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CHAPTER – 1

INTRODUCTION

A supply chain is a network of facilities and distribution options that performs

the functions of procurement of materials, transformation of these materials into

intermediate and finished products and the distribution of these finished products to

customers. A supply chain consists of all parties involved, directly or indirectly in

fulfilling a customer request. The supply chain includes not only the manufacturer

and supplier, but also transporters, warehouses and customers themselves.

Supply chain exists in both service and manufacturing organizations,

although the complexity of the chain may vary greatly from industry to industry and

firm to firm. The concept of supply chain management has undergone tremendous

changes over a period of time. In the earlier decades companies used supply chain

basically to cut costs from existing operations rather than a strategic way to gain

competitive advantage and differentiation. The advent of Information Technology

broke down communication barriers, helped to reach out disparate audiences and

fostered collaboration – all of which contributed to the growth of supply chain

management.

The innovative companies such as Toyota, 7-Eleven Japan, Dell, Nokia,

Wal-Mart and Zara that were in the forefront of implementing supply chain

management practices resulted in outperforming their competitors and enhancing

customer satisfaction. Nokia with fast moving product and discerning customers

altered its playing field with rapid response manufacturing, quick ship logistics and

a global supply web enabled to link its suppliers and plants and to also support its

vendor managed inventory and collaborative planning. These capabilities have

contributed 20 per cent to profit margins, a 35 percent market share and an

average cost to make and sell phones that is 18 per cent lower than its rivals.

Improving supply chain performance can help companies cut down their

inventories by 25-50 per cent, throughput time by more than 60 per cent while

completely eliminating stock-outs and improving service levels. This could result in

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increased sales at least by five per cent. A research study by Accenture Supply

Chain Management Service in conjunction with Accenture Institute for Strategic

Change, Stanford University and Insead based on 600 global companies found

that transforming supply chain operations had a substantial impact on growth in

market capitalization.

RETAILING IN INDIA

Retailing consists of all activities involved in selling goods and services to

consumers for their personal, family, or household use. It covers sales of goods

ranging from automobiles to apparel and food products, and services ranging from

hair cutting to air travel and computer education.1

Retailing is one of the largest sectors in the global economy. In India, for a

long time the corner grocery store was the only choice available to the consumers.

With the increasing demand of the customers spurred by changing trends, aspiring

needs for variety, the traditional retail gave rise to modern retail format. The

traditional food and grocery segment has seen the emergence of

supermarkets/grocery chains, convenience stores and hypermarkets.

Traditionally, retailing has not been a structurally organized industry in India.

Organized retail network was seen only in fabrics, with large mills building their

own exclusive stores like Raymond’s, Bombay Dyeing etc.

The Indian Retail Industry on the whole is divided into organised and

unorganised sectors. Unorganised/Traditional retailing refers to the traditional

formats of low-cost retailing, for example, the local kirana shops, owner manned

general stores, paan/beedi shops, convenience stores, hand cart and pavement

vendors, etc.2

In India, the terms large-scale, modern-format and organized are used

synonymously even though they have different meanings. Large-scale refers to the

1 Chetan Bajaj et al, Retail Management, Oxford Publishers, 2005. 2 Corporate Catalyst India, “A report on Indian Retail Industry”, 2006.

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scale of operation of retail business which in turn implicitly refers to a chain of

stores. Modern-format basically refers to self-service. However, many of the self-

service stores also called as “Supermarkets”, are in the range of 500 square feet or

less in size and are nothing more than independent mom-and-pop stores. And

organized retail typically means large-scale chain stores which are corporatized,

apply modern-management techniques and are very likely to be self-service in

nature. Most of the estimates of organized retail market size refer to only large-

scale retail.3

Modern Retail has seen a significant growth in the past few years with large

scale investments made by Indian corporate houses primarily in Food and Grocery

retailing. The total retail (organised and unorganised) industry in India is estimated

to be Rs 20 lakh crore in 2010. This is expected to reach Rs 27 lakh crore by 2015.

Organised retail, which is estimated to be Rs 1.0 lakh crore (5 per cent share) in

2010, is projected to reach Rs 3.0 lakh crore (11 per cent share) by 2015. This

means a tripling of the current size and scale of organised retail in the next five

years, i.e. 2010 - 2015. While organised retail will grow at a fast pace, it is

important to note that a larger part of the Rs 7.0 lakh crore growth in total retail will

come from unorganised retail. This segment (unorganised retail) is projected to

grow by over Rs 4.5 lakh crore in the next five years.4

The retail market in India is about $410 billion in 2010 and may rise to $637

billion in 2015 (Figure 1.1), according to consultancy Technopak Advisors.5 The

Indian retail business employs nearly 21 million people, about 7% of total

employment. There are about 15 million retail outlets, the largest number in the

world.

3 Vijay Anand and Vikram Nambiar, “Indian Food Retail Sector in the Global Scenario”, Business Line, 23rd July 2007. 4 Raghav Gupta, Rohit Bhatiani, and Pranay Gupta, “An Overview of India’s Consumer and Retail Sectors”, pp 27-32, Technopak Perspective, Volume 4, 2010. 5 Retail biz, January 2010.

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Figure 1.1: Size of Indian Retail

Source: CII, 2007 and Technopak Analysis, November 2010.

