Indian Retailing - Will it be Traditional or Modern?...


By

Dr. M. Senthil
Reader
Alagappa Institute of Management
Alagappa University
Karaikudi

S. Selvabaskar
Asst. Professor
Happy Valley Business School
Coimbatore
 


ABSTRACT

Retailing in India is poised for an exponential growth with activities geared up across categories and geography. Let it be the exorbitant number malls in operation, format exploration or strategy development, there is a definite visible transition that is happening in the way retailing has been done in this country. But critics are always on a debate- bender there is always a strong argument from the critics that "is the growth of modern retailing is a threat to traditional retailers?" OR "Traditional retailers will pose a threat to modern retailers?"  This article analyses the prospects and problems of both  forms of retailing.

INTRODUCTION

Indian has been regarded as the country of shopkeepers. This is mainly due to the mushrooming of retail stores spread across the length and breadth of the country. Next to Agriculture, the largest no. of people are connected to retailing in India. Almost every major street of the country will have some form of retail activity. The definition of retailing says that retailing facilitates consumption. In the Indian context probably it is consumption with convenience. Thus the dynamics of retail activities in India have done remarkably to the customers, marketers and importantly the Country as a whole.

Very recently the Indian Retail Scenario has undergone a major transition in terms of modern retail activities picking up quiet noticeably. There are various factors that has fuelled the growth of this modern retailing. To name a few., changing customer preferences, the increase in purchase power, free and easy access to international brands, flexible foreign policies of the government etc., The following statistics are quiet impressing and assures of a promising future for organized retail activities in the country:

* The share of organized retailing overall        - 3-4%
* The share in some of the Metros                - 14-15%
* Estimated overall share                            - 8-9%
* Major organized retail activity happens in Food Retailing which holds a share of 65%.
* Growing steadily by 35-40% annually.
* Estimated employment in the next 2 years   - 2 million
* No. of major corporate houses ventured into retailing is around 25
* Reliance Retail Revolution has further instigated the spread of organized retail with an estimated no. of outlets of 5500.

All these are finally leading to one major question i.e., Will Indian retailing be more of Organized in the near future? Or it will hold the identity of being traditional?  This paper discusses this aspect of Indian Retail Industry which is definitely one of the most happening all over the world.

TRADITIONAL RETAILING The Caring Grandmother

The retail activities in this country had started centuries back even when the barter system was in place. Right from that time the activity had grown with momentum and spread across the rural, urban and metro areas. The way this activity has been happening clearly indicates both areas of strength and weakness.

THE AREAS OF STRENGTH

Traditional retailing has numerous advantages which keep it still the widely accepted and most familiar way of purchasing to the Indian consumers. These retailers have some of the strengths which even the stronger of the strongest retailers around the world could not offer. These are:

1. The locational advantage Grab it from the next door shop is always possible as the spread of traditional store is so strong. This is one advantage which the modern retailers would be interested in adapting. As mentioned earlier, almost every street in the country has a retail identity.

2. The Familiarity Advantage- The traditional retailers are the familiar one to generations. Right from the kid to the eldest in the family is familiar to the shop-keeper which is a definite advantage.  Interestingly, this familiarity leads to building the strongest relationship as well as the trust mutually.

3. The Product Advantage- Though the range of products sold by them is only limited, they have the advantage of selling in small denominations which majority of the customers would favour. This keeps them the most understanding retailer than the modern ones.

4. The Credit Advantage - Another interesting area is that they offer monthly credit to the customers. This not only helps the salaried class but also it relieves our worries for keeping the change ready every time we purchase.

THE AREAS OF CONCERN

The very nature of modern retailing revolves around the concerns of traditional retailers. Rather, the improvisation happened over these areas. The following is the list of some of these:

* The lack of modernization in the operations
* The lack of deeper variety / attractive display of products
* The lack of space which restricts the possibilities of shopping experience
* The lack of price advantage / special promotion offers.
* Lack of capital for expansion and modernization activities.
* The lack of professional affiliation to higher level trade associations.

