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PRANVEER SINGH ACADEMY OF TECHNOLOGY

A Research Project

ONIMPACT OF ORGANIZED RETAI SECTOR ON UNORGANIGED RETAIL

SECTOR IN INDIA

SUBMITTED FOR THE PARTIAL FULFILLMENT TOWARDS THE AWARD

OF THE DEGREE IN MASTER OF BUSINESS ADMINISTRATION 2010-2012

G B TECHNICAL UNIVERSITY, LUCKNOW

SUBMITTED TO: SUBMITTED BY:

MR.DURGESH AGNIHOTRI NITIN KUMAR

SINGH

FALCULTY OF (MBA) ROLL NO: 1034870019SESSION -2010-2012

1

PRANVEER SINGH ACADEMY OFTECHNOLOGY


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PREFACE

In spite of the theoretical knowledge gained through classroom study, a person isuncompleted if not subject to practical exposure of real corporate world and many have to

face hurdles, which will be difficult to overcome without any firsthand experience of

business.

In this context research program has been design to make the person aware of

happening of the real business world. the report, entitled impact of organized retail sector

on the unorganized retail sector in India has been done by me at different locations, in

Kanpur.

.

The data which is taken in this report shows th awareness of customer who are living

in the Kanpur so it is very helpful for unorganized retailers by understanding the customer

needs and wants and problems faced by them. it is specially design on the basis of

secondary data as well as primary data collected through questionnaire, book, internet,

business magazine etc. i hope my research report will be fruitful for retail sector and it will

helpful in different ways.

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ACKNOWLEDGEMENT

We think if any of us honestly reflects on who we are, how we got here, what we

think we might do well, and so forth, we discover a debt to others that spans written history.

The work of some unknown person makes our lives easier every day. We believe it's

appropriate to acknowledge all of these unknown persons; but it is also necessary to

acknowledge those people we know have directly shaped our lives and our work.

First of all we would like to thank our faculty Mr.Durgesh Agnihotri and my

head of department (HOD) Dr. C.K. Tiwari during my Dissertation Project Report on

IMPACT OF ORGANIZED RETAI SECTOR ON UNORGANIGED RETAIL

SECTOR IN INDIA r their guidance through out the semester. Then we would like to thank

our friend and brother for providing us the information that was required for completion of

this project.I would like to thank my guide.

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DECLARATION

I hereby declare that the project report entitled Impact of organized retail sector

on the unorganized retail sector in India is the produce of my sincere effort. This Winter

Training Project report is being submitted by me, at the Pranveer singh Academy of

Technology, Kanpur for the partial fulfilment of the course MBA, and the report has not

been submitted to any other educational institutions for any other purpose.

Date: - Signature:-

NITIN KUMAR SINGH

ROLL NO.1034870019

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TABLE OF CONTENTS

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Chapter No. Subject PageNo.

Ch.1.0 Executive Summary 6-7

Ch. 2.0 Research Methodology 8-9

Primary ObjectiveResearch DesignSample Design.Scope of the StudyLimitations

Ch. 3.0 Industry Profile 10-50Review of literature on the industryMajor Companies

Ch. 4.0 Data Collection 51-64Primary DataSecondary DataData analysis

Ch. 5.0 Findings 65

Ch. 6.0 Suggestion & Recommendations 66

Ch. 6.0 Conclusion 67

Ch.7.0 Bibliography 68

Ch.8.0 Annexure 69-71


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EXECUTIVE SUMMARY

The real GDP is expected to grow at 8-10 per cent per annum in the next five years. As a

result, the consuming class with annual household incomes above Rs. 90,000 is expected to

rise from about 370 million in 2006-07 to 620 million in 2011-12. Consequently, the retail

business in India is estimated to grow at 13 per cent annually from US$ 322 billion in 2006-

07 to US$ 590 billion in 2011-12. The study shows:

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The unorganized retail sector is expected to grow at about 10 per cent per Annum with sales

rising from US$ 309 billion in 2006-07 to US$ 496 billion in 2011-12.

Given the relatively weak financial state of unorganized retailers, and the Physical space

constraints on their expansion prospects, this sector alone will Not be able to meet the

growing demand for retail. Hence, organized retail which now constitutes a small four per

cent of total retail sector is likely to grow at a much faster pace of 45-50 per cent per annum

and quadruple its share in total retail trade to 16 per cent by 2011-12. This represents a

positive sum game in which both unorganized and organized retail not only coexist but also

grow substantially in size. The majority of unorganized retailers surveyed in this study,

indicated their preference to continue in the business and compete rather than exit.

The Empirical Basis

The study comprises the largest ever survey of all segments of the economy that could be

affected by the entry of large corporates in the retail business. The findings are based on a

survey of 2020 unorganized small retailers across 10 major cities; 1318 consumers shopping

at both organized and unorganized retail outlets; 100 intermediaries; and 197 farmers. In

addition, a control sample survey was done of 805 unorganized retailers who are not in the

vicinity of organized retail outlets in four metro cities. Detailed interviews were also carried

out for 12 large manufacturers, 20 small manufacturers and six established modern retailers.

The study contains an extensive review of international retail experience, particularly from

the major emerging market economies. Unorganized retailers in the vicinity of organized

retailers experienced a decline in their volume of business and profit in the initial years after

the entry of large organized retailers. There was no evidence of a decline in overallemployment in the unorganized sector as a result of the entry of organized retailers. There is

some decline in employment in the North and West regions which, however, also weakens

over time. The rate of closure of unorganized retail shops in gross terms is found to be 4.2

per cent per annum which is much lower than the international rate of closure of small

businesses. The rate of closure on account of competition from organized retail is lower still

at 1.7 per cent per annum. There is competitive response from traditional retailers through

improved business practices and technology upgradation. A majority of unorganized retailers

is keen to stay in the business and Compete, while also wanting the next generation to

continue likewise. Small retailers have been extending more credit to attract and retain

customers. However, only 12 per cent of unorganized retailers have access to institutional

credit and 37 per cent felt the need for better access to commercial bank credit. Most

unorganized retailers are committed to remaining independent and barely 10 per cent

preferred to become franchisees of organized retailers.

Impact on Consumers

Consumers have definitely gained from organized retail on multiple counts. Overall

consumer spending has increased with the entry of the organized Retail. While all income

groups saved through organized retail purchases, the survey revealed that lower income

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consumers saved more. Thus, organized retail is relatively more beneficial to the less well-

off consumers.

Proximity is a major comparative advantage of unorganized outlets.

Unorganized retailers have significant competitive strengths that include

Consumer goodwill, credit sales, amenability to bargaining, ability to sell loose items,

convenient timings, and home delivery.

Impact on Intermediaries

The study did not find any evidence so far of adverse impact of organized retail on

intermediaries. There is, however, some adverse impact on turnover and profit of

intermediaries dealing in products such as, fruit, vegetables, and apparel. Over two-thirds of

the intermediaries plan to expand their businesses in response to increased business

opportunities opened by the expansion of retail. Only 22 per cent do not want the next

generation to enter the same business.

Impact on Farmers

Farmers benefit significantly from the option of direct sales to organized Retailers.

RESARCH METHODOLOGY

RESEARCH OBJECTIVE

The objective of my research report The Impact of Organized Retail Sector on the

Traditional Kiranas Business is categorized into following part.

