Final Indian Retail Industry Its Prospects and Challenges

“INDIAN RETAIL INDUSTRY ITS PROSPECTS AND CHALLENGES”
Chapter 1
INTERNATIONAL INSTITUTE OF FOREIGN TRADE AND RESEARCH 1

1. An Overview of Indian Retailing

1. An Overview of Indian Retailing
Retail has been defined as business activities involved in selling goods and services to
consumers for their personal, family or household use. Although retailing has been around for
millennia, the 20th century witnessed a lot of changes in the retail sector, especially in the
developed countries. Modern formats such as department stores, discount stores, Super
markets, convenience stores, fast food outlets, specialty stores, warehouse retails and
hypermarkets have emerged. Retailing has become more organized and chain stores have been
growing at the expense of independent shops. India retailing is undergoing a process of
evaluation and is poised to undergo dramatic transformation. The retail sector employs over 8%
of the national workforce but is characterized by a high degree of fragmentation with over 5
million outlets, 96% of whom are very small with area of less then 50 m2. The retail universe
more than doubled between 1978 and 1996 and the number of outlets per 100 people at an all
India level, increased from 3.7 in 1978 to 5.6 in 1996. For the urban sector alone, the shop
density increased from 4 per 100 people in 1978 to 7.6 per 100 people in 1996 because of their
small size, Indian retailers have very little bargaining power
With manufacturers and perform only a few of the flow in marketing channels unlike in
the case of retailers in developing countries
The corner grocer or the ‘kirana’ store is a key element in the retail in India due to the
housewife’s unwillingness to go long distance for purchasing daily needs. Although
convenience and merchandise were the two important reasons for choosing a store, the choice
criteria varied across categories.
Convenience was indicated by consumer as the moat important reason in the choice of
groceries and fruit outlets, chemist and lifestyle items while merchandise was indicated as the
most important in durables, book and apparel. The traditional format like hawkers, grocers and
paan shop co exist with modern format like supermarket, and non store retailing channels such
as multi level marketing and teleshopping. Example of modern formats include department
store like Bigbazzar, supermarket like Food World, franchise store like Van Heusen and Lee,
discount store like Subiksha, Shop-in-shops, Factory outlets and service retailers. Modern
stores tend to be larger, carry more stock keeping units have a self service format and an
experiential ambience. Modern format also tend to have higher level of sales per unit of space,
stock turnover and gross margin but lower level of net margin as compared to traditional
format. Modernization in retail formats is like to happen quicker in categories like Dry
groceries, electronics, Men’s apparel, Books, Music, Some reshaping and adaptation may also
happen in fresh groceries, Women’s apparel, Fast food and personal care product
In recent years, there has been a slow spread of retail chain in some formats like
supermarket, department store, malls and discount stores. Factors facilitating the spread of
chain are the availability of quality product at a lower price, improved shopping standards,
convenient shopping and display, and blending of shopping with entertainment, and the entry
of industrial house like Goenkas, Rahejas, Piramals and Tatas into retailing.
However formats are mot easily scalable across the country. Several companies have
found that it is not easy to expand beyond some regions and cities as evident from the example
of margin free market and Food world, which are active only in a few states or cities.
Affordable real estate price and availability of sufficient number of economically well off
household in the catchment area are critical requirement that will determine new store viability
and thus the possibility of future expansion.
According to Rao (2001), foreign direct investment in the retail sector in India, although
not yet permitted by government, is desirable, ass it would improve productivity and increase
competitiveness. New stores will introduce efficiency. Customers also gain as prices in the
mew stores tend to be lower. The consequences of modernization in India may be somewhat
different due to lower purchasing power and the new store may cater to only to branded
products aimed at upper income segment. However it will be wise for old style stores to join
together into wholesale and retail groups to improve bargaining power as experience in
developed markets such as UK has that the modernization in retail has led to the decline of
independent mom and pop stores.

