IJRFM Volume 1, Issue 8 (December 2011) (ISSN 2231-5985) Retailing in India-Future Perspective
IJRFM Volume 1, Issue 8 (December 2011) (ISSN 2231-5985) Retailing in India-Future Perspective
(ISSN 2231-5985)
Retailing is the interface between the producer and the individual consumer buying for personal consumption. This excludes direct interface between the manufacturer and institutional buyers such as the government and other bulk customers. A retailer is one who stocks the producers goods and is involved in the act of selling it to the individual consumer, at a margin of profit. As such, retailing is the last link that connects the individual consumer with the manufacturing and distribution chain. Indian economy is growing by 8% a year, its stock market rose by nearly 40% in 2005 and foreign investors are flooding in. There are about nine million small grocery shops in India whichever way you measure it, business in India is booming and as the economy grows so does India's middle class. It is estimated that 70 million Indians in a population of about 1 billion now earn a salary of $18,000 a year, a figure that is set to rise to 140 million by 2011. Many of these people are looking for more choice in where to spend their new-found wealth. The Indian retail sector is now worth about $250bn (140bn) a year, but it is heavily underdeveloped. Over 94% of the market is made up of small, un-computerized family-run stores. Well, the retail industry is divided into organised and unorganized sectors. Organised retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganised retailing, on the other hand, 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.
*Faculty MBA, Maharaja Agrasen Institute of Management and Technology, Jagadhri, Haryana, India. International Journal of Research in Finance & Marketing http://www.mairec.org 66
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Traditional Organized
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Second Phase Range, Portfolio, Former options Third Phase End to end supply chain management, Backend operation, Technology, Process
2011
Source: A Report by Ernst & Young for IBEF,www.ibef.org/download%5c Retail_220708.pdf) Clearly India has started emerging as a new market for all the global players because of changing demand and growing economy. The economy is one of the biggest magnetic factors which is pilling every major retail player outside this economy to enter and get the biggest possible bite of the cake as the cake called Indian market is the most tempting one today. The booming economy itself is not just an invitation but also is creating a necessity for the country to get some major players in the country to serve the demand. The economy of India is a growing economy in every aspect so even the demands are growing. International Journal of Research in Finance & Marketing http://www.mairec.org 68
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Source: www.mospi.gov.in And in particular because of the growing economy and income of people the standard of living is growing at a fast pace too. Which means that the demand of for the organized retail is growing as the consumer is demanding standards which the unorganized retail sector of India in not capable of providing. The increasing influence of the western media has led to a considerable change in the life style of the Indian consumer. The economic well being of Indian Middle class and their growing aspirations for material comforts has also been responsible for consumerism slowly gaining momentum in India. Today the Indian consumer are more inclined towards buying goods like cars, washing machine, audio systems, designers dresses, cosmetics and others. There are three categories of Indian Middle class.
Categories
Levels of Income
TV,
Refrigerator,
mobile,
scooter or car Strivers 5-10 lac per annum Foreign made car, electronic gadgets, vacation, air conditioning,
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Clothing 55%
Graph shows the retail segments ratio in Indian. The major spending in the upper graph is suggesting the fact that the main expenses done by Indians are on cloths and food consumption which are falling under the main operations catogory of retail sector as today the organized retail sector is trying to get in the market in the above shown major areas and India has got a huge business opportunity lying in the open for such companies. Consumerism and increased brand conscientiousness has led to increased number of brands today. Today every product is branded. Sold, oils, flour which was earlier sold as commodities is now branded. There is presence of almost all kinds of global brands in the present market situation. India has also shared of strong brands like Titans, McDonald, Asian paints, ITC, Thumbs-up, Whisky, Kingfisher. The launches of more and more brands into the market increased the demand of shelf space and hence demand for retail outlets. There are various reason for changing customer needs and preferences
1. Single family concepts 2. Dual Income Concepts 3. Limited to One children concepts 4. Willing to spend concepts 5. Brand Preference concepts 6. Personal and Health Care concepts Major contributor to these variables is Indian Middle Class. They are investing a greater portion of their income on upgrading and diversifying their life styles, eating out, and percentage of young population who are more ostentatious in their purchasing habits, as this brand savvy urban population is likely to drive demand for lifestyle products such as perfumes, jewellery and watches.
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Source: Articles on Retailing in Business line, www.thehindubusinessline.com As we can see the that the share of organized retail in India in comparison to many of the countries is very less which suggest that if we want to reach to the level of countries like Thailand and Malaysia we have a lot to be done in the sector in coming future. This means that there is a big scope in Indian economy as well if we talk of retail sector there is yet a lot more to be covered as the difference in the rural and urban market area is huge although the urban market is still not developed there is a big no. to be snatched but in rural market there is almost nothing preset on the name of organized retailing.