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The primary objective of my research is to know that why the business of kiranas affecting

due to the organized retail outlets and also to find that why those consumers who were

purchasing their daily used products from these kiranas store and

Why their preferences have been changed towards the kiranas store and now they are

purchasing daily using products from the organized retail outlets

The secondary objective of my research is to know that what impact or affects comes on the

manufacturers business, retailers and intermediaries business due to the organized retail

sector.

TYPE OF RESEARCH:

Research type is descriptive cum exploratory research designee was chosen for my research

project.

SAMPLE SIZE:

In order to understand the actual impact of the growing organized retail, the study carried out

surveys in the city and interview 100 people including hawkers, kiranas store shopkeepers,

consumers and people who visited directly to the outlets.

SAMPLE SELECTION:

The sample was selected through convenience and random sampling

SCOPE OF STUDY

This study will be helpful for student to know in depth about the impact of organized retail sector on

the traditional kiranas business.

This report would do well to the entire person interested in learning about organized retail sector and

kiranas business.

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The organized retail sector & kiranas would find useful to look in to the viability of the

implementation of the recommendation ,once implemented and are expected to fetch immense

benefits to the organized retail sector & kiranas business.

LIMITATION OF STUDY

People still consider surveys and interview as a worthless matter to them and do not show interest

and neither responds.

I was able to cover malls in Kanpur only due time restrictions and wide area.

The shopkeepers of kiranas responses are biased (at time)

More than part 5 year data are not included in the report.

The some retailers of the organized outlets are biased in providing the data.

INTRODUCTION OF RETAIL INDUSTERY

The retail industry is focused on the sale of goods or merchandise from a specific location

for direct consumption by the purchaser. North America is the home of most of the worlds

largest retailers, since the U.S. dominates the global retailing industry. Not only is the retail

industry responsible for two-thirds of the U.S.s GDP, U.S. retail companies have also

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established a presence on every continent. The largest retail giants globally are Wal-Mart

(USA), Metro AG (Germany), Carrefour (France) and Tesco (UK).

The industry employs a staggering number of people, and given its rapid proliferation, this

number is always on the rise. The backbone of the sector are the operations and supply chainmanagement jobs but there are various other options as well, from sales executives and store

managers to merchandise planners and buyers.

Performance

In todays dynamic and shaky business world, the retail industry is constantly upgrading

itself. With an endless array of customer choices, fierce competitors, pervasive use of the

internet, and a complex global economy, retailers need to focus on finding ways to sustain

and grow their businesses. Traditional growth models that focused on rolling out more stores

and adding more product lines, no longer enjoy the return on investment they once did.

Successful retailers are those who are able to adapt and change to the environment and

develop new way1s of serving customers, respecting the dynamics of current trends and

adapting accordingly.

The retail industry in India is hailed as a sunrise sector, and is estimated to double in value

from US$ 330 billion in 2007 to $640 billion by 2015. In fact, India has topped AT

Kearney's annual Global Retail Development Index (GRDI) for the third year in a row as the

most attractive market for retail investment.

The bad news is, despite the fact that India has one of the largest number of retail outlets in

the World, organized retail accounts for only 4% of the total market. This makes it especially

difficult to apply sophisticated merchandising and sales tools, enhance consumer interaction

and also, make very accurate analysis. That said, analysts believe the sector is likely to show

significant growth of over 9 % p.a over the next 10 years and also see rapid development in

organized retail formats, with the proportion likely to reach a more respectable 25% by

2018.

Growth Potential

The key growth areas include the urban, luxury segment on one end of the spectrum and

serving the rural sector on the other. In addition, government policy encouraging FDI in the

segment has resulted in a plethora of international retailers keen on entering the market;

American retail giant Wal-Mart has tied-up with Bharti Enterprises and global coffee giant

Starbucks' has tied up with PVR Limited. In addition, Carrefour, Boots and others are also

expected to come in.

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With so much action, it is natural that there is a huge scope for employment opportunities,

and experts estimate that the sector will generate employment for ~ 2.5 million people in

2010. The top retail companies in India include the Raheja Group, Reliance Retail, Tata

Trent, Future Group, RPG Retail, and Ebony Retail Holdings.Future Prospects

There are many opportunities for those seeking to enter this sector, and entry level positions

such as sales executives dont even require a degree. Naturally, the higher order jobs for

graduates with relevant degrees and work experience, involve more responsibility,

challenges and remuneration. MBAs are increasingly being recruited, which marks a change

of HR policy, from the traditional preference to hire those from the FMCG and hospitality

sectors. In fact, senior executives in retail such as operations heads are extremely well

looked after, and HR consultants believe they are paid in excess of Rs. 60 lakhs.

The good news for graduates is that since the sector is so young and vibrant, career growth

happens very rapidly, and these positions are very achievable in a compressed time period.

Successful candidates across all levels are those who are dynamic, able to multi-task and are

equipped with great communication skills.

Formats In Indian Organized Retail Sector

Formats in Indian Organized Retail Sector and its subsequent successful operation are

credited to India Economic System reform earnest in July 1991. Formats in Indian

Organized Retail Sector are at its nascent stage. The Central Government have ultimately

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realized the need to remove the insulation out of the Indian retail sector. Sceptics opines

opening up Indian retail industry would jeopardize way of income for the poor small

retailers. In fact, the actual story is quite heartening for the small time retailer and its

vendors.It is the second fastest growing economy of the world

Potential to be the third largest economy in terms of GDP in next few years

It ranks high amongst the top 10 FDI destinations of the world

Fastest growing tourist market in Asia

World Bank states, India to be worlds second largest economy after China by the year

2050

Stable and investor friendly Central Government at the helm of affairs

Introduction of Value Added Tax or VAT and tax reforms

High degree of professionalism and corporate ethics

Excellent Investment opportunities in Indian retail sector and in allied sectors; sure and high

returns on investments

To invest US $130 billion for the development of infrastructure, by year 2010

To attract US $ 10 billion FDI for infrastructure development by the end of year 2008

Bullish stock markets

Hordes of foreign investors are thronging in to invest in Indian retail markets

Highly educated English speaking young workforce

Vibrant and multi cultured cities

Huge opportunity exists, especially in semi-rural and rural areas

Till date the second largest employer after agriculture sector, for the huge semi-skilled

Indian population

Offers highest shop density in the whole world

Having almost 1,20,000 shops, across the length and breadth of the country

In a nascent stage of development as an organized industry

Formats in Indian Organized Retail Sector -

Supermarkets

Hypermarkets

Department Stores

Modern format individual retailers

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Shopping malls

Specialty Chains

1. High Street ShopsHigh Street Shops of India are predominantly unorganized. Indian high street shops are

varied and scattered. High Street Shops of India generally occurs in small tufts and sells

products that are very relevant to economic needs of that particular area. For example, the

High Street Shops in villages offer groceries and daily use commodities that are generally

unbranded and cheaper in price and quality. High Street Shops in towns and cities are more

organized and sells daily use commodities along with luxury items. Generally, these High

Street Shops of India sells branded products from Indian and foreign manufacturersrespectively. Although, the consumerism is showing a rising trend in India, but the majority

of the semi-rural and rural market is untapped. Huge opportunity exists in organized retailing

in India.

High Street Shops of India and its stupendous growth is credited to India Economic System

reform earnest in July 1991. The important parameters of Indian Economic System showed

prominent increase. The economic liberalization of Indian economy resulted from enactment

of liberal financial and economic policy. This in fact, has removed the insulation from the

Indian market. Foreign Direct Investments started to flow into the Indian domestic markets.