The need for fresh perspective while developing theories to explain the new
development has been stressed by Bennett et al (1998). The Indian retail environment is
witnessing several changes on the demand side due to increased per capita income. Changing
lifestyle and increased product availability. Experience of retailing in US show that existing
theories of retail development based on changing consumer need are inadequate to explain new
development. In developed markets, there has been a power shift with power moving from
manufacturers towards retailers. The strategies used by retailers to wrest power include the
development of retailers own brands, and the introduction of slotting allowances which
necessitate payment by manufacturers to retailers for providing shelf space for new product.
Retailers have also used technology effectively to obtain usable information about consumer
buying pattern. The increased power of retailers has led to the introduction of new tactics by
manufacture such as everyday low price, partnership with retailers and increased use of direct
marketing methods because of these issues, a supply side perspective need to be fused with the
demand side in developing theories for explaining modernization in retail

Chapter 2
2. History of Indian Retail Market

2.History of Indian Retail Market
Retail is India’s industry it account for over 10% of the India’s GDP and around 8% OF
The Employment. Retail sector is one of the India’s fastest growing sectors with a 5 %
compounded annual growth rate. India’s huge middle class and its untapped retail industry are
key attraction for global retail giants planning to enter newer market .driven by changing
lifestyle, strong income growth and favorable demographic patterns, Indi retail is expected to
grow 25% annually. It is accepted that retail in India could be worth US$ 175-200 Billion in
2016
The organized retail industry in India had not evolved till the early 1990s. Until then,
the industry was dominated by the un-organized sector. It was a seller market, with a limited
number of trained manpower, tax laws and government regulation all discouraged the growth
of organized retailing in India during that period. Lack of consumer awareness and restriction
over entry of foreign player into the sector also contributed in delay in the growth of organized
retailing. Foundation for organized retail in India was laid by Mr. Kishore Biyani of Pantaloon
Retail India Limited (PRIL) following pantaloon’s success venture a host of Indian business
giants such as Reliance, Bharti, Birla and others are now entering into retail sector. A number
of factors are driving India’s retail market. These include increase in young working
population, hefty pay-packets, nuclear families in urban area, increasing working-women
population, increasing in disposable income and customer aspiration, increases in expenditure
for luxury items and low share of organized retailing, India’s retail boom is manifested in
sprawling shopping center multiplex-malls and huge complexes that offer shopping
entertainment and food all under one roof
But there is a flip side to the boom in the retail sector. It is feared that the entry of
global business giants into organized retail would make redundant the neighborhood kirana
stores resulting in dislocation in traditional economic structure. Also, the growth path for
organized retail in India is not hurdle free. The taxation system still favors small retail business.
With the intrinsic complexities of retailing such as rapid price changes, constant threat of
product obsolescence and low margins there is always a threat that the venture may turn out to
be a loss making one. Retail in India is still at a very early stage. Most retail firms are
companies from other industries that are now entering the retail sector on account of its
amazing potential. There are only a handful of companies with a retail background. One such
company is Nilgiri's from Bangalore that started as a dairy and incorporated other areas in its
business with great success. Their achievement has led to the arrival of numerous other players,
most with the backing of large groups, but usually not with a retail background. Most new
entrants to the India retail scene are real estate groups who see their access to and knowledge of
land, location and construction as prime factors for entering the market.
New retails stores have traditionally started operations in cities like Mumbai and Delhi
where there has been an existing base of metropolitan consumers with ready cash and global
tastes. The new perspective to this trend is that new entirely on the metros. Spending poer in
India is not concentrated any more in just the 4 metros (Delhi, Mumbai, Chennai, and Kolkata).
Smaller but upcoming cities like Chandigarh, Coimbatore, Pune. Ahmadabad, Baroda,
Trivandrum, Cochin, Ludhiana, Simla etc. will fast be catching up to the metros in their
spending capacity.
Cities in south India have taken to the supermarket style of shopping very eagerly and
so far the maximum number of organized grocery and department stores are in Chennai,
Bangalore and Hyderabad. The north has a long way to go to come up to par. International
stores now prefer to gauge the reaction of the public in these cities before investing heavily in a
nation-wide expansion. Milou, the Swiss children's wear retailer, recently opened up its first
store in Chennai, bypassing Delhi and Mumbai. Besides the urban market, India's rural market
has just started to be seen as a viable option and companies who understand what the rural
consumer wants will grow to incredible heights. The bulk of India's population still live in rural
areas and to be able to cater specifically to them will mean generating tremendous amounts of
business.
In the past decade, international companies entering India (Levi's, Pepe, Tommy
Hilfiger, Marks and Spencer, Mango) have generally offered moderately priced to expensive
items. They have aimed for the upper-middle and rich classes of Indian society. These are
consumers who travel abroad often and can buy these items overseas quite easily. Instead,
international companies should be focusing on the lower and lower-middle classes of India.
This is where the real potential is, the inspirational class of consumers who want to lead a better
lives and believe in education, hard work and absorb knowledge from every possible angle. The
phenomenal success of Big Bazaar. Pantaloons version of Wal-Mart, is proof that there is
enormous potential in providing products and services to this class of consumers. Companies
entering India cannot have just one game plan to apply to the entire country as the people, their
tastes, the lifestyle, the budgets etc. are all too divergent. International entrants must enter each
market specifically focusing only on that area to be successful. Business, specifically retail
business must focus on the most important factor in the Indian mind-set---Value for Money.
Indian consumers are ready to pay almost any amount of money for a product or service as long
as they feel they are getting good Value for Money. This is often misconstrued as being tight
fisted or interested in lower priced and/or lower quality products.
Retail growth in the coming five years is expected to be stronger than GDP growth,
driven by changing lifestyles and by strong income growth, which in turn will be supported by
favorable demographic patterns and the extent of which organized retailers success in reaching
lower down the income scale to reach potential consumers towards the bottom of the consumer
pyramid. Growing consumer credit will also help in boosting consumer demand. The structure
of retailing will also develop rapidly. Shopping malls are becoming increasingly common in
large cities, and announced development plans project at least 150 new shopping malls by
2008. The number of department stores is growing much faster than overall retail at an annual
24%. Supermarkets have been taking an increasing share of general food and grocery trade
over the last two decades.
However, Distribution continues to improve but it still remains a major inefficiency.

