Organzed Retail in India. Opportunities and Challenges

7/31/2019 Organzed Retail in India. Opportunities and Challenges

1/9

Organized Retail in India

Opportunities & Challenges


2/9

Current Scenario

Today retailing is largest contributing sector to

country's GDP i.e. 10% as compared to 8% in China,6% in Brazil.

Modern retailing is capable of generatingemployment opportunities for 2.5 million people by

2010 in various retail operations and over 10million additional workforces in retail supportactivities.

Organised retail which presently account for only 4-

6% of the total market is likely to increase its shareto over 30% by 2013.

The total size of industry stands at $475 Billion andis expected to touch $650 Billion by 2015-16.


3/9

Organized retailing is growing at 8%

2nd largest contributor to GDP afteragriculture at 20%.

Pattern of consumption changing along withshopping trends.

Consumer spending increasing at 11%annually.

Almost 25 million sq. ft. retail spaceavailable.

Paradigm shift in shopping experience forconsumers pulling in more people.

Shortage of quality retail spaces ataffordable rates.

Government regulations on developmentof real estate(Urban Land Ceiling Act)

Need to provide Value for Money-squeezing margins

Lack of industry status.

Retail revolution restricted to 250 millionpeople due to monolithic urban-rural divide.

Lack of huge investments for expansion

Increasing urban population-moreparticipants in retail revolution.

Increase in consuming middle class

population. Social factors, like dual household income

has enhanced spending power.

Spends moving towards lifestyle productsand esteem enhancing products.

Average grocery spends at 42% of monthly

spends-presents a huge opportunity.

Increase in use of credit cards.

Rising rental costs affecting project viability Poor monsoons and low GDP Growth could

affect consumer spending Archaic labour laws are a hindrance to

providing 24/7 shopping experience. Personalized service offered by Kirana stores

Unavailability of qualified personnel tosupport exponential growth in retail.

Differentiate taxation laws hinderingexpansion

Opportunities

Strengths Weaknesses

Threats


4/9


5/9

30%

21%

7%

7%

14%

21%

Major Infrastructural problems in Organized Retail

Industry in India

Parking

Public TransportSquatting

Sewerage

Power Supply

Low Govt. investment


6/9

Subhiksha

(Non-operational)

High Volume and Low Margin

Model

Low Price and Low

Margin

Fresh Fruit and

Vegetables, grocery,

pharmacy and mobile

phone

Faced in balancing in

mad expansion plan

and in deciding demand

prone product mix.

Pantaloon One stops shopping model(Over 2, 50,000 SKUs.) Maximising on Grossmargin Branded and Privatelabel apparel, Personal

care products, leather

products, Books, Music,

Toys,

Consumer durables,

Home Furnishing, Food

and Grocery

MRP Laws, Rising Realestate Price,

Unavailability of Land.

Reliance Fresh Farms to forks model is

adopted to operate business.

Disintegrates

intermediary andreduce cost of fresh

produce.

Fresh fruit and

vegetables, staples,FMCG and Dairy

products

Political Interface and

people movementsagainst the retail giant

at various places

Vishal Megamart Small format models which

later on

converted into hypermarket

model. Focusing on lower

middle income group

Price suit to every

targeted customer

House Hold

merchandise, groceries,

Footware, toys, home

furnishing, mobile

phones, watches,

toileteris items.

Managing the

expansion plans with

supervising demands of

consumers and keeping

economic of

scale high.

Globus Departmental Store Amazing Price suited to

every YOUTH.

Apparel for men,

women, kids and

accessories

Managing the

expansion plans with

supervising demands of

consumers and keeping

economic of scale high.

Coupon Mall One stop model targeting TierII and III cities.

Big Brand, big discount Apparel, Jewellery,luggage, home

furnishing

It will take time toposition the brand in

the mind of customer


7/9

Recommendations

There is a need for setting up of Retailers Co-operatives

which function as distribution centres and warehouses. Itwill help the retailers to buy the products they wantdirectly from original manufacturers in bulk quantity.

Mergers of weak retailers and buy out weak retailers by astronger one are other important steps. This will give newretailers the desired leverages to be world class.

Networking of Independent firms believing the use oftechnology for business excellence and pressurizingsuppliers and others channel members to use compatibletechnology.


8/9

Suggestions

Accord Industry Status to Retail : Industry status should be given to improve retail development, tofacilitate organised financing and to establish insurance norms.

Incentives for Investments : Tax holidays norms for cold storage chains, infrastructure and investments insupply chain should be enacted.

Comprehensive Legislation : Comprehensive legislation should be drafted and enacted with futuristicapproach.

Eliminating Archaic Laws : Laws, Essential Commodities Act, APMC Acts, Licensing restriction, differentialtaxes, stamp duties, should be simplified and put in proper place so that it would not hinder growth of retailsector. This will help in creating "Commodities Futures Markets".

Allow Foreign Direct Investment (FDI) in phased manner : Allow foreign direct investment in the

company according to financial planning. Rationalise the tax structure : The current multipoint taxation should be rationalised. Government should

introduce a uniform taxation system across the country to relax the law that hinder inter state flows of goods.

Amend the existing cumbersome labour laws: The existing labour laws needs to be amended on an urgentbasis in order to support the growth the growth of organised retailing and to develop India as a sourcing hub.

Announce a national policy for retail: The Government should announce a National Retail Policy thatallows the coexistence of both organised and unorganised retail and address issues such as sourcing, contractfarming, movement of goods across India and also defines clear cut guidelines for the functioning of retailsector in India.

Establishment of National Commission on Retail: The national commission on retail must be established.

Streamline the process of clearance

Encourage PPP model for infrastructural development

Reduce impediments to inter state movement of goods

Enforce uniform quality standards

Setup a regulatory body for the governing the operations of retail sector.


9/9

References

Sanjay Manocha and Anoop Pandey, Organized Retailing in India :Challenges and Opportunities, VSRD International Journal of BusinessManagement Research, Vol. 2 (3), 2012, 65-80.

Documents

Organzed Retail in India. Opportunities and Challenges