The Indian retail market is at its nascent stage. The Central Government has ultimately

realized the need to remove the insulation out of the Indian retail sector. Sceptics opines

that opening up the Indian retail industry would jeopardize the way of income for the poor

small retailers. In fact, the actual story is quite heartening for the small time retailer and its

vendors.

High Street Shops of India - opportunities galore - the key attractive points are -

It is the second fastest growing economy of the world

Potential to be the third largest economy in terms of GDP in next few years



World Bank states, India to be worlds second largest economy after China by the year

2050


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Excellent Investment opportunities in Indian retail sector and in allied sectors; sure and

high returns on investmentsTo invest US $130 billion for the development of infrastructure, by year 2010







Till date the second largest employer after agriculture sector, for the huge segment of semi-

skilled Indian population


Having almost 1,20,000 shops across the length and breadth of the country


2. Cvenience Storeson

This site provides detailed information on convenience stores of India. The site also focuses

on the current status of convenience stores operating in India.

The successful launch and operations of convenience stores in India is credited to the Indian

economic reforms in July, 1991. Convenience stores in India are still at a nascent stage but

are headed for stupendous growth in the near future. The central government has ultimately

realized the need to open up the Indian retail sector.

The key advantages of convenience stores in India are:

India ranks 5th on global retail development index

India is the 2nd fastest growing economy of the world

India is poised to become the 3rd largest economy in terms of GDP in next few years

India ranks high among the top 10 FDI destinations of the world

India is the fastest growing tourist market in Asia

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World Bank states that India will become the world's 2nd largest economy after China by

2050

India has a stable and investor-friendly central government at the helm of affairs

It has introduced Value Added Tax (VAT) and tax reformsIt has a high degree of professionalism and corporate ethics

It has excellent investment opportunities in the retail sector and allied markets

India is to invest US$ 130 billion for the development of infrastructure by 2010

India will attract US$ 10 billion FDI for infrastructure development by 2008

It has bullish stock markets


Highly educated, English speaking, young workforce

Vibrant and multi-cultured cities

Huge opportunity exists in semi-rural and rural areas

Till date, India is the 2nd largest employer for the huge semi-skilled Indian population

Offers highest shop density in the whole world - has almost 1,20,000 shops across the

length and breadth of the country

In a nascent stage of development as an organized industry.

Types of convenience stores found in India are:

Specialty Stores

Supermarkets

Franchisee Outlets

Hypermarkets

Sceptics opine that liberalizing the Indian retail industry would jeopardize the income of

small retailers. However, small-time retailers and vendors also stand to gain from the launch

of convenience stores in India. Indian and international market leaders are flocking to the

Indian market to cash in on the specialty stores retail boom. Some industry leaders operating

in other sectors are also diversifying into the specialty stores sector.

3. Specialty Stores

Specialty Stores of India and its subsequent successful operation is credited to India

Economic System reform earnest in July 1991. Specialty Stores of India is at its nascent

stage and heading for a stupendous growth in the near future. The Central Government has

ultimately realized the need to remove the insulation out of the Indian retail sector. Sceptics

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opine that opening up of the Indian retail industry would jeopardize the way of income for

the poor small retailers. In fact, the actual story is quite heartening for the small time retailer

and its vendors. Both, Indian and international market leaders are pouring into the Indian

market to encase on the specialty stores retail boom. In fact, some industry leaders operatingin other sectors are also diversifying into specialty stores sector.

Specialty Stores of India - the key advantages are:

Ranks 5th on global retail development index


to be the third largest economy in terms of GDP in next few years



World Bank states, India to be world's second largest economy after China by the year

2050














segment of the Indian population


Having almost 1,20,000 shops across the length and breadth of the country


Specialty Stores of India like -

Pantaloons

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Steel junction

Metal junction

Food bazar

Haldiram bhujiawalaMusic world

Nokia world

Sony world

Khadims

Adidas

Bata

Raymonds

Ganguram

KC Das

Bausch and Lomb

Apollo pharmacy

Sify-i way

are doing good business and the profit margin of these Specialty Stores of India are rising

every year.

4. Hypermarkets

The concept of Hypermarkets is new to Indian consumers. Actually, the British colonial

government introduced the idea of Supermarkets to facilitate its officers with access of all

household goods under one roof. This led to the development of super-supermarket or

modern supermarket or Hypermarket. Hypermarkets in India houses varied shops selling

different types of essential commodities along with luxury items. These Hypermarkets are

mainly concentrated in urban areas only. Hypermarkets operating in India typically have a

heterogeneous mixture of large and small individual retailers. Most of these Hypermarkets

sell branded products of both, domestic and international manufacturers. Hypermarkets of

India offer products with different price bands for each and every sections of urban society.

Hypermarkets - the India advantages are:



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Going to be the third largest economy in terms of GDP in next few years


Fastest growing tourist market in AsiaWorld Bank states, India to be world's second largest economy after China by the year

2050











Huge opportunity exists, especially in urban and semi-rural areas

Till date the second largest employer after agriculture sector for the huge semi-skilled

segment of the Indian population

These Hypermarkets in India sells products like -

Electronic goods

Groceries

Vegetables and fruits

House hold items

Stationaries

Pharmaceuticals and health care products

Consumer durables

Vegetables

Dress materials

Furniture

Furnishings etc.

Hypermarkets in India - the first choice places

Delhi

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Noida

Gurgaon

Hyderabad

BangaloreAhmedabad

Chandigarh

Hypermarkets in India - the operators

Reliance retail

Bhakti-Wal-Mart retail

5. Supermarkets

The concept of Supermarkets is not new to Indian consumers. Actually, the British colonial

government introduced the idea of Supermarkets to facilitate its officers with access of all

household goods under one roof. Supermarkets in India houses varied shops selling different

types of essential commodities along with luxury items. These Supermarkets are mainly

concentrated in urban areas or semi-urban areas. Supermarkets operating in India typically

have a heterogeneous mixture of large and small individual retailers. Most of these

Supermarkets sell branded products of both, domestic and international manufacturers.

Supermarkets of India offer products with different price bands for each and every sections

of urban society.

Supermarkets - the advantages of doing business in India are -






World Bank states, India to be world's second largest economy after China by the year

2050




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To attract US $ 10 billion FDI for infrastructure development by the end of year 2008Bullish stock markets






Indian population


Having almost 1,20,000 shops, across the length and breadth of the country


With increased consumerism post India Economic System reform earnest in July 1991, the

Supermarkets in India are regaining their lost importance. Moreover, this consumerism has

spread its tentacles to semi-rural areas also, leaving tremendous scope of growth in semi-

rural and rural areas also. The Central Government has ultimately realized the need to

remove the insulation out of the Indian retail sector. Sceptics opine that opening up the

retail sector in India would jeopardize the way of income for the poor small retailers. In fact,

the actual story is quite heartening for the small time retailer and its vendors. Both, Indian

and international market leaders are pouring into the Indian market to encash on the

Supermarkets boom.

6. Shopping Malls

The latest trend in the corporate universe is of the emergence of the shopping malls.

Shopping malls are an emerging trend in the global arena. The first thing that comes in our

mind about the shopping malls is that it is a big enclosed building housing a variety of shops

or products. According to historical evidences shopping malls came into existence in the

Middle Ages, though it was not called so. The concept of departmental stores came up in the

19th century with the Industrial Revolution. Consumers wanted a better shopping experience

and this demand gave rise to the emergence of shopping malls in India.