However, the size of Indian organized retail is merely 5% compared to the

US – 80%, Western European Countries – 70% and Brazil – 40% (Figure 1.2).

This indicates the huge scope for the growth of the organized sector in India and its

potential to grow to a significant 20% by the end of the decade.6,7

The Global Retail Development Index (GRDI) 8 is an annual study that ranks

the top 30 developing countries for retail expansion worldwide. The Index analyzes

25 macroeconomic and retail-specific variables to help retailers devise successful

global strategies and to identify emerging market investment opportunities. India

continues to be one among the top five countries for the last five years (Table 1.1).

6 Economic Times, 4th July 2011. 7 Business World, 20th December 2010. 8 “Retail Global Expansion: A portfolio of Opportunities”, A T Kearney, 2011.

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Figure 1.2: Modern retail as Percentage of Total Retail Sales

Source: Economic Times, 4th July 2011 and Business World, 20th December 2010.

Table 1.1: Global Retail Development Index – 2011

2011 Rank

Country Market

Attractiveness (25%)

Country risk

(25%)

Market Saturation

(25%)

Time Pressure

(25%)

GRDI Score

Change in rank

compared to 2010

1 Brazil 100.0 79.4 42.9 63.9 71.5 +4

2 Uruguay 85.0 73.8 63.6 39.6 65.5 +6

3 Chile 54.3 100.0 30.3 44.3 64.7 +3

4 India 28.9 59.9 63.1 1000.0 63.0 -1

5 Kuwait 80.4 80.6 57.3 27.1 61.3 -3

6 China 49.5 76.5 31.0 87.7 61.2 -5

0=Low Attractiveness 100=High Attractiveness

0=High Risk 100=Low Risk

0=Saturated 100=Not Saturated

0=no time pressure 100=urgency to enter

Source: A.T. Kearney, 2011.

India and China both fell this year, 2011. While these countries are large

and growing, on a relative basis, several Latin American markets outshine both

India and China. And as retailers continue to enter India and China—particularly in

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tier 2, 3 and 4 cities where consumers are increasingly accepting global brands

with rising disposable incomes and are becoming more discerning in their tastes—

in several instances, traffic to stores has yet to meet expectations.

Figure 1.3: Global Retail Development Index 2011 – Country Attractiveness

Source: A.T. Kearney, 2011. FOOD AND GROCERY RETAIL

Organised food retailing is relatively a new phenomenon in India, with the

emergence of small western-style supermarkets since the 1990s. Most of the food

products are sold through local 'wet' market vendors, roadside pushcart sellers or

small grocery stores. Out of 15 million retail outlets, almost seven million sell food

and grocery products. The vast majority of these are small kiosks (17 per cent),

general provision stores (14 percent) and grocery stores (56 per cent of all rural

retail outlets) run by a single trader and his family (M. Bhasi).9

9 Dr. M Bhasi, Retailing in Kerala, http://www.indianmba.com/Faculty_Column/ FC612/fc612.html.

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Food and grocery retail in India is poised to grow further. According to KSA

Technopak study, food and grocery retail sales have grown from Rs 3,81,000 crore

in 1996, to Rs 8,66,000-crore in 2007 (Business Line: January 03, 2007).10

Table 1.2: Segment wise Share and Growth of Indian Retail ($ billion)

2006 2010

Market Size Share Market Size Share

Food & Beverages 195 65% 256 60%

Personal Care 15 5% 23 5%

Apparel 21 7% 33 8%

Footwear 5 2% 7 2%

Furnishings 4 1% 7 2%

Consumer Durables & IT 14 5% 24 6%

Furniture 9 3% 16 4%

Jewellery & Watches 15 5% 24 6%

Medical Care 8 3% 12 3%

Recreation 2 1% 3 1%

Others 12 4% 23 5%

Total 300 100% 428 100% Source: CII Logistics, 2008.

India's strong growth fundamentals—9 percent real GDP growth in 2010;

forecasted yearly growth of 8.7 percent through 2016; high saving and investment

rates; fast labour force growth; and increased consumer spending—make for a

very favourable retail environment. Indian consumers continue to urbanize, have

more money to spend on non-food purchases, and have more exposure to brands.

The result is a powerful, more discerning consumer class. Going by the adage

‘markets are there where people are’, India's population of nearly 1.2 billion—

forecast eventually to overtake China's—also is an attractive target.11

Food accounts for 70 percent of Indian retail, but it remains under-

penetrated by organized retail. The food business in India is largely unorganised

10 Business Line Bureau, Heritage Food joins food retail bandwagon, Business Line, Jan 03, 2008. 11 “Retail Global Expansion: A portfolio of Opportunities”, A T Kearney, 2011.

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adding up to barely Rs. 400 billion, with other large players adding another 50

percent to this. The share and growth of different retail sectors in India are given in

the Table 1.2. The All India food consumption is close to Rs. 9,000 billion, with the

total urban consumption being around Rs. 5,300 billion (Table 1.3). This means

that aggregate revenues of large food players is currently only 5 per cent of the

total Indian market (Figure 1.4), and around 15-20 per cent of total urban food

consumption. According to McKinsey report, the share of an Indian household’s

spending on food is one of the highest in the world.