Poor quality of infrastructure, coupled with poor quality of the distribution sector, results in
logistics costs that are very high as a proportion of GDP, and inventories, which have to be
maintained at an unusually high level. Distribution and marketing is a huge cost in Indian
consumer markets. It's a lot easier to cut manufacturing costs than it is to cut distribution and
marketing costs.
Growth of retail Market in India

Chapter 3
3. Market Overview
3.1Indian retail on the fast-track
3.1.1GRDI
3.1.2GCCI
3.2Indian retail revolution
3.3Transition from traditional to modern retailing
3.4Growth across segments
3.5Increasing penetration of organized retail
3.6Future outlook

3. Market Overview
3.1 Indian retail on the fast-track
 The Indian retail market is the fifth-largest retail destination globally. It is estimated to
grow from the US$ 330 billion in 2007 to US$ 427 billion by 2010 and US$ 637 billion
by 2015.
 Retail contributes to 10 per cent of India’s gross Domestic Product and provides
employment to 8 per cent of India’s working population.
 Higher disposable incomes, easy availability of credit and high exposure to media and
brands has considerably increased the average propensity to consume over the years.
3.1.1 GRDI
India ranked first for the third consecutive year on the global Retail
Development index – 2007, conducted by at Kearney across 30 emerging economies.
India is ranked as the most preferred retail destination for international investors.
3.1.2 GCCI
India ranked first for the fifth time on the global consumer confidence index –
June 2007, conducted by the Nielsen Company. Indians were judged as the world’s
most optimistic consumers, with high financial confidence about their income for the
next 12 months.
3.2 Indian retail revolution

 Modern retail would increase its share in the total retail market to 22 per cent by 2010.
 Indian retail showed a growth rate of 49.73 per cent with a turnover of US$ 25.44
billion in 2007-2008 as against US$ 16.99 billion in 2006-2007.
 Organized retail segment is expected to grow from five per cent to about 14 to 18 per
cent by 2015.

Total Retail Sales
2005-06
2004-05
2003-04
2002-03
2001-02
0 100 200 300 400

US$ Billion
Source: Data monitor
 The market is witnessing a migration from traditional retailing to modern/organized

retailing formats, with an explosive proliferation of malls and branded outlets.
 Modern retailing outlets in India are increasingly matching up to global standards and
witnessing intense competition.
Projected Retail growth
2010-
11P
2006-
07P
2005-06E
0 100 200 300 400 500

Organised Retail Total Retail

Source: Crisis Research Exchange Rate: US$ 1 = INR 41
3.3Transition from traditional to modern retailing