Though these concerns do ask for immediate correction, still in the long run they need to have a closer look at it and try to rectify. In fact this has to immediately happen in the urban areas where the modern retailers have strong footholds.

THE MODERN RETAILING The Glamorous Girl

In the recent past the Urban India has witnessed huge, multi-storied retail structures coming up. This is considered to be one the latest and greatest developments in the Indian sub-continent next to the IT boom in the 90's. How this does happen and very importantly why does this happen? The reason is only one. The Urban Indian Consumer is up for a new, world-class retail experience. Thanks to the Internet which gave them the virtual buying experience for brands some where else in the world.

If at all the pace with which organized retail grows in the market, simultaneously the customer expectations for the best of retail experiences also grow at a faster rate. Given these developments what are the strengths this sector has over the traditional form? Here are few of these:

* The bulk of investments in this form of retailing.
* The entrance of corporate houses with experience and thorough knowledge of whats and hows of Indian consumers.
* Greater product assortment across categories
* Technological advantage with modernization at its best.
* Range of retail formats right from neighborhood to hypermarkets.
* Contemporary professional retail practices offering the newer retail-mix to the customers.
* High street locations attracting large no. of foot-falls into the stores.
* Nation-wide large retail chains offering similar assortment in most of the categories
* Higher degree of awareness among the target group.
* Consistent Brand building measures and unique promotion offers in place.
                       And so on.,

In addition there are few grey areas which are to be strengthened by these retailers on a war footing. These are:

* Lack of localization of retail-mix
* Negligence of upcountry markets
* Lack of sectoral concentration
* Yet to be found profitable retail  Model
* Poor scores on customized service     and so on.,

Though these areas are highlighted still it is too early to make any criticism about an Industry which hold just 3-4% of the total market. Further the organized activities are metro-centric and hence it may take few years before they consolidate their operations.

CONCLUSION

Given these retail realities, the question of whether on a whole will Indian retailing be traditional or modern leads to an interesting analysis that finally ends up saying the following:

* Considering the consumer demographics, a country where Bottom-of-the-Pyramid marketing only could sustain, one should understand that Organized or Modern Retailing is not for all.

* The geography of the country warrants more of localization rather than of nationalization which seems to be only advantageous to the traditional retailers.

* Further, modern retailing may take away a sizeable share from traditional retailing but will never close down the opportunities of selling certain categories in specific denomination for the traditional retailers.

* In general, Indian retailing will have a form of more of modern in urban areas and more of traditional in upcountry rural markets.

* One can't neglect the competition between the big retailers within the country and from outside. For instance the talk of the retail industry is the competition predicted between the Reliance Retail which wants to be the Indian Wal-Mart and the recent Bharti venture into retailing which promises Wal-Mart in India. What ever the case be Retailing is definitely gonna be the most happening for all right from academicians to researchers to politicians to businessmen and most importantly to the CUSTOMERS.

References

1. Levy,Weitz, "Retailing Management", 5th Indian edition 2003, TMH publications, New Delhi.

2. Mulky Avinash and Nargundkar Rajendra, ' Modernisation in Indian Retailing: Managerial and Policy perspectives', Udyog Pragati, Vol 27, No.2, April-June 2003.

3. Obarski A.M, 'Retail Business is show business!', Marketing Mastermind, October 2003, pp 23-24.

4. Srinivasan Priya,' The Great Marketing Rush', Business Today, July 18, 2004, pp 58-62.

5. www.thehindubusinessline.com

6. www.ksatechnopak.com

7. www.theindiabusinessline.com
 


Dr. M. Senthil
Reader
Alagappa Institute of Management
Alagappa University
Karaikudi

S. Selvabaskar
Asst. Professor
Happy Valley Business School
Coimbatore
 

Source: E-mail August 7, 2009

          

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