Table 1.3: Consumer Spending

(Excluding Institutional and Government Spending)

S. No Consumer spending (excluding

institutional and government spending)

Size in 2009 (in

US$ Billion)

Size in 2014 (US$

billion)

Likely Ranking in 2014

1 Food and grocery 260 325 1

2 Healthcare 34 55 2

3 Apparel and home textiles 32 43 4

4 Education (K-12, higher education & vocational)

28 45 3

5 Telecom 25 41 5

6 Jewellery & watches 25 34 7

7 Personal transport (vehicles + fuel + repairs)

240 37 6

8 Travel and leisure 12 20 8

9 Consumer durables and IT products 11 17 9

10 Home (furniture, furnishings, etc.) 10 15 10

11 Personal care 10 14 11

12 Eating out 5 7 12

13 Footwear 4 5 13

14 Health and beauty services 1 2 14 Source: “Changing India, Changing Consumption, Changing Consumers”, Technopak, Perspective, Volume 03, 2010

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Figure 1.4: Share of Modern and Traditional Retail

Source: Indian Retail Report, 2009.

The Growth Factors

One of the key contributing factors for the retail growth is the young

population in India. India’s 45% of population is below 25 years and 81% below 45

years. A large young population – possessing both the ability (disposable income)

and willingness (consumer confidence) to spend – is driving the growth of the

Indian retail industry. Furthermore, increasing household incomes are boosting

consumption to new levels.12 Table 1.4 and Figure 1.5 highlight the information.

Table 1.4: Proportion of Young Population (< 25 years)

Country Percentage

India 53%

China 42%

Indonesia 30% USA 30%

Brazil 29%

Japan 27%

Germany 26%

Source: Technopak, 2nd November, 2007.

12 CII – Logistics, 4th January 2007.

10

Figure 1.5: Median Age of Population (in years)

Source: Technopak, 2nd November, 2007.

The other key factors that have enormous importance in increasing demand

for food and are expected to play a major role in the transformation of the demand

are13:

- Rising population and incomes

- Increasing number of nuclear families and working women

- Palate and lifestyle changes

These factors are likely to impact demand for food individually as well as in

combination, and result in significant changes in not only the demand for food

quantitatively but also in terms of where, how, what and when food is consumed.

This is likely to translate to new and innovative modes of delivery mechanisms,

retailing formats, packaging formulations and a range of convenience and ready-to-

eat food products.

Rising Population and Incomes

13 V. Sridhar and Nimisha Chhabra, “India’s Food Vision: The Next Decade”, pp 73-79, Technopak Perspective, Volume 4, 2010.

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India’s population estimated to be 1.2 billion out of which approximately 60

per cent – are expected to fall in the age group below 40 years, making it a

demanding segment to cater to. In addition, with real per capita income likely to

nearly double in the next 10 years and more than two-thirds of the current

population still just above or below the poverty line, in the consumption basket,

obviously, the first category to see increased spending will be food.

The increase in population combined with the increase in the disposable

income will translate into not only an increase in demand in value-added sectors

such as meat, dairy, fresh vegetables and fruits but also an accelerated demand

for primary food products. This demand will graduate into an exponential demand

for primary commodities, deriving partly from the fact that it takes greater quantities

of primary food to get processed and aggregated into a value-added product. On

top of this requirement for accelerated usage or absorption of primary commodities

or food conversion from raw to processed form, the demand for basic commodities

would increase with the growing population.

Increasing Nuclear Families and Working Women

Liberalisation of the economy and the incentives to private sector growth

have led to a rise in new trade formats and increased employment creation. This in

turn has led to the migration of both the skilled and unskilled workforce from rural

areas to major cities resulting in an increasing proportion of nuclear families

combined with higher employment possibilities for women. The rural-to-urban

migration trend coupled with other factors such as increased exposure to the media

and paucity of time has not only led to changes in awareness of gender equality

and rights but also changes in the habits of people towards traditional household

chores such as grocery-shopping and cooking. The trend towards preference for

ready to eat or frozen food is bound to intensify with improvements in packaging

technology and infrastructure.

Palate and Lifestyle Changes

Rising income and growing urbanisation are primarily responsible for the

shift in traditional Indian food habits. Driven by higher disposable incomes, Indians

are increasingly travelling within India and globally and are exposed to diverse

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lifestyles. This has given birth to a new generation of consumers with a global

orientation in food habits. According to a Euromonitor report, it is anticipated that

there would be a dramatic rise in the number of Indians travelling abroad – 132 per

cent between 2006 and 2011. It is also expected that the total number of outbound

travellers is set to reach 16.3 million in 2011 alone.

High-income urban dwellers are seeking variety in their choice of foods and

are willing to spend more on international cuisine, including fast food. Indians have

become open to experimenting with newer tastes and multiple cuisines have found

a way into Indian kitchens, leading to a diversification in the Indian palate. This has

created opportunities for imported food products such as pasta, sauces, salad

dressings, dairy products such as yoghurt, cheese, etc.

The survey by Technopak on the volume of private consumption in India and

National Sample Survey Organisation (NSSO) survey 2011 shows the spend on

food is going to be an important component of expenditure. Nielsen’s shopper

trends show how the consumers have slowly started adapting to the organised

retail.

