Urbanization :

Consumerism

Consumerism and increased brand conscientiousness has led to increased number of brands today.Today every products is branded.Sold, oils,flour which were earlier sold as a commodities is now branded.There is presence of al most all kinds of global brands in the present market situation.India has also share of strong brands like Titans,Mc Donells , asian paints,Itc,thumps up,whisky,kingfishers. The launches of more and more brands into the market increased the demand of shelf space and hence demand for retail outlets.

Availabilities of real estates:

The cost of real states forms a major part of fixed investments in the last few years, real estates prices hit its lowest and encouraged many entrepreneurs to set up retail stores in different parts of country.Apart from decrease in real estate costs, availabilities of ample retail space has also led to the proliferation of retail stores India.The rising consumer trends in India with the mall culture is fast engulfing the buyers in the tier 3 locations.Cities like Chandigarh,Ludhiyana,Amritsar ,Raipur ,Bhopal,Indore are now attracting attention from large developers like Unitech,Suncity Projects,Avinash Builders,Omaxe,Ansals and DLF.These cities are slowly growing into large markets with wide consumer base and high per capita incomes.Nearly 100 malls are going to operational very soon in the country.

Changing Customer need and preferences

There are various reason for changing customer needs and preferences

1. Single family concepts
2. Dual Income Concepts
3. Limited to One children concepts
4. Willing to spend concepts
5. Brand Preference concepts
6. Personal and Health Care concepts

Major contributor to these variable is Indian Middle Class.They are investing a greater portion of their income on upgrading and diversifying their life styles ,eating out and  percentage of young population who are more ostentatious in their purchasing habits ,as this brand savvy urban population is likely to drive demand for lifestyle products – such as perfumes ,jewellery and watches.

A large unorganised sector

Organised retailing in India is still at evolving stage and accounts for only 4 percent of the total market.The traditional segments comprising of Mom and Pop stores accounts for 96% of the total retails in India.Organised retailing will be increased phenomenally in coming four  to five years. This shows that growth of retail sector is very much expected.

FDI: Global players have shown greater interest in this sector.A number of reformed has been done  to promote investments in retail sector.100% FDI in cash and carry through automatic route and 51% in single brand outlets through approval is permitted.Frenchies route is available for big operators.The Ministry of Finance has recently announced new FDI norms for enhancing the investment in this sector.

Increased Investments in Retail:An investment of $35bn is expected in next five to seven years.As per estimate 88% of this investment will directed to urban areas.Modern retailers in India are working on number formats from supermarket to hypermarket to discount to convenience stores. Hypermarkets and discount stores are growing very fast.The share of Investment slated for Hypermarket,supermarket, speciality stores and cash and carry is 40%,28%,18% and 14% respectively. According to AT Kearney, India is ranked at 5^th preferred destination for investors among 30 most attractive retail markets in world.

Organised/Modern Retailing:

Indian corporates major like Reliance, ITC, Bharti, Tatas, Rahejas, Piramals and Pentaloons have entered into the segments but more and more players are showing interest in USD350b(APPROX.) Indian Retail Market. Growth of organised retailing is limited to few metros,state capitals,tierI and tier II cities where no. of middle and higher income people is large and choice of high priced products they sought for.

Rural Retail forward market

Country rural market is offering great opportunities for Modern retailers for opening of stores in villages.46% of rich and well-off population is living in rural areas and 60% of them are living in 17% of total villages.It creates good scope for investment in rural areas in retailing.

Advantage Modern Retailing

1) Employment Generation
2) Increasing efficiency in Agriculture
3) Enhance shopping experience for consumers
4) Creating a positive social Change
5) Economies of Scale

Employment Generation: Modern retailing has the potential for generating employment of 2.5millions people by 2010 in various retail operations and more than 10millions in indirect retail activities including contract production and processing, supply chain and logistics, retail real estate development and management.

Increasing efficiency in Agriculture:The concept of middleman in food supply chain is matter of yesterday.Farmers are cultivating crops as per the demand of retailers.Customers are getting benefits of reduced pricing while the farmers are receiving higher returns for their produce.Only organized retail provides mass marketing of processed and package foods.

Enhanced shopping experience for consumers :Trends of shopping with entertainment is gaining momentum because of time and traffic congestion.Organised retails offers one stop shopping with many product baskets at single location.These formats adds experience of large scale purchase ,consumer preference,excellent ambience and choice of merchandising.

Creating Positive Social Change: Retailing leads to improvement in local infrastructure by providing adequate parking facilities ,ATM, a safe and secure environment which encourages the setting up of 24 hrs. convenience stores, a hygienic ambience to the consumer's etc.This is enabling positive social change in the industry.

Economies of scale:

They are going for vertical integration from outlets to establish malls.