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Originally the first of the shopping malls was opened in Paris. Then the trend followed in the

other metros over the world, and there was a spree of shopping malls coming up at various

places. In this age of mass production and mass consumption, the concept of shopping malls

is most modern method of attracting consumers. The concept of shopping was alteredcompletely with the emergence of these shopping malls.

Shopping was no longer limited to a mere buying activity - it has become synonymous with

splurging time and money. People simply go about roaming through the shopping mall in

order to peep through the window of the shop and often ending up buying something they

like. The consumers desire a combination of comfort and suitability which the shopping

malls cater to, and so this format of shopping has become so popular all over the world, and

especially so in India. The inclusion of amenities like restaurants, multiplexes, and car parks

attract more and more crowds to shopping malls, that are considered family hangout zones.

Advantages of shopping malls

Increase in the growth of the organized retail sector

Monumental increment in economic growth

Employment generation by the organized retail sector

Good competition means better products & services

Disadvantages of shopping malls

The companies with superior resources would muscle out the ones inferior to them.

Monopolization of the organized retail sector

In India, the emergence of shopping malls has mostly altered the lifestyle of the consumers.

With the growth in income, changing attitudes, and also the demographic patterns favour the

emergence of shopping malls.

The trends to follow in the future

The shopping malls favour a growth in the Indian organized retail sector by 10% within

2010

There would be different formats of shopping malls depending on the region.

7. Franchisee Outlets

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Franchisee outlets in India are predominantly unorganized and considerably new in concept.

For an international company with a famous product or service to sell, Franchisee outlets can

provide huge opportunity for fast expansion and deep market penetration. Opening up of

Franchisee Outlets saves initial capital investment. Franchisee outlets in India can effectivelyhelp in the distribution process of goods and services in lesser time but creating similar

effects on balance sheet. The greatest advantage of opening Franchisee outlets in India is that

it offers full commitment from franchisees. And as a matter of fact the franchisees are more

committed than employers or staff since they own a share of the main business and are

accountable for losses.

Franchisee outlets in India - its benefits are:

Franchisee enjoys liberty of self-employment

The most successful way of starting a new business

Franchising opportunities exists in every area of business and trade

Low or no initial capital investment for the franchiser

Quality and reputation of the parent company is maintained

The license for franchise is renewable after or before the expiry of the term of contracts

Liabilities of parent companies are less

The Franchisee outlets have better commitments and responsibilities to discharge

Huge income opportunity for the franchiser and franchisee

No introductory advertisement is needed for the Franchisee outlets for the establishment of

the brand

Franchisee outlets in India - some well-known outlets are:

Mc. Donald's

Kentucky Fried Chicken

Subway

Monginis

Sugar and spice

Coca cola

Pepsi

Frito lays

Perfetti

Franchisee outlets in India - opportunities galore; the key attractive points are:

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It ranks high amongst the top 10 FDI destinations of the worldFastest growing tourist market in Asia






Retail industry to attract US $ 10 billion FDI for infrastructure development by the end of

year 2008



Huge employment scope for the semi-skilled segment of the Indian population


Indian Unorganized Retail Sector & Its Challenge

India is the only one country having the highest shop density in the world, with 11 outlets

per 1000 people (12 million retail shops for about 209 million households). Rather we can

see the democratic scenario in Indian Retail (because of low level of centralization, low

capital input and due to a good number of self-organized retail).

India started its Retail Journey since ancient time.

In Ancient India there was a concept of weekly HAAT, where all the buyers & sellers gather

in a big market for bartering. It takes a pretty long times to & step to shape the modern retail.

In between these two concepts (i.e. between ancient retail concept & the modern one there

exist modern kirana/ mom and pop shops or Baniya ki Dukan.

Still it is predominating in India

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Unorganized retailing refers to the traditional formats of low-cost retailing, for example,

hand cart and pavement vendors, & mobile vendors, the local kirana shops, owner manned

general stores, paan/beedi shops, convenience stores, hardware shop at the corner of your

street selling everything from bathroom fittings to paints and small construction tools; or theslightly more organized medical store and a host of other small retail businesses in apparel,

electronics, food etc

Characteristics of unorganized retail

Small-store (kirana) retailing has been one of the easiest ways to generate self-employment,

as it requires limited investment in land, capital and labour. It is generally family runbusiness, lack of standardization and the retailers who are running this store they are lacking

of education, experience and exposure. This is one of the reason why productivity of this

sector is approximately 4% that of the U.S. retail industry.

Unorganized retail sector is still predominating over organized sector in India, unorganized

retail sector constituting 98% (twelve million) of total trade, while organized trade accounts

only for 2%.

The reasons might be-

1. In smaller towns and urban areas, there are many families who are traditionally using

these kirana shops/ 'mom and pop' stores offering a wide range of merchandise mix.

Generally these kirana shops are the family business of these small retailers which they are

running for more than one generation.

2. These kiran shops are having their own efficient management system and with this they

are efficiently fulfilling the needs of the customer. This is one of the good reasons why the

customer doesn't want to change their old loyal kirana shop.

3. A large number of working class in India is working as daily wage basis, at the end of the

day when they get their wage, they come to this small retail shop to purchase wheat flour,

rice etc for their supper. For them this the only place to have those food items because

purchase quantity is so small that no big retail store would entertain this.

4. Similarly there is another consumer class who are the seasonal worker. During their

unemployment period they use to purchase from this kirana store in credit and when they get

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their salary they clear their dues. Now this type of credit facility is not available in corporate

retail store, so this kirana stores are the only place for them to fulfill their needs.

5. Another reason might be the proximity of the store. It is the convenience store for the

customer. In every corner the street an unorganized retail shop can be found that is hardly awalking distance from the customer's house. Many times customers prefer to shop from the

nearby kirana shop rather than to drive a long distance organized retail stores.

6. This unorganized stores are having n number of options to cut their costs. They incur

little to no real-estate costs because they generally operate from their residences.

Their labour cost is also low because the family members work in the store. Also they use

cheap child labour at very low rates.

As they are operating from their home so they can pay for their utilities at residential rates.

Even they cannot pay their tax properly.

Currently the value of the retail market is estimated at around $ 270 billion with a growth

rate of 5.7 per cent per annum according to the Indian retail report which creates a big threat

for the small unorganized retailers.

Over 20,000 new retail outlets are expected to open within this segment. Major corporate

retail like Wal-Mart and have started to try and take over the Indian retail sector.

But in India the unorganized retail is a source foods and other necessities of millions of

Indians , major link between rural and urban societies. Not only that it is also act like a

convenience store for the customer offering right product at right time at right place. In a

country with large numbers of people, and high levels of poverty, this model of retail

democracy is the most appropriate

So these unorganized retail sector need to be promoted so that they can organize & supply

food to Indian consumer.

Now the question is how to promote this sector-

The suggestions might be-

(a) Establishment of Retailer co-operatives among retailers which is highly required for the

sustenance of the unorganized retail sector

(b) Merger and buy-out of weak retailers by a stronger one that would give a new horizon to

the small retailer

(c) Setting up of franchisee organization may also help in strengthening the position of the

retailers. The franchiser can exert a tremendous control over the way retailing is done.

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(d) There must be good network connection between retail organizations, the suppliers and

other channel members to use compatible technology so that they can build strong

distribution set-up to satisfy the customers.