Changes in Consumption and Retail Growth14

Private consumption in India currently is about Rs 34 lakh crore and

accounts for 60 per cent of GDP. With growth in GDP expected at over 8 per cent,

inflation expected at 6-7 per cent, and private consumption expected to stay at 60

per cent of GDP, nominal growth in private consumption is expected to be 14-15

per cent. As such, private consumption is expected to double in five years hence to

reach about Rs 67 trillion by 2015. This throws open significant opportunities for

Indian and international companies to develop and create large businesses in the

consumer products and retail sectors in India.

Nielsen’s Shopper Trends – 201115

14 Raghav Gupta, Rohit Bhatiani, and Pranay Gupta, “An Overview of India’s Consumer and Retail Sectors”, pp 27-32, Technopak Perspective, Volume 4, 2010. 15 Bhusan Ratna, “Attractive deals and promotions help big retailers grow”, Economic Times, 5th July 2011.

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According to Nielsen’s consumer research survey, modern business in India

is recovering from the slump and is growing faster than traditional trade. One in

every five consumers in Indian cities and towns buy most of their groceries from a

modern retail store (Table 1.5), says the study. Now a shopper might shop at both

the formats (traditional and modern) but prefers to allocate most of their spend to

purchases made at modern formats (Table 1.6). The major spending of an Indian

household on various heads is given in the Figure 1.6.

Table 1.5: Shoppers Visiting Supermarket / Hypermarket

in a 4-week Period

2009 30%

2010 37% Source: Nielson’s Shopper Trends, July 2011.

Table 1.6: Shoppers Spending most of their Grocery Budgets at Modern Trade Stores

2009 14%

2010 21% Source: Nielson’s Shopper Trends, July 2011.

Figure 1.6: Major Spending of Indian Households

Source: Indian Retail Report, 2009.

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The shoppers are not neglecting the local kirana store too. The rise of

traditional grocery stores continue to be strong driven by convenience, availability

of home delivery and trusted relationships between the shopper and local grocer.

The National Sample Survey Organisation (NSSO)16,17 66th round survey,

covering the period from July 2009 – June 2010 is based on data collected from

over one lakh households. The survey shows (Table 1.7 and Figure 1.7) an

average rural Indian household allocating 53.6 per cent of their total monthly

consumption expenditure on food items. The corresponding share for urban

household was less, at 40.7 per cent.

Table 1.7: Share of Food in Total Consumer Expenditure (in percentage)

Year Rural Urban

1987-1988 64.0 56.4

1993-1994 63.2 54.7

1999-2000 59.4 48.1

2004-2005 55.0 42.5

2009-2010 53.6 40.7 Source: Economic Times, 11th July 2011.

Figure 1.7: Share of Food in Total Consumer Expenditure (in percentage)

16 Business Line Bureau, “Consumers still spend most on food”, Business Line, 9th July 2011. 17 “Key indicators of household consumer expenditure in India, 2009-10”, Ministry of Statistics and Programme Implementation, National Sample Survey Organisation, 8th July 2011.

15

Source: Economic Times, 28th July 2011.

The striking fact about the data is that the decline in the share of food in

total consumer spending is not as significant as in the previous quinquennial

survey rounds. Table 1.8, Table 1.9 and Table 1.10 depict the per capita net

national income, per capita monthly consumer expenses and share in spending of

urban and rural households respectively.

Table 1.8: Per capita Net National Income (in Rs. 2004-05 prices)

FY 2005 FY 2010

24,143 33,731 Source: Economic Times, 11th July 2011.

Table 1.9: Monthly Per capita Expenses (in Rs.)

FY 2005 FY 2010

Rural 559 1,052

Urban 928 1,786 Source: Economic Times, 11th July 2011.

Table 1.10: Share in Spending

FY 2000 FY 2010

Rural Urban Rural Urban Consumer Durables 2.6 3.6 4.8 6.7 Miscellaneous goods and services 19.6

31.3

24.0

37.8

Source: Economic Times, 11th July 2011.

According to the survey, cereals still make up the largest chunk of an

average Indian household’s consumption budget: 15.6 per cent in rural and 9.3 per

cent in urban areas; milk and milk products 8.6 per cent and 7.8 per cent and

vegetables 6.2 per cent and 4.3 per cent (Table 1.11 and Table 1.12) respectively.

The survey has estimated the all India average monthly per capita expenditure at

Rs. 1,052 in rural and Rs. 1,786 in urban areas.

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Table 1.11: Per cent Share in Food Spending

Rural Urban

FY 2005

FY 2010

FY 2005

FY 2010

Cereals 18 15.6 10.1 9.1

Pulses 3.1 3.7 2.1 2.7

Milk 8.5 8.6 7.9 7.8

Vegetables 6.1 6.2 4.5 4.3

Fruits 1.9 1.6 2.2 2.1

Egg, Meat & Fish 3.3 3.5 2.7 2.7

Total 40.9 39.2 29.5 28.7 Source: Economic Times, 11th July 2011 .

Table 1.12: Expenditure on Food (in Rs.)

Rural Urban

FY 2005 FY 2010 FY 2005 FY 2010

Cereals 101 145 106 163

Pulses 17 34 22 48

Milk 48 80 83 139

Vegetables 34 58 47 77

Fruits 11 15 23 38

Egg, Meat & Fish 18 32 28 48

Total 229 364 309 513 Source: Economic Times, 11th July 2011.