Key Player Analysis:

(Subhiksha, Pentaloon, Reliance Fresh, Vishal Megamart, Coupon Mall, Trent, Globus ,Mother Dairy)

Subhiksha :

Subhiksha was the retail venture of the Chennai-based, Vishwapriya Group. The Subhiksha Trading Services discount chain was launched in 1997.

Subhiksha Model

High Volume and Low Margin Model

This model focused on Small sized functional stores locating in high population density areas with close proximity to each other.

Product Mix : Fresh Fruit and Vegetables, grocery, pharmacy and mobile phone.

Challenges Faced in balancing in mad expansion plan and in deciding demand prone product mix.

Today Subhiksha is no more in the market but it played vital role in popularizing modern retail in India.

Pentaloon:

Pentaloon Retail India Limited is flagship of Future Group of Companies,based at Kolkatta.The group is incorporated by Mr. Kishore Biyani. PRIL is the first retail store in hypermarket format. The group is recognized as multi format retailers.

PRIL Model:

One stop shopping model

Under one roof you can get vast range of merchandise with over 2,50,000 SKUs.

Product Mix:

Branded and Private lebel apparel,Personal care products,leather products,Books,Music,Toys,Consumer durables,Home Furnishing, Food and Grocery.

Pricing Strategy:

Maximising on Gross margin

Challenged Faced:MRP Laws,Rising Real estate Price, Unavialbility of Land.

Reliance Fresh:

Reliance Fresh is the venture of Reliance Industry Limited in foods and vegetables.It is first modern retail enterprise in food sector which has potential of approx $500bilion market.It is one of the best example of agribusiness industries which boost economic integration in rural areas and villages.

Reliance Fresh Model:

Farms to forks model is adopted to operate business. Small and medium size stores varies from 1500 sqft. to 3000 sqft.

Product Mix:

Fresh fruit and vegetables,staples,FMCG and Dairy products.

Pricing Strategy: disintegrates intermediary and reduce cost of fresh produce.

Reliance fresh is focusing on value to customer.

Challenged faced : Politcal Interface and people movements against the retail giant at various places.

Vishal Megamart:

Vishal Megamart is established in 1986 in Kolkatta. The group is conglomerate today having 180 showrooms across the country. Vishal is one of the fastest retail group in India.The outlets caters to almost all price range.

Vishal Megamart Model:

Small format models at the time of initial phase in tier I and tier II cities and lateron converted into hypermarket model. Focussing on lower middle income group.

Product Mix:

House Hold merchandise,groceries,Footware,toys,home furnishing,mobile phones, watches,toileteris items.

Pricing Strategy:

Price suit to every targeted customers.

Challenges:

Managing the expansion plans with supervising demands of consumers and keeping economic of scale high.

Coupon Mall:

It is retail arms of Prateek Life Styles. It came in existence in late 2007 in Bengalore.The group is focusing upon middle class segment with big discount.

Coupon Mall Model : One stop model targeting tier II and III cities.

Product Mix:

Apprael,Jewellery,luggage,home furnishing.

Pricing Strategy:

Big Brand,big discount.

Challenges Faced:

It will take time to position the brand in the mind of customer.

Trent

Trent is a flagship company of Tata Group established in 1998.The company having four retail dimensions in life style(WESTICIDES),Hypermarket Chain(STAR BAZAR),BOOKS AND Music Chain(LANDMARK) and a complete family fashion store(FASHION YATRA.).

Multiple Format Model

Trent Limited was the first company in India to position itself as an in-house single brand  store in garments and household accessories. The firm's business model follows the acquisition route with a strategy to get a jump start and take advantage of the  already experienced manpower, infrastructure, front-end property, and gained knowledge.

Pricing Strategy:

The Westside clothing line is generally conceived to be slightly expensive compared to other brand

Challenges:Lack of Trained manpower, Attrition Rate

Globus:

It has been launched by Rajan Raheja Group in January 1998.Started from Indore and 24^th the new one at Nagpur, journey is continue with a mission to democratize fashion and be 'the' iconic youth fashion brand in India. The store aim to create deep connections with the Indian youth through inspiring product design, signature store experiences and compelling marketing.The concept of the Privilege Club which is the best way to ensure 100% card to benefit ratio is the unique selling proposition of the store.

Product Mix: apparel for men, women, kids and accessories - work wear, campus wear, club and lounge dressing and genres Western, Indian and mix-n-match. A well matched sizing ensures a good fit for the Indian silhouettes.

Pricing Strategy : Amazing Price suited to every YOUTH.

Model :Department Store . At present the group is venturing into speciality stores.

Challenges Faced: Managing the expansion plans with supervising demands of consumers and keeping economic of scale high.