(e) Setting up of more and more non-store retailing centres would also ensure a strongretailing organization. Non-store retailing makes implementation of modern principles easier

and less costly.

(d) Moreover there must be a change in the mind-set of the unorganized retailer. They have

to understand the pulse of the trend. They have to understand, come forward & lead this

change management then only this sector not only can exist but flourish.

Employment Impact

The sampled unorganized retail outlets employ more family labour than hired labour;

on an average they employ 1.5 persons per shop from the family, and hired employees

of 1.1 persons. The survey finds a marginal increase in overall employment for these

outlets over the period of existence of the sampled organized retail outlets which

averaged 21 months. However, there has been a general increase in employment in

the South and East but a decline in the West and virtually no employment change in

the North. There appears to be a relation between the employment effect on unorganized retail

and the period of existence of organized outlets; the adverse effect, if at all there is any, wears

off with time. Interestingly, in the South and East, where the sampled

organized retailers have been in operation for some time, there has been an increase in

employment .

The survey has brought out that there has been an adverse impact on turnover and profit of the

unorganized retail sector after the opening of organized outlets. The overall impact has been a

decline in turnover of about 14 per cent and in profit of about 15 per cent over the period, which

is an average of 21 months. Therefore, the annual decline in turnover and profit is in the range of8-9 per cent. The negative impact has been felt most in the West with an annual fall in turnover

and profit of 19 per cent followed by the North and East in the range of 10-16 per cent whereas

the effect has been virtually insignificant in South

Closure of Unorganized Outlets

It is interesting to know whether the presence of organized retail has led to the closure

of traditional outlets. The survey asked the respondent retailers whether they are

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aware of any closing down of small shops in their neighborhood after the opening of

Organized outlets. A total of 151 such outlets were reported to have been closed down

over an average period of 21 months, which constituted about 4.2 per cent annualized

closure of retailers. This ratio is somewhat higher in the West at 6.8 per cent, about4.5 per cent in the North, 3.5 per cent in the South and least at 2.1 per cent in the East.

These rates of closure are very low by international standards. The US data show a 50

per cent closure of small businesses within four years of operation (Headd, 2003).

However, only 41 per cent of the retailers attributed these closures directly to

competition from organized retail. This means that the closure of unorganized retail

outlets has been about 1.7 per cent a year on account of competition from organized

outlets. This varied between a high of 3.2 per cent in the West to a low of 0.4 per cent

in the East and 1.5 per cent in the South and 1.6 per cent in the North.

Response to Competition

According to the survey, unorganized retailers have indicated a number of steps taken

in response to competition from organized retail, such as adding new product lines

and brands, better display, renovation of the store, introduction of self service,

enhanced home delivery, more credit sales, acceptance of credit cards, etc

Retailers reporting Home Delivery

The results of the survey suggest that over a third of the retailers (35 per cent)

currently provide cash credit to their customers and the proportion is highest at 44 per

cent in the East and least in the South at 32 per cent and in between at 36-37 per cent

in the West and North. The average share of credit sales to total sales has been 21 per

cent, up from 13 per cent before the opening of organized outlets a number of modern

technological facilities and this section is going to widen in the

future (Table 4.10). For example, acceptance of credit cards by small retailers is a

new phenomenon resulting from the presence of organized retailers. Currently 7 per

cent of the sampled unorganized retailers have installed credit card machines and the

survey showed that Another interesting finding is that a section of traditional retailers are

currently usinga huge additional 24 per cent plan to use a credit card machine in

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the future. Computerized billing is done by 10 per cent of these retailers and an

additional 27 per cent is planning to use it in the future. Scanning and bar coding is

done currently by 4 per cent and an additional 17 per cent plan to use it in the future.

Computerized accounting and inventory control is practiced by 5 per cent now and 19Per cent more want to do it in the future. Refrigerant, freezer, and hot case facilities

Are already being used by 36 per cent and in addition 14 per cent wish to utilize it in

The future. About 10 per cent of the traditional outlets are air-conditioned and another

21 per cent will opt for it in the future. Surprisingly, about 45 per cent of these

Retailers have an electronic weighing machine, and an additional 15 per cent want to1.

Introduction

An important aspect of the current economic scenario in India is the emergence of

Organized retail. There has been considerable growth in organized retailing business

In recent years and it is poised for much faster growth in the future. Major industrial

Houses have entered this area and have announced very ambitious future expansion

Plans. Transnational corporations are also seeking to come to India and set up retail

chains in collaboration with big Indian companies. However, opinions are divided on

the impact of the growth of organized retail in the country. Concerns have been

raised that the growth of organized retailing may have an adverse impact on retailers

in the unorganized sector. It has also been argued that growth of organized retailing

will yield efficiencies in the supply chain, enabling better access to markets to

producers (including farmers and small producers) and enabling higher prices, on the

one hand and, lower prices to consumers, on the other. In the context of divergent

views on the impact of organized retail, it is essential that an in-depth analytical study

on the possible effects of organized retailing in India is conducted.

In order to assess the impact of growing organized retail on different aspects of the

Economy, the Indian Council for Research on International Economic Relations (ICRIER)

was appointed by the Ministry of Commerce and Industry, Government of India to carry out

a study on organized retail focusing on the following issues:

Effect on small retailers and vendors in the unorganized sector keeping in

mind the likely growth in the overall market.

Effect on employment.

Impact on consumers.

Impact on farmers and manufacturers.

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Impact on prices.

Overall impact on economic growth.

ICRIER has been asked by the Ministry to analyze the above issues in the context of a

growth scenario of 7-10 per cent per annum in the next five years and in the light ofPractice in other fast- growing emerging market economies.

1.2 Partners in the Study

In this study, ICRIER sought and received assistance from three important groups: (a)

Development & Research Services Private Limited (DRS) for conducting all-India

Surveys; (b) Technopak Advisers Pvt. Ltd., a leading management consultancy firm

on retailing; and (c) Dr. Thomas Reardon and Dr. Ashok Gulati as Co-Directors of the

International Food Policy Research Institute (IFPRI)-Michigan State University

(MSU) Joint Programme of Markets in Asia. After a study framework was prepared,

it was discussed in a brainstorming session organized by ICRIER on April 9, 2007 in

which industry representatives, government officials, and senior academics

Participated.

Questionnaire-based survey of unorganized retailers including fixed fruit

and vegetable vendors and push-cart hawkers;

Questionnaire-based exit survey of consumers shopping at organized retail

outlets and also consumers shopping at unorganized outlets; and

Questionnaire-based survey of farmers who are selling their produce directly

to organized retailers and also farmers who are selling through the traditional

mandi route.

1.4 Organization of the Report

The report has been organized into eight chapters as follows:

1. Introduction

2. Current Retail Scene: An Overview

International Retail

Indian Retail

3. Evolution of International Retail: Implications for India

4. Indian Organized Retailers: Case Studies

Subhiksha

Trent Limited

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Pantaloon Retail

ITC Choupal Sagar and Choupal Fresh

RPG Spencers

Mother Dairy5. Impact of Organized Retailing

Advantages to the Indian Economy

Unorganized Retail Sector: Survey Results

Consumers: Survey Results

Intermediaries: Survey Results

6. Impact of Organized Retailing on Producers

Farmers : Value Chain and Survey Results

Manufacturers : Interview Report

7. Future Scenario in Retailing

Growth of Retail: Organized vs. Unorganized

Investment and Employment Projections

8. Policy Recommendations

International Retail

Global retail sales are estimated to cross US$12 trillion in 2007.1 almost reflecting

The growth in the world economy, global retail sales grew strongly in the last five

Years (2001-06) at an average nominal growth of about 8 per cent per annum in dollar

Terms (Table 2.1). This is in contrast to near stagnant global retail sales during the

previous five years, 1996-01. Grocery dominates retail sales with a share of

approximately 40 per cent which varies from about 30 per cent in rich Japan to an

average of 60 per cent in poor Africa. Retail sales through modern formats have been

rising faster than total retail sales; the share of modern retail has risen from about 45

Per cent in 1996 to over 52 per cent in 2006 .

