi-brand retailers,

foreign direct investments are unlikely to begin in cold storage and farm logistics

infrastructure.

Until 2010, intermediaries and middlemen in India have dominated the valuechain. Due to a number of intermediaries involved in the traditional Indian retail

chain, norms are flouted and pricing lacks transparency. Small Indian farmers

realize only 1/3rd of the total price paid by the final Indian consumer, as against

2/3rd by farmers in nations with a higher share of organized retail. The 60%+

margins for middlemen and traditional retail shops have limited growth and

prevented innovation in Indian retail industry.

India has had years of debate and discussions on the risks and prudence of

allowing innovation and competition within its retail industry. Numerous

economists repeatedly recommended to the Government of India that legalrestrictions on organized retail must be removed, and the retail industry in India

must be opened to competition. For example, in an invited address to the Indian

parliament in December 2010,Jagdish Bhagwati, Professor of Economics and Law

at the Columbia University analyzed the relationship between growth and poverty

reduction, then urged the Indian parliament to extend economic reforms by

freeing up of the retail sector, further liberalization of trade in all sectors, and

introducing labor market reforms. Such reforms Professor Bhagwati argued will

accelerate economic growth and make a sustainable difference in the life of

India's poorest.

A 2007 report noted that an increasing number of people in India are turning to

the services sector for employment due to the relative low compensation offered

by the traditional agriculture and manufacturing sectors. The organized retail

market is growing at 35 percent annually while growth of unorganized retail

sector is pegged at 6 percent.


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The Retail Business in India is currently at the point of inflection. As of 2008, rapid

changes with investments to the tune of US $ 25 billion were being planned by

several Indian and multinational companies in the next 5 years. It is a huge

industry in terms of size and according to India Brand Equity Foundation (IBEF), it

is valued at about US$ 395.96 billion. Organized retail is expected to garner about16-18 percent of the total retail market (US $ 65-75 billion) in the next 5 years.

India has topped the A.T. Kearneys annual Global Retail Development Index

(GRDI) for the third consecutive year, maintaining its position as the most

attractive market for retail investment. The Indian economy has registered a

growth of 8% for 2007. The prediction for 2008 is 7.9%. The enormous growth of

the retail industry has created a huge demand for real estate. Property

developers are creating retail real estate at an aggressive pace and by 2010, 300

malls are estimated to be operational in the country.

Growth after 2011

Before 2011, India had prevented innovation and organized competition in its

consumer retail industry. Several studies claim that the lack of infrastructure and

competitive retail industry is a key cause of India's persistently high inflation.

Furthermore, because of unorganized retail, in a nation where malnutrition

remains a serious problem, food waste is rife. Well over 30% of food staples and

perishable goods produced in India spoil because poor infrastructure and small

retail outlets prevent hygienic storage and movement of the goods from the

farmer to the consumer.

One report estimates the 2011 Indian retail market as generating sales of about

$470 billion a year, of which a miniscule $27 billion comes from organized retail

such as supermarkets, chain stores with centralized operations and shops in

malls. The opening of retail industry to free market competition, some claim will

enable rapid growth in retail sector of Indian economy. Others believe the growth

of Indian retail industry will take time, with organized retail possibly needing a

decade to grow to a 25% share. A 25% market share, given the expected growthof Indian retail industry through 2021, is estimated to be over $250 billion a year:

a revenue equal to the 2009 revenue share from Japan for the world's 250 largest

retailers.


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The Economist forecasts that Indian retail will nearly double in economic value,

expanding by about $400 billion by 2020. The projected increase alone is

equivalent to the current retail market size of France.

In 2011, food accounted for 70% of Indian retail, but was under-represented by

organized retail. A.T. Kearney estimates India's organized retail had a 31% share in

clothing and apparel, while the home supplies retail was growing 20% to 30% per

year. These data correspond to retail prospects prior to November announcement

of the retail reform.