All the analysis and forecasts undoubtedly show that food retailing in India

has lot of potential and is expected to grow exponentially. In this context, the

retail supply chain management takes the central stage in the retail trade.

With the advent of Foreign Direct Investment (FDI) in retail, retail majors around

the world such as Wal-Mart, Tesco and Carrefour who are looking for an

opportunity would invest heavily to set up chain of outlets. As these food retail

majors are known for leveraging on their efficient supply chain, they would try to

use their expertise in India too to capture the market pie within a short span of time.

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EVOLUTION OF ORGANISED FOOD AND GROCERY RETAIL IN SOUTH INDIA18

Organized retail is spreading and making inroads into different parts of the

country. The trend in grocery retailing, however, has been slightly different with a

growth concentration in the South. The south of the Vindhyas is a cosmopolitan

stew of ingredients favourable for organised retail. It’s a motley mix of

experimentative consumers aided by a generous and affordable infrastructure

blended with long-standing entrepreneurial activity.

In a way, the genesis of organised retail was scripted from South India. The

four southern states rank highest in penetration of retail outlets in India and a

sizeable chunk of corporate sales. The south is considered to be the largest and

most developed region for modern trade. This also has to do with consumers in the

region with a positive disposition in terms of propensity to shop at such

formats. Adoption is typically higher in south India.

Though there were traditional family owned retail chains in South India such

as Nilgiri’s since as early as 1905, the retail revolution happened with the RPG

group starting the Foodworld chain of food retail outlets in South India with focus

on Chennai, Hyderabad and Bangalore markets. Owing to the success of

Foodworld of RPG group, several new models such as Trinethra, Subhiksha,

Margin Free and others have made their foray into this sector albeit at regional

levels.

The regional entrepreneurs in south India kick-started organised retail.

Examples include the supermarket chains such as Saravana stores in Chennai,

acknowledged as the inspiration of Kishore Biyani's Big Bazaars, Varkey's

supermarkets in Kerala, Ratnadeep in Hyderabad or Nilgiri's, MK Retail and

Foodworld in Bangalore. This has been backed up by a strong supply chain.

18 Sarah Jacob, “Retail Reach: Highest in South India”, South India Features, Economic Times, 28th July 2011.

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Heterogeneous Mix

This retail expansion has been helped along by the growing nuclear families

in the south, who are typically young professionals in the age group of 24 – 31

years. They form the double income base that travels frequently, experiments and

welcomes new lifestyles. A large part of this consuming base is further

strengthened by the migration of globally exposed IT employees.

Ecosystem Strength

Added to the linguistic divisions across the four states, retailers have the

opportunity to target consumers by city and even test out new formats.

The higher levels of education in the south, on an average, allows many chains to

get a quick snapshot of the success of their format through online customer

database services. The demographics act as a key differentiator between the

south Indian consumers and their counterparts in the north and west, offering more

analytical data for retailers. Consumers are well informed of the durability,

functionality, price and virtues of a product and as such they are quick to compare

it with similar multinational offerings.

In order to succeed in food retailing in India, customers need to be drawn

away from the roadside hawkers and kirana stores to supermarkets. This transition

can be achieved to some extent through pricing. So the success of a food retailer

depends on how best he understands and squeezes his supply chain. The other

major factor is that of convenience shopping which the supermarket is endowed

with over the traditional kirana stores.19

HISTORY AND GROWTH OF BANGALORE CITY20

Karnataka is one of the richest states in India (Table 1.13) and the GSDP

growth rate during 2005-2009 was 7.85 per cent (Table 1.14). Bangalore is the

principal administrative, cultural, commercial, industrial, and knowledge capital of

19 Indian Food Retail Sector in The Global Scenario, Vijay Anand

& Vikram Nambiar, 2007. 20 Sudhira H.S., Ramachandra T.V. and Bala Subrahmanya M.H., "City profile – Bangalore", www.elsevier.com/locate/cities. Vol. 24, No. 5, p. 379-390, 2007.

19

the state of Karnataka. A short description about the history and growth of

Bangalore is elucidated here.

Table 1.13: Some of the Rich and Poor States in India

Rich States Poor States

Delhi Jharkhand

Maharashtra Orissa

Goa Chattisgarh

Sikkim Nagaland

Himachal Pradesh Madhya Pradesh

Punjab Bihar

Kerala Assam

Karnataka Uttar Pradesh

Andra Pradesh West Bengal Source: Economic Times, July 18, 2011.

Table 1.14: GSDP Growth of Select States in India

2000 - 2004 2005 - 2009

All India 6.3 8.33

Karnataka 4.9 7.85

Tamil Nadu 4.2 8.21

AP 6.1 8.46

Delhi 7.1 10.57 GDP 1999-2000 prices annual average growth, (2000-01 to 2004-05), estimates as on 9/9/10 (%). GDP 20004-05 prices annual average growth, (2005-06 to 2009-10), estimates as on 9/3/11. Source: Business Standard, 17th March 2011.

The topography of Bangalore makes it an unlikely spot for a metropolis,

since it lies on a semi-arid plateau between 900 and 1,000 metres above sea level,

with no major rivers running near the city. Its early history was unremarkable. By

the ninth century, the agricultural economy rested on irrigation through artificial

lakes (tanks) along with gardening and dry farming. The construction of tanks

required the mobilisation of local labour to raise artificial bunds that trapped run-off

water, with small irrigation channels feeding water to fields lying downstream. Near

this fields stood small villages in which local notables founded the construction of

temples, and on the temples, they inscribed records of their religious donations.