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SWOT ANALYSIS

Strengths:

Low operational costs

Presence of established distribution networks in both urban and rural areas

Presence of well-known brands in FMCG sectors

Weaknesses:

Lower scope of investing in technology and achieving economies of

scale, especially in small sectors

Low exports levels

"Me-too products, which illegally mimic the labels of the established

brands. These products narrow the scope of FMCG products in rural and

semi-urban market.

Opportunities:

Untapped rural market

Rising income levels, i.e. increase in purchasing power of consumers

Large domestic market- a population of over one billion.

Export potential

High consumer goods spending

Threats:

Removal of import restrictions resulting in replacing of domestic

brands

Slowdown in rural demand

Tax and regulatory structure

Industry Category and Products

Household Care

Personal Wash:-

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REASONS FOR RETAIL SECTOR BOOM IN INDIA

It has been a decade-and-a-half since India embarked on an ambitious economic

liberalization programmer. Over the last five years, many of its benefits have manifested

themselves and one of the areas where growth is clearly reflected is retailing.

The latest pronouncements of Finance Minister P Chidambaram about the sector havefuelled interest in stocks from the segment. Let's turn the spotlight on the factors that

triggered the exponential growth in the sector.

Primary reasons

The prime reasons that fuelled this boom include favorable demographics, rising consumer

incomes, real estate developments, especially the emergence of new shopping malls,

availability of better sourcing options - both from within India and overseas - and changing

lifestyle.These factors have transformed hitherto savings-oriented and conservative Indian consumers

and made them akin to those in developed markets.

Organised versus unorganised

In a sharp contrast to the retail sector in developed economies, retailing in India - though

large in terms of size - is highly fragmented and unorganised. With close to 12 million retail

outlets the country has one of the highest retail densities worldwide.

Retailers include street vendors, supermarkets, department stores, restaurants, hotels and

even two-wheeler and car showrooms.

Counter stores, kiosks, street markets and vendors, where the ownership and management

rest with one person, are classified as traditional or unorganised retail outlets.

These formats typically require employees with low skills and account for around two-thirds

of the sector's output. These are highly competitive outlets, with minimal rental costs

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(unregistered kiosks or traditional property), cheap labour (work is shared by family

members) and negligible overheads and taxes.

However, unorganised retailers suffer due to poor shopping experience and inability to offer

a wide range of products and value-addition due to lack of sourcing capabilities.The modern Indian consumer is seeking more value in terms of improved availability and

quality, pleasant shopping environment, financing options, trial rooms for clothing products,

return and exchange policies and competitive prices. This has created a rapidly growing

opportunity for organized, modern retail formats to emerge in recent years and grow at a fast

pace.

Inefficiency in the existing supply chains presents further opportunity for organized players

to draw on this large market even as lack of consumer culture and low purchasing power

restricted the development of modern formats. Migration from unorganized to organized retail

has been visible with economic development in most countries.

Changing age profile and disintegration of joint family

India is witnessing a change in the age and income profiles of its over 1 billion population,

which is likely to fuel accelerated consumption in the years to come.

The country is believed to have an average age of 24 years for its population as against 36

years for the USA and 30 years for China. A younger population tends to have higher

aspirations and spends more as it enters the earning phase.

Besides, the gradual disintegration of the traditional Indian joint family system has led to

nuclearisation of families, which in turn has led to enhanced demand.

Add to this an increasing population of working women and new job opportunities in

emerging service sectors such as IT-enabled services, retail, food services, entertainment and

financial services.

With declining interest rates, the aversion of domestic consumers to taking loans is also fast

disappearing. Growing media penetration is leading to a convergence of aspirations of

various classes of consumers, bridging the rural-urban divide.

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Growing disposable income

More Indian households are getting added to the consuming class with the growth in income

levels. The number of households with income of over Rs 45,000 per annum is expected to

grow from 58 million in 1999-2000 to 81 million by 2005-06.This large base of households with growing disposable income is expected to drive demand

for organized retail. Of this, 56 per cent (44. 8 million households) are expected to be

concentrated in urban India.

Changing income demographics, age profile and macro environment are visible in the

growth in consumption of durables. To cite live examples, the installed base of cars, cable

TV subscribers and cellular subscribers has increased significantly over the last five years.

CHALLENGE FACING THE INDIAN RETAIL SECTORE

India is the fifth largest retail destination globally from among thirty emergent markets,

with a size of US$500bn., and has been growing at 7% per annum with a contribution of

14% to the national GDP and employing 7% of the total workforce (only agriculture

employs more) in the country. Retail is the India's industry of the future. It can also be a big

source of employment, more so for unskilled labor. Organized retail accounts for just 5% of

total retail sales and has been growing at 35% CAGR.The sector is expected to grow up to

US$ 535 bn by 2013, with 10% coming from the organized retail sector. Modern retail has

entered India as seen in sprawling shopping centers, multi-storeyed 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 working-women population and emerging opportunities in the services sector are

going to be the key growth drivers of the organized retail sector in India. The present paper

aims to discuss the opportunities and challenge for retail industry and different retail formats

that are prevailing in India.

KEYWORDS: Organized retailing; Consumption spending; emerging retail formats;

Trends in Indian retailing; Retail Players; Challenging Faces retailing in India .

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INTRODUCTION INDIAN RETAIL MARKET: OPPORTUNITIES

AND CHALLENGES PRESENT SENERIO

Retail in India changed radically to become one of the sunrise sectors in the economy. It

gained importance in terms of employment generation and business opportunity. The waves

of globalization, liberalization and privatization have been responsible for this change. But

the retail industry has been hard-hit by the economic downturn, with many retailers putting a

brake on their expansion plans. In this scenario, the kirana stores

Retail in India changed radically to become one of the sunrise sectors in the economy. It

gained importance in terms of employment generation and business opportunity. The waves

of globalization, liberalization and privatization have been responsible for this change. But

the retail industry has been hard-hit by the economic downturn, with many retailers putting abrake on their expansion plans. In this scenario, the kirana stores are flourishing again. India

is the fifth largest retail destination globally from among thirty emergent markets, with a size

of US$500bn., and is expected to grow at 7% over the next 10 years, reaching a size of US$

850 billion by 2020. Traditional retail is expected to grow at 5% and reach a size of US$ 650

billion (76%), while organized retail is expected to grow at 25% and reach a size of US$ 200

billion by 2020.