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23/26

RECENT TRENDS

y Retailing in India is witnessing a huge revamping exercise as can be seen in thegraph

y India is rated the fifth most attractive emerging retail market: a potentialgoldmine.

y Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade)makes up 3 percent or US$ 6.4 billion

y As per a report by KPMG the annual growth of department stores is estimated at24%

y Ranked second in a Global Retail Development Index of 30 developing countriesdrawn up by AT Kearney.

y Multiple drivers leading to a consumption boom:o Favorable demographicso Growth in incomeo Increasing population of womeno Raising aspirations: Value added goods salesy Food and apparel retailing key drivers of growthy Organized retailing in India has been largely an urbany Phenomenon with affluent classes and growing number of double-income

households.

y More successful in cities in the south and west of India. Reasons range fromdifferences in consumer buying behavior to cost of real estate and taxation laws.

y Rural markets emerging as a huge opportunity for retailers reflected in the shareof the rural market across most categories of consumption

o ITC is experimenting with retailing through its e-Choupal and Choupal Sagar ruralhypermarkets.

o HLL is using its Project Shakti initiative leveraging women self-help groupstoexplore the rural market.

o Mahamaza is leveraging technology and network marketing concepts to act as anaggregator and serve the rural markets.

y IT is a tool that has been used by retailers ranging from Amazon.com to eBay toradically change buying behavior across the globe.

y E-tailing slowly making its presence felt.


24/26

RETAIL SALES IN INDIA


25/26

CHALLENGES & OPPORTUNITIES

Retailing has seen such a transformation over the past decade that its verydefinition has undergone a sea change. No longer can a manufacturer rely on

sales to take place by ensuring mere availability of his product. Today, retailing is

about so much more than mere merchandising. Its about casting customers in a

story, reflecting their desires and aspirations, and forging long-lasting

relationships. As the Indian consumer evolves they expects more and more at

each and every time when they steps into a store. Retail today has changed from

selling a product or a service to selling a hope, an aspiration and above all an

experience that a consumer would like to repeat.

For manufacturers and service providers the emerging opportunities in urban

markets seem to lie in capturing and delivering better value to the customers

through retail. For instance, in Chennai CavinKares LimeLite, Maricos Kaya Skin

Clinic and Apollo Hospitals Apollo Pharmacies are examples, to name a few,

where manufacturers/service providers combine their own manufactured

products and services with those of others to generate value hitherto unknown.

The last mile connect seems to be increasingly lively and experiential. Also,

manufacturers and service providers face an exploding rural market yet only

marginally tapped due to difficulties in rural retailing. Only innovative conceptsand models may survive the test of time and investments.

However, manufacturers and service providers will also increasingly face a host

of specialist retailers, who are characterized by use of modern management

techniques, backed with seemingly unlimited financial resources. Organized

retail appears inevitable.

Retailing in India is currently estimated to be a US$ 200 billion industry, of which

organized retailing makes up a paltry 3 percent or US$ 6.4 billion. By 2010,

organized retail is projected to reach US$ 23 billion. For retail industry in India,things have never looked better and brighter. Challenges to the manufacturers

and service providers would abound when market power shifts to organized

retail.


26/26

CONCLUSION

The retail sector has played a phenomenal role throughout the world in

increasing productivity of consumer goods and services. It is also the second

largest industry in US in terms of numbers of employees and establishments.

There is no denying the fact that most of the developed economies are very

much relying on their retail sector as a locomotive of growth. The India Retail

Industry is the largest among all the industries, accounting for over 10 per cent

of the countrys GDP and around 8 per cent of the employment. The Retail

Industry in India has come forth as one of the most dynamic and fast pacedindustries with several players entering the market. But all of them have not yet

tasted success because of the heavy initial investments that are required to

break even with other companies and compete with them. The India Retail

Industry is gradually inching its way towards becoming the next boom industry.

Documents

Khar Education Society