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The relative paucity of surviving temples and inscriptions from the Bangalore region

probably reflects a mixture of such village farming communities with extensive

areas where animal husbandry and hunting-and-gathering lifestyles remained

important. There is no indication that this region, part of old Gangavadi named after

local Ganga rulers, had any political significance.21

The earliest reference to the name, in the form ‘Bengalooru, is seen in a

ninth century Ganga inscription (hero-stone) from Begur, referring to a battle that

was fought in that place. The present name of the city, Bangalore is an anglicised

form of Bengalooru which according to the popular belief is derived from Bengaalu

– synonymous of Benda kaalu or boiled beans and ooru meaning a town.

However, the founding of modern Bangalore is attributed to Kempe Gowda, a scion

of the Yelahanka line of chiefs, in 1537. Kempe Gowda is also credited with

construction of four towers along four directions from Petta, the central part of the

city, to demarcate the extent of city growth.

Later on, the city was administered by the Wodeyars, rulers of Mysore, until

it was given as Jagir (with rights for general administration and collection of taxes)

to Hyder Ali during late 18th century. Hyder Ali and later, his son, Tippu Sultan,

were responsible for growth and development of Bangalore in a significant way

with the construction of summer palace and Lalbagh. Indeed, Bangalore was

already the commercial capital during Tippu’s time and the second important city

after Srirangapatna, Tippu’s capital. The fall of Bangalore in the Second Mysore

War of 1792, may also have led to the fall of Tippu Sultan in Third Mysore War of

1799, after which Bangalore became a base for the British troops and saw the

establishment of the Cantonment in 1802.

By 1831, the administration of the city was taken over by the British, and in

1862 two independent municipal boards were established: Bangalore City

Municipality (in the older areas), and Bangalore Civil and Military Station

Municipality. At Independence, Bangalore was notified as the Capital of Mysore

(now Karnataka) State. In 1949, the two municipalities were merged and the

Bangalore City Corporation was formed. Subsequently, to keep up with the pace of

21 Heitzmann, James, Network City – Planning the Information Society in Bangalore, Oxford University Press, 2004.

21

growth and development, there have been reorganizations with respect to the

zones and wards within the corporation, rising from 50 divisions in 1949 to 95

wards in 1980s, 100 wards in 1995 and about 150 wards in 2006. With the 2006

notification, the Bangalore City Corporation is now reorganized as Greater

Bangalore City Corporation.

BANGALORE – The “GARDEN CITY”

Greater Bangalore, an area of 741 km2 agglomerating the city, neighbouring

municipal councils and outgrowths, was ‘notified’ (established) in December 2006

(Figure 1.8). A tiny village in the 12th century, it grew to become one of the fastest

growing cities in the world by the 21st century. Bangalore has grown spatially more

than 10 times since 1949 (Table 1.15).

Figure 1.8: Bangalore City

Source: Sudhira H.S. et al., 2007.

22

Table 1.15: Bangalore City Corporation Limits over the Years

Year Area (sq. km) 1949 69

1963–1964 112 1969 134 1979 161 1995 226 2007 741

Source: Sudhira H.S. et al., 2007.

The city is known for its tree-lined streets, beautiful gardens, numerous

parks, abundant greenery and flowers. Hence it is known as the “Garden City”.

Bangalore is India's fifth largest metropolitan city with a population of about 8

million as per the 2011 census (Table 1.16).

Table 1.16: Demographic Trends of Bangalore – 2011

Bangalore Karnataka

2001 45.92 Lakh 5,27,33,958

2011 84.74 Lakh 6,11,30,704

Male 44+ Lakh 3,10,57,742 Female 40+ Lakh 3,00,72,962

Others 650+

2007 onwards

Average Birth Rate 1.35 Lakh / Year

Average Death Rate 40,000 / Year

Population Density 4,378

Literacy Rate 88.48

Source: Times of India, 20th March 2011 and Deccan Herald 1st April 2011.

Further, Bangalore is one of the fastest growing cities in India and by virtue

of being the national hub for Information Technology (IT) and Telecommunication

Industry, is often called the ‘Silicon Valley of India’. With the advent and growth of

IT industry, as well as numerous industries in other sectors and the onset of

economic liberalisation since the early 1990s, Bangalore has taken the lead in

service-based industries fuelling substantial growth of the city both economically

and spatially. Thus, Bangalore has emerged as a cosmopolitan city over the last

23

two decades attracting people and business alike, from within and across the

nations (Sudhira H.S. et al., 2007).22

Moreover, Bangalore has also transformed into a manufacturing hub with

organisations such as Hindustan Aeronautics Limited (HAL), Indian Space

Research Organization (ISRO), Bharat Earth Movers Limited (BEML), etc. The

landscape of Bangalore is dotted by the concentration of hi-tech ICT (Information

and Communication Technology) sector based firms, besides a few manufacturing

giants. Some of the companies which are pride of India and are globally known like

Infosys, Wipro, Mindtree, etc. are located in Bangalore. That apart, almost all the

global IT majors have their presence in Bangalore, to name a few, IBM, HP,

Accenture, Philips, Sun Micro Systems, Oracle, Apple, Google, Dell, Motorola, 3M,

etc. have substantial Indian operations in Bangalore, besides several Business

Process Outsourcing (BPO) units. IT firms in Bangalore employ about 30% of

India's pool of one million IT professionals.