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The growth of organized retail also helps reduce the inefficiencies in trade a win-win

situation for farmers and consumers. It can also be a big source of employment, more so for

unskilled labor. Organized retail accounts for just 5% of total retail sales and has been

growing at 35% CAGR. The retail industry is definitely one of the pillars of the Indian.Going forward, with the competition intensifying and the costs scaling up, the players who

are able to cater to the needs of the consumers and grow volumes by ensuring footfalls,

while being able to reduce costs, withstand downturns, and face competition will have a

competitive advantage. Since 2010 was a tough year for the retail sector, India fell slightly in

the rankings of the US-based global management consulting firm, A T Kearney, in its Global

Retail Development Index (GRDI) 2011, has ranked India as the fourth most attractive

nation for retail investment, among 30 emerging markets. However, India ranks higher

compared to other emerging markets like Brazil and Russia. Compared to other emerging

markets, India a more stable and stronger economy and penetration levels are low, while

domestic consumption is high. Due to these reasons, India is still one of the most attractive

destinations for international retailers looking at expanding into emerging markets. Retailing

in India is gradually inching its way toward becoming the next boom industry. 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 working-women population and emerging

opportunities in the services sector are going to be the key growth drivers of the organized

retail sector in India.

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EVOLUTION OF INDIAN RETAILING

Retailing in India has a long history. Early retailing in India can be traced back to the weekly

hats where vendors used to put their offerings on sale. Kirana stores have traditionallydominated the Indian retail market for a long time. Most of the retail stores in India are small

family run businesses utilizing predominantly household labor. Organized retail began to

make

its mark in India in the 1970 s when shops like Raymonds, Nallis and Bata were in the

market through their exclusive stores or franchisees. Till the early 1980 s Indian people

did not visit large retail stores to buy ready- to- wear clothing. During the 1990 s , the

wave of liberalization, privatization and globalization ushered in new retailing

formats , modern techniques and exclusive retail outlets like Shoppers Stop(1991),

Pantaloons (1997) and others. Further transformation was witnessed during the early

years of 21st century, with the opening of the numerous supermarkets, departmental

stores, chain stores and malls across the country, and emergence of hypermarkets and big

discount stores. The affluent and the upper middle class enjoyed shopping at these retail

stores, given the improved facilities that they offered such as shopping ambience ,

friendly layout and a single point- of purchase for a wide variety of goods. Organized

Retail in India refers to the modern retail formats like supermarkets and hypermarkets

prevalent in most developed countries. Organized retail remained a dormant sector largely

due to the lack of infrastructure for large-scale retail, absence of product variety and a

conservative Indian consumer. Today the flood of products in the market coupled with

a wealthier, more informed Indian consumer have created the atmosphere for the

entry oforganized retail in India Today people look for better quality

product at cheap rate, better service, better ambience for shopping and

better shopping experience. Organized retail promises to provide all these. The various

formats of organized retail are:

HYPERMARKETS: They store products of multiple brands comprising food items and

non-food items. Supermarkets: These are self service stores selling food and personal care

products. e.g.: Subhiksha. Departmental stores: Retails branded goods in non-food

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categories. e.g.: Shoppers Stop. Specialty Chains: These stores focus on a branded product or

a product category. e.g.: Bata

CONVENIENCE STORES: These are small self service outlet located in crowded urbanarea.

MALLS: A huge enclosures which has different retail formats. e.g.: Nucleus Key players in

organized retail are: Pantaloon Retail.

GLOBAL RETAILING INDUSTRYThe latter half of the 20th Century, in both Europe and North America, has seen the

emergence of the supermarket as the dominant grocery retail form. The reasons why

supermarkets have come to dominate food retailing are not hard to find. The search for

convenience in food shopping and consumption, coupled to car ownership, led to the birth of

the supermarket. As incomes rose and shoppers sought both convenience and new tastes and

stimulation, supermarkets were able to expand the products offered. The invention of the bar

code allowed a store to manage thousands of items and their prices and led to 'just-in-time'store replenishment and the ability to carry tens of thousands of individual items. Computer-

operated depots and logistical systems integrated store replenishment with consumer demand

in a single electronic system. The superstore was born.

On the Global Retail Stage, little has remained the same over the last decade. One of the few

similarities with today is that Wal-Mart was ranked the top retailer in the world then and it

still holds that distinction. Other than Wal-Marts dominance, theres little about todays

environment that looks like the mid-1990s. The global economy has changed, consumer

demand has shifted, and retailers operating systems today are infused with far more

technology than was the case six years ago.

Saturated home markets, fierce competition and restrictive legislation have relentlessly

pushed major food retailers into the globalization mode. Since the mid-1990s, numerous

governments have opened up their economies as well, to the free markets and foreign

investment that has been a plus for many a retailer. However, a more near-term concern, has

been the global economic slowdown that has resulted from dramatic cutback in corporate IT

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and other types of capital spending. Consumers themselves have become much more price

sensitive and conservative in their buying, particularly in the more advanced economies.

From an operational point of view, active practitioners have voiced their opinion that retailer

concerns in 2003 have turned to deflation, lack of pricing power, global over-capacity, lowinterest rates, economic stagnation, slump in world tourism and declining consumer

confidence. But, even before the global economic slowdown that forced retailers into

monitoring costs more effectively, technological advances were a way of life in retail

organizations. Technology has become the real enabler for retailers over the last six years.

Supply chain innovations for retailers were particularly strong in the second half of the

1990s and have continued into today. With all the emphasis on technology and cost-cutting,

a major thrust

The Far East Experience:

The Food Retail Industry in the Far East has evolved into what could be called the breeding

ground for emerging models with countries like Singapore being the home to some of the

big players in the industry in these parts of the world. The presence of all the major players

of the retailing industry is found in Singapore. Singapore has 2 hypermarkets, one run by

Carrefour and the other by Giant Hypermarket, part of Dairy Farm International. According

to the government, there are slightly more than 11,000 market stalls operating in 150

markets located all across Singapore Island. The markets further spread to China, Thailand,

and Malaysia thanks to the major support that the local governments provided in creating the

necessary regulatory framework in establishing their presence. Singapore, Malaysia and

Thailand not only fueled the retail industry within the country, but also attracted hordes of

tourists to experience the shopping experiences that they created in these islands. The

markets are now saturated with no additional space for a new entrant and are expected to

consolidate within the next few years.

Apart from Singapore, which is a more recent development, Japan enjoys an active spot on

the retailers map. The retail industry is as huge as US$ 1088 Billion, with a split of US$

594.8 Billion in the non-food segment and US$ 493.2 Billion in the food-retailing sector.

The leaders in sales are Ito-Yokado, Aeon, Daiei, Takashimaya, and Uny, in that order.

Several retailers, however, have made recent improvements in their warehousing and

distribution technologies to make their presence felt in the Japanese market. Convenience

stores, which are small and suitable in a country where land is very expensive, continue to

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do well. Food, in fact, has been one of the few sectors that have experienced growth over the

last several years. A period of shake up in the industry is likely now that Wal-Mart has

entered Japan. Numerous smaller, less efficient retailers may become takeover targets. The

entire Japanese retail sector will likely undergo some form of restructuring over the nextdecade as a result of overcapacity, dismal profits and the Wal-Mart factor. In Mainland

China, the retail markets have mushroomed over the years of intense economic development

to a very considerable size. The total volume of retail sales for consumer goods and food

increased by 10.6 percent in China over the last couple of years which shows tremendous

growth. Consumer spending has held strong. A decade ago, the top five retail enterprises in