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Source: ASSOCHAM study on Retailing in India 2008 As the graph suggest the market area to be covered in order to establish organized retailing in the rural area of the country the companies has a lot of work to do because development in retail sector in India is in a state of beginning.
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2009. India remains among the leaders in the 2010 GRDI and presents major retail opportunities. India's retail market is expected to be worth about US$ 410 billion, with 5 per cent of sales through organized retail, meaning that the opportunity in India remains immense. Retail should continue to grow rapidlyup to US$ 535 billion in 2013, with 10 per cent coming from organized retail, reflecting a fast-growing middle class, demanding higher quality shopping environments and stronger brands, the report added. Bharti Retail strengthened its position in northern India by opening 59 stores, Bharti Wal-Mart is expected to open 10 to 15 wholesale locations in the next three years, and Marks & Spencer is considering plans to open additional outlets in the next few years. Corporate bigwigs such as Reliance, AV Birla, Tata, Godrej, Bharti, Mahindra, ITC, RPG, Pantaloon, Raheja and Wadia Group are expected to invest close to Rs.1 trillion in the business of retail over the next five years. Reliance Retail is investing Rs.30,000 crore in setting up multiple retail formats backed by a 68-strong distribution network, with expected sales of over Rs.100,000 crore by 2010. The Future Groups Pantaloon Retail and RPGs Spencers are also going all out to maintain their dominant position on Indias retail horizon. Subhiksha has earned global accolades for its fast-track growth. The Lifestyle India, Indiabulls, Wadhawan Group, Vishal Retail, petroleum majors IOCL, BPCL & HPCL, and others are firming up more and more ambitious retail expansion plans by the day. While global retailers Metro AG and Shoprite Holdings increase their presence on the Indian retail landscape, the Bharti Wal-mart combine is scouting locations for their joint retail venture. The recent tie-up between Tata and Tesco further adds to the action in retail.
CHALLENGES IN RETAILING
The industry is facing a severe shortage of talented professionals, especially at the middlemanagement level. Most Indian retail players are under serious pressure to make their supply chains more efficient in order to deliver the levels of quality and service that consumers are demanding. Long intermediation chains would increase the costs by 15 per cent. Lack of adequate infrastructure with respect to roads, electricity, cold chains and ports has further led to the impediment of a pan-India network of suppliers. Due to these constraints, retail chains have to resort to multiple vendors for their requirements, thereby, raising costs and prices. The available talent pool does not back retail sector as the sector has only recently emerged from its nascent phase. Retailing is yet to become a preferred career option for most of Indias educated class that has chosen sectors like IT, BPO and financial services. International Journal of Research in Finance & Marketing http://www.mairec.org 73
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Even though the Government is attempting to implement a uniform value-added tax across states, the system is currently plagued with differential tax rates for various states leading to increased costs and complexities in establishing an effective distribution network. Stringent labor laws govern the number of hours worked and minimum wages to be paid leading to limited flexibility of operations and employment of part-time employees. Further, multiple clearances are required by the same company for opening new outlets adding to the costs incurred and time taken to expand presence in the country. The retail sector does not have industry status yet making it difficult for retailers to raise finance from banks to fund their expansion plans.
CONCLUSION
The paper paints a verbal picture of the impending retail boom likely to happen sooner. The signs are all over the place. For few years foreign retailers will have the role of facilitator for to standardize the agribusiness and to unify customers preference across the country. The competition will help to increase the quality of service of the existing local retailers and greater customer satisfaction in Indian society. Concept of self-employment will vanish and sustainable small industries will be roped with the big chains. Paper gives a glimpse of the slow evolution of retail market over the years. A concise description of the drivers of this
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phenomenon was discussed. The likely positive and negative impact of this revolution is enumerated.
REFERENCES
1. CRISIL Research-Retailing Annual Review 2009. 2. HSBC Global Research referred in ASSOCHAM report on Retailing in India 2008. 3. Tata Strategic Management Group-Organized Retailing in India: The next growth frontier, 2006. 4. The McKinney Quarterly-Tracking the growth of Indian Middle class, November 2007. 5. Various Press Sources, the Economic Times, The Hindu Business Line, The Indian Express, The Hindu, The Business Standard. 6. India Retail Report 2009, IMAGES F&R Research. 7. A T Kearney, 8th annual Global Retail Development Index (GRDI) 2009. 8. BMI India Retail Report for the third-quarter of 2010. 9. Report by Ernst & Young for IBEF. 10. Andrew Collins, Competitive Retail Marketing Dynamic Strategies for Winning and Keeping Customers, McGraw-Hill, 1992 11. Arjun Swarup,India`s Retail Revolution, Blog Globaleconomydoesmatter, March, 2007.
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