Bangalore is also one of the scientific hubs of India. The scientific

establishments in Bangalore include Indian Institute of Science, Indian Institute of

Astrophysics, Raman Research Institute, Jawaharlal Nehru Centre for Advanced

Scientific Research, National Centre for Biological Sciences, Indian Institute of

Information Technology and the Indian Statistical Institute.

Bangalore is also known for its architectural monuments, flora and fauna

and rich heritage. There are numerous gardens and historical sites within the city.

The Vidhan Soudha or the State Secretariat is the prime attraction. The

Government Museum of Bangalore and the Visvesvaraya Technological and

Industrial Museum are worth visiting. The Lal Bagh Botanical Gardens, which holds

a number of flower shows especially during the Republic Day, attracts a large

number of tourists. The Fort and Palace of Tipu Sultan are the other important

places in Bangalore. The temple dedicated to Nandi, the Bull besides the

Venkataramanaswamy Temple, the Gavi Gangadhareswara Cave Temple and the

22op cit.

24

Someshwara Temple are the pilgrimage places. The Ulsoor Lake is an ideal spot

for picnics.

Bangalore is situated in the Deccan Plateau, with an average elevation of

920 metres above sea level. Due to its elevation, Bangalore enjoys a pleasant and

equable climate throughout the year. Winter temperatures rarely drop below 12 °C

(54 °F) and summer temperatures seldom exceed 38 °C (100 °F). The summer

heat is moderated by fairly frequent thunderstorms and occasional squalls.

All the above place specific strengths catapulted Bangalore into a prime

place. It tops the list in the Morgan Stanley report on India's booming cities 2011

(Table 1.17). Its findings are based on a City Vibrancy Index (CVI), which looks at,

among other factors, infrastructure, job opportunities, modern consumer services

and a city's ability to mobilise savings.23 A year-long net census study by eBay

ranks Bangalore as the third largest e-commerce hub in terms of buying and selling

online after Delhi and Mumbai.24, 25

Table 1.17: Twenty Cities to Watch

Megacities Boomtowns Niche Cities

All India Annual Household Income Growth (%)

7.5 8.5 7.3 6.6 2002-‘05 11 12.6 10.5 9.5 2005-‘08(E) 9.8 11.7 9.3 8.4 2008-16(E)

Mumbai Delhi Kolkata Chennai Bangalore Hyderabad Ahmedabad Pune

Surat Kanpur Jaipur Lucknow Nagpur Bhopal Coimbatore

Faridabad Amritsar Ludhina Chandigarh Jalandhar

Source: NCAER - Future Capital Research's "The Next Urban Frontier: Twenty Cities to Watch" and Economic Times, August 08, 2008.

23 'Bangalore shines among booming cities', The Indian Express, 18th February, 2011. 24 The Hindu Bureau, “When it comes to online shopping, Bangaloreans are way up there”, The Hindu, 29th September 2011. 25 BS Reporters, “E-commerce gain steam in towns and villages: Survey”, Business Standard, 29th September 2011.

25

FOOD AND GROCERY RETAIL IN BANGALORE26

Despite traffic snarls, pollution and booming real estate growth, the retail

sector in Bangalore is witnessing an explosive growth. The reason for the retail

boom is the city's growing affluence. In the last 10 years Bangalore's population

has increased around 30 per cent and is ranked the seventh most affluent city in

India. It is estimated that over one-third of the households in Bangalore have an

annual expenditure between Rs 50,000 and Rs 1 lakh, while 40 per cent of the

city's population has annual incomes ranging between Rs 70,000 and Rs 1.4 lakh.

The 15-45 age group is a retailer's delight.

The retail boom in Bangalore is not merely visible in bigger malls but also

among the smaller ones which are basically large stand-alone departmental stores

and have sprung up in shopping areas in several localities. The retail boom can be

seen in every nook and corner. Smaller shops, which not so long ago struggled for

survival, have started expanding and at least three-four supermarkets exist in

almost every locality. In some cases, the established large kirana shops have

morphed into still bigger stores.

There are many malls in Bangalore. To name a few, the Forum Mall (3.5-

lakh sq ft), Garuda Mall (2.3-lakh sq ft), Bangalore Central and Mantri Square (1.7

million sq ft), etc. deserve a special mention. Bangalore is expected to have about

30 malls in the near future (Table 1.18).

Further, Organized Food Retail Chains in Bangalore include Food Bazaar,

Reliance Retail, Aditya Birla More, Food World, @Fresh and Spencer’s. These

corporate chains have set up a number of outlets in the city. There are many stand-

alone retail outlets as well. Bangalore is a hot bed for innovations. As the city

represents mini India, one could find people from all parts of the country. With the

above citations and studies, it is justified that Bangalore is an ideal place for

conducting the research study of this kind.