China were all traditional merchandise companies, but now the top five are mainly

supermarkets and chain stores. The world is enamored with Chinas potential and

opportunities. But in medium-sized and small cities and rural areas, traditional retailing

methods, such as department stores and local

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retailing networks, will be sufficient, as consumption is lower. In Indonesia, Wet markets

and supermarkets remained the major distribution channels for food products. Although

these retail sub-sectors also offered non-food products, such as household goods, food

products remained dominant in terms of the number of items. Wet markets distribution offood products tended to be much greater than non-food as these retail channels mainly

provided fresh produce. Conversely, supermarkets had an almost equal distribution, with

food taking up the greater proportion. On the other hand, the distribution of non-food

products benefited from both food and non-food retailers. For example, some food retail

formats offered non-food items, such as supermarkets, hypermarkets, and convenience

stores. These retail outlets provided some basic non-food products, such as toothpaste, soap,

or detergent. However, non-food retail outlets rarely provided food items, except certain

department stores or druggists. In Malaysia, a majority of food retailer outlets offer food

and non-food items, with at least a 70:30 distribution. The traditional food distribution

system in Thailand is through so-called 'wet markets' which sell fruits, vegetables, meat and

fish, together with small 'mom and pop' food stores which distribute dry goods. However,

the rapid growth of the economy, particularly during the decade before the financial crisis

began, has led to dramatic changes in the structure of the food-retailing sector. Modern

supermarkets, superstores, hypermarkets and convenience stores developed at breakneck

pace to service the growing middle class with their demand for more sophisticated food

stores and a greater variety of products many of which were imported.

FOOD RETAIL IN INDIA

Though with a population of a billion and a middle class population of over 300 millions

organized retailing (in the form of food retail chains) is still in its infancy in the Country.

India has been rather slow in joining the Organized Retail Revolution that was rapidly

transforming the economies in the other Asian Tigers. This was largely due to the excellent

food retailing system that was established by the kirana (mom-and-pop) stores that continue

meet with all the requirements of retail requirements albeit without the convenience of the

shopping as provided by the retail chains; and also due to the highly fragmented food supply

chain that is cloaked with several intermediaries (from farm-processor-distributor-retailer)

resulting in huge value loss and high costs. This supplemented with lack of developed food

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processing industry kept the organized chains out of the market place. The correction

process is underway and the systems are being established for effective Business-to-Business

(farmer-processor, processor-retailer) solutions thereby leveraging the core competence of

each player in the supply chain.

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Spread of Organized Retailing in India

Organized retailing is spreading and making its presence felt in different parts of the country.

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

concentration in the South. Though there were traditional family owned retail chains inSouth India such as Nilgiris as early as 1904, the retail revolution happened with various

major business houses foraying into the starting of chains of food retail outlets in South India

with focus on Chennai, Hyderabad and Bangalore markets, preliminarily. In the Indian

context, a countrywide chain in food retailing is yet to be established as lots of Supply Chain

issues need to be answered due to the vast expanse of the country and also diverse cultures

that are present.

Retail Models in India: Current & Emerging

The Indian food retail market is characterized by several co-existing types and formats.

These are:

1. The road side hawkers and the mobile (pushcart variety) retailers.

2. The kirana stores (the Indian equivalent of the mom-and-pop stores of the US), within which

are:

a. Open format more organized outlets

b. Small to medium food retail outlets.

Modern trade the organized retailers

Within modern trade, we have:

1. The discounter (Subhiksha, Apna Bazaar, Margin Free)

2. The value-for-money store (Nilgiris)

3. The experience shop (Food world, Trinethra)

4. The home delivery (Fabmart)

While the focus of this note is on modern organized retail trade, we hereunder present

insights into the smaller, semi and unorganized retailers.

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Hawkers mobile supermarkets

The unorganized sector is characterized by the lari-galla vendors (also known as mobile

supermarket) seen in every Indian byline and is, therefore, difficult to track, measure and

analyses. But they do know their business these lowest cost retailers can be foundwherever more than 10 Indians collect a rural post office, a dusty roadside bus stop or a

village square. As far as location is concerned, these retailers have succeeded beyond all

doubt. They have neither village nor city-wide ambitions nor plans their aim is simply a

long walk down the end of the next lane. This mode of mobile retailers is neither scalable

nor viable over

the longer term, but is certainly replicable all over India. Most retailing of fresh foods in

India occurs in Mandis and roadside hawker parks, which are usually illegal and entrenched.

These are highly organized in their own way. Hawking of food products, cooked food and

FMCG products is a very interesting model of retailing. Much has been written about these

roadside malls from social security issues to their nuisance value. However, if you put

these hawkers together, they are akin to a large supermarket with little or no overheads and

high degree of flexibility in merchandise, display, prices and turnover. While shopping

ambience and the trust factor maybe missing, these hawkers sure have

INTEGRATION OF FOOD INDUSTRY THE KEY DRIVER OF FOOD RETAIL

IN INDIA

India is worlds second largest grower of fruits and vegetables after Brazil and China. While

the agriculture sector has witnessed several leaps of innovation and technological

advancements, the processing sector is still in its infancy. Even with less than 4% processing

of fruits and vegetables, the Food Processing Industry sector in India is one of the largest in

terms of production, consumption within India, export and growth prospects. The

government has accorded it a high priority, with a number of fiscal reliefs and incentives, to

encourage commercialization and value addition to agricultural produce; for minimizing

pre/post harvest wastage, generating employment and export growth. As a result of several

policy initiatives undertaken since liberalization in early 90s, the industry has witnessed fast

growth in most of the segments. In the following few paragraphs, it can be noted that the

processed food market for India is vast and the amount of scope that retail chains would be

exposed to is phenomenal taking into consideration the demographics and raise in standards

of living. Retailers could throng the market with all these processed and packaged foods with

their private labels.

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With the emergence of the big private corporates, NGOs (Non-Government Organizations)

and Government organizations into the food processing scene, India is making big in-roads

into the Food Processing Industry. These corporates and NGOs have reached out to the

farmers and provided them with timely advice and help in the up gradation of farm practiceswith valuable inputs on various areas of farming from sowing to harvesting which includes

quality seed procurement, manures, fertilizers and pesticides etc. Some of the successful

models are that of ITCs e-choupal a model that helps the soybean farmers in contract

producing for ITC for its commodity trading business. The PEPSI experimenting with

Punjab farmers in growing the right quality tomato for its tomato purees and pastes. Some of

the leading food retail chains working with farmers for contract growing greens for supply to

their retail outlets etc etc. These successful models are being replicated with required

changes all over the country and the food industry is getting integrated more strongly.

India has also seen a flurry of food chain majors like McDonalds, Pizza Hut and Kentucky

Fried Chicken finding their place among the Indian consumers. The trend still follows for

food chains in India to spread to almost all cities and towns.

These advancements have revolutionized the integration of the Indian Food Industry and has

played a vital role in solving, to a large extent, major supply chain issues that prevailed. The

trend is that these successful institutional intervention models be replicated and spread in all

segments of the food industry far and wide through the country that benefit all the

incumbents of the chain evolve. This finally helps the retailer as his supply chain becomes

much leaner and vertically integrated. He is in a position to offer a wide variety and highest

degree of convenience to his customer.

ECONOMY

Economic growth at over 5.5% over the last eight years, forex reserves of over $100 billions

and a stable government has helped India to look more progressively towards future. The

economic development was largely attributed to its dominance in the Information

Technology Sector in the global market place and its large English speaking population that

made it the ideal choice for back office operations for MNCs world over. The

manufacturing sector also provided its might to the economic development by going global

hitherto restricting to export of raw materials or intermediaries that has not graduated to

supply of end product be it Pharmaceuticals or C

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