Mother Dairy :

Mother Dairy was established in 1974 with a view of making liquid milk available to city consumers.It is set up by National Dairy Development Board under first phase of operation flood programme.Mother Dairy also markets dairy products such as ice cream,dahi, lassi,butter cheese dairy whitner, dhara range of edible oils and safal of fresh fruit and vegetablesfrozen vegetables and fruit juices.

Mother Dairy Model:

Mother Dairy follows cooperative models.This model directs the formation of federation, by the help of village level societies and district level unions, whose prime responsibilities is the marketing of milk and milk products.

Pricing Strategy:

Mother dairy ensures that farmers get market price by offereing quality produce and also provide the produce to the consumers at reasonable prices through minimizing costs.

Challenges faced: Company is facing competition from other organised retailers and increased imports.The quality of milk, low yields,falling cattle health are some major challenges faced by company.

Conclusion:

Retailing provides a crucial link between producers and consumers in modern market economy.Retail in India is most dynamic industry and represents a huge opportunity both for domestic and international retailers.

Modern retailing is not threat to independent Mom and Pop stores as most of the consumers said that they never stoped visiting kirana stores.They strongly agreed on coexistence of both is requirement of the day.Their frequency of going to  kirana stores is reduced but its kind of opportunities for reorienting Mom and Pop stores for attracting more customers.So, organised retailing is beneficial for India because its not alarming to create conflict with unorganised stores but reshaping unorganised stores into budding/nascent organised stores.

Modern retailing has miles to go in India.The growth of modern formats has been much slower in India as compared to other countries and the development of this sector is restricted by the presence of regulatory and structural constraints.

Recommendations:

Certain steps are required to make Indian Retailing world class is mentioned below:

1. There is a need for setting up of Retailers Cooperatives which functions as distribution centres and warehouses.It will help the retailers to buy the products they want directly from original manufacturers in bulk quantity.

2. Mergers of weak retailers and buy out weak retailers by a stronger one are another important steps.This will give new retailers the desired leverages to be world class.

3. Networking of Independent firms believing the use of technology for business excellence and pressurizing suppliers and others channel members to use compatible technology.

Suggestion for Retail reforms :

1.Accord Industry Status to retail

Industry status should be given to improve retail development,to fascilitate organised financing and to establish insurance norms.

2.Incentives for investments

Tax holidays norms for cold storage chains,infrastructure and investments in supply chain should be enacted.

3.Comprehensive legislation:

Comprehensive legislation should be drafted and enacted with futuristics approach.

4.Eliminating Arachic Laws

Laws,Essential Commodities Act,APMC Acts,Licensing restriction,differential taxes,,stamp duties, should be simplyfied  and put in proper place so that it would not hinder growth of retail sector.This will hepl in creating "Commodities Futures Markets".

5..Allow Foregin Direct Investment (FDI) in phased manner:

6.Rationalise the tax structure:

The current multipoint taxation should be rationalised.Government should introduce a uniform taxation system across the counrty to relax the law that hinder inter state flows of goods.

7.Streamline the process of clearance

8.Encourage PPP model for infrastructural development

9.Amend the existing cumbersome labour laws:

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

10..Announce a national policy for retail:

The Government should announce a National Retail Policy that allows the coexistence of both organised and unorganised retail and address issues such as sourcing,contract farming,movement of goods across India and also defines clear cut guidelines for the functioning of retail sector in India.

11.Establishment of National Commission on Retail:

The national commission on retail must be established.The function of commission should be :

a) to set clear target for gaint retailers for procurement.

b)to formulate rules on entry of foreign players and compliance with social safeguards.

c)to develop cooperative stores for eradicating the problems of limited marketing and promotions.

d) to fascilitate the way of setting up Agricultural Perishable Produce Commission for ensuring the procurement prices for perishable commodities.

12. Reduce impediments to inter state movement  of goods

13.Enforce uniform quality standards

14.Setup a regulatory body for the governing the operattions of retail sector.

QUICK LOOK

"Just adding numbers or bringing foreign players doesn't ensure success unless you have operational efficiency and that will come only with time."Piyush Sinha, Professor-marketing,IIM-A.

"Organised retail will not harming the traditional Indian retailers.In fact, the two will co-exist to make Indian Retail story a success."Nirupana Soundarajan,Co-author, ICRIER report on Retail,Impact of organized retailing on unorganised retailing.

References:

1. CRISIL Research-Retailing Annual Review 2009

2. HSBC Global Research-India Consumer Brands & Retail, October 2007

3. Tata Strategic Management Group-Organised Retailing in India: The next growth frontier, 2006

4. The McKinney Quarterly-Tracking the growth of Indian Middle class, November 2007

5. Various Press Sources, The Economic Times, The Hindu Business Line, The Indian Express, The Hindu, The Business Standard

6. Various websites. www.commerce.nic.in,www.rediff.com,www.timesofindia.com,