26 K Giriprakash, Bangalore’s Retail Boom, Business Line, December 24, 2005.

26

Table 1.18: Malls in Bangalore27

Operational Under Construction Upcoming

Forum Mall Brigade Metropolis Soul Space Arena

Sigma Mall Brigade Gateway (Yeswanthpur) Orion Mall

Garuda Mall Forum Mall (Shantiniketan, Whitefield)

Soul Space Spirit

Esteem Mall G Corp Lido Centre (old Lido Theatre) in Ulsoor

Signature mall

Eva Mall Galaxy Embassy (old Galaxy Theatre) on Residency Road

Phoenix Market City

Total Mall Mantri House (Sarjapur Road) Alliance mall

Vaswani Cosmos Ozone (Factory Outlet, Whitefield) Innovation Mall Gopalan Legacy Mall

Sigma Grand Karle Mall

Oasis Mall Sobha Minerva (Minerva Mills) Royal Meenkshi Mall

The Collection Tata Imperial (Old Imperial Theatre) off Brigade Road

ITPL Mall

Garuda Swagath Mall

Poorva Mall on Old Madras Road Inorbit Mall

Arch Mall Maximus Mall

Forum Value Mall Central (International brands)

Total Mall Viva City

(office+retail)

Mantri Square/ Mantri Mcube mall

Source: www. karnataka.gov.in and www.virtualbangalore.com.

RETAIL SUPPLY CHAIN MANAGEMENT

The supply chain in retailing is different from a traditional manufacturing

supply chain. In a manufacturing supply chain, a manufacturer gets raw materials

and components from its suppliers to make the finished goods. Materials can come

directly to the manufacturer’s factory or can be outsourced or can be consolidated

at a warehouse and supplied. These materials are processed in the plant,

converted into the finished goods and delivered to customers through warehouses,

distributors, dealers, regional offices and retailers (Figure 1.9).

27 Purvita Chatterjee, Mall tales, Business Line, January 03, 2004. www. karnataka.gov.in and www.virtualbangalore.com.

27

Figure 1.9: Stages in a Manufacturing Supply Chain

In a retail supply chain, items are sourced from a supplier or directly from

the manufacturer. These items can be delivered directly to the store, or at the

retailer’s distribution centre from where it is distributed to the stores. Further the

items are purchased or sold to the customers. There may be a backward

distribution flow in case of deficiency, poor quality or for any other reason from

customer to retailer to the supplier (Figure 1.10).

Figure 1.10: Retail Supply Chain

In the organized retail market in India, the role of supply chain is very

important for Indian customer is price and quality conscious. It is the supply chain

that ensures various offerings to the customers that a company decides, be it cost,

service, or the quickness in responding to ever changing tastes of the customer.

Source: Sunil Chopra, 2010

Source: http://www.emeraldinsight.com/fig/0050290704003.png

28

The Indian organized retail sector is growing; so the role of supply chain

becomes all the more important. It needs to become all the more responsive and

adaptive to customers demand. There is also need for the supply chain to be more

cost efficient and collaborative to win the immense competition in this sector.

In the first phase of the retail revolution, the focus of food retailers had been

largely on capturing the consumers’ attention and providing them with a new

shopping experience. As Indian retail experience has revealed what matters most

is not just the shopping ambience, but the price and quality, also to play a

dominant role.

As such, the increasing scale of organised retail distribution network and

increasing competition are forcing the players to focus on restructuring the whole

supply chain to improve productivity and provide a better deal to customers. 28

Till recently, the retail investments in India were focused more on the front

end than on the back-end. As a result, though most players have several stores in

place, they have no rigorous supply chain to generate the cost efficiencies and fill

rates needed to improve the bottom line and improve customer experience.29

In spite of the importance of supply chain management and its ability to pass

on the benefits to the customer in terms of price and quality, it is disheartening to

note that India lacks quality logistics infrastructure which hinders the scaling up of

retailing operations. Supply chain is a key bottleneck for retail sector growth. The

country lacks efficient and reliable logistics infrastructure in roads, rail and ports.

Truck industry is also highly fragmented and has no reliable national service

provider. Hence the supply chain management system has very low penetration

especially in the vast hinterland.30

28 Chetan Ahya, “The retail supply chain revolution”, Economic Times, 7 Dec, 2006. 29 Anil Rajpal, Pragya Singh, S, “The Indian Retail Landscape: Now and Beyond, The Indian Retail Landscape: Now and Beyond”, Technopak Perspective ,Volume 01, 2009. 30 Retail in India: Getting organized to drive growth, AT Kearney –CII report, November 2006.

29

According to Sunil Chopra (2010), the strategic fit requires a company’s

supply chain achieve the balance between responsiveness and efficiency that best

meets the needs of the company’s competitive strategy. To understand how a

company can improve supply chain performance in terms of responsiveness and

efficiency, one must examine the logistical and cross functional drivers of supply

chain performance: facilities, inventory, transportation, information, sourcing and

pricing. These drivers interact with each other to determine the supply chain’s

performance in terms of responsiveness and efficiency (Figure 1.11).31

Figure 1.11: Supply Chain Decision-Making Framework

Source: Sunil Chopra, 2010.

According to Chopra, supply chain processes in a firm can be classified into

three macro processes as shown below. There need to be coordination among

these three processes for efficient supply chain management (Figure 1.12).

31 Sunil Chopra and Peter Meindl, Supply Chain Management Strategy, Planning & Operations, 4th Edition, 2010.

30

Figure 1.12: Supply Chain Macro Processes

Source: Sunil Chopra, 2010.

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