 With a share of over 95 per cent of total retail revenues, traditional retailing continues to
be the backbone of the Indian retail industry.
 Over 12 million small and medium retail outlets exist in India, the highest in any
country.
 Traditional retail formats are highly popular in small towns and cities with primary
presence of neighborhood “kirana” stores, push-cart vendors, “meals” and “mandis”.
 Modern/organized retailing is growing at an aggressive pace in urban India, fuelled by
burgeoning economic activity.
 Increasing number of domestic and international players are setting up base in the
country and expanding their business to tap this growing market.
3.4Growth across segments

 The food and beverages segment accounts for the largest share over 74 per cent of the
total retail pie.
 Traditional retail dominates food, grocery and allied products sector, with grocery and
staples largely sourced from the “kiranas” and push-cart vendors.
 Apparel and consumer durables verticals are the fastest growing verticals.

FoodandBeverages clothingand textile

consumer Durables Jewelleryand watches
home Decor Beautycare
3% 2% 1% 1%
6%
5%
9%
73%
Source: Crisil Research
Revenue of Verticals
Food and Beverages US$ 231,951 million
clothing and textile US$ 29,024 million
consumer Durables US$ 15,171 million
Jewelers and watches US$ 19,390 million
home Decor US$ 9,463 million
Beauty care US$ 6,854 million
Footwear US$ 3,268 million
Books, Music and gifts US$ 2,610 million
 With high telecom penetration in towns and villages and five million new users having
added every month, the mobile phone category is one of the highest growth product
categories.
 With the reducing average age of Indians buying homes, the home décor sector is
growing rapidly coming down.
 Beauty care, home décor, books; music and gifts segments are gaining traction
predominantly in the urban areas and emerging cities.
3.5Increasing penetration of organized retail

 Organized retail in India is largely restricted to the urban and semi-urban regions, with
consumer exposure to modern retailing formats like malls and stand-alone stores, etc.,
for specific product categories.
 Penetration of organized retail is projected to increase to 9.52 per cent in 2009-2010,
with revenues from organized retail touching US$ 43,829 million in 2009-2010.
 Clothing and textiles/apparel segment dominates the organized retail sector with
revenues worth US$ 4.76 billion, contributing to over 36 per cent of the organized retail
pie.
Size of Indian retail market across segments, 2007

Segment Total Retail Organized Retail
Food and grocery 6,422 50
Textile and apparel 980 185
Jewelers and watches 554 30
Consumer durables 415 43
Parma 364 10
Home solutions 351 32
Books, music and gifts 115 15
Others 1,159 111
Total 10,360 475
 Apparel is one of the fastest growing verticals, with higher number of domestic and
foreign brands, and increasing consumer willingness to pay for quality.
 Footwear has the highest organized retail penetration, primarily due to players like Bata
India Pvt. ltd. and liberty, with wide distribution network and customer confidence.
Increasing penetration of organized retail

Comparative penetration of organized retail

India 3% 97%
China 20% 80%
Indone… 30% 70%
Thailand 40% 60%
Malaysia 55% 45%
Taiwan 81% 19%
US 85% 15%
Organised Retail Traditional Retail
Source: Ernst & Young research

3.7Future outlook
 Retail sector revenues pegged at US$ 460.6 billion by 2010-11
 organized retail projected to grow to US$ 43.8 billion
 Modern retail is expected to adapt and imbibe from the traditional formats
 Unorganized formats converging from organized formats, in the form of mushrooming
village malls
Changing Paradigm: The Confidence of Modern and Traditional Retail
1st Phase 2nd Phase 3rd Phase 4th Phase

Segmental size of Indian retail market
Source: IBEF research
 large Indian retail players have already begun formulating strategies for the rural retail
space
 The food and beverages (F&B) sector is expected to touch US$ 116 billion mark by the
end of 2008-2009.

Chapter 4
4. Advantage India
4.1Fastest Growing Economy
4.2Young India
4.3Potential Untapped Market
4.4Abundant Availability of Skilled Labor
4.5 Low Costs of Operations

4 Advantage India
4.1 Fastest Growing Economy
 GDP growth rate of 9.4 per cent posted in 2006-07 is highest ever in last 18 years. With
the first quarter growth rate for 2007-08 estimated at 9.3 per cent, the economy is well
poised to continue its growth story.
 The fast pace of GDP growth is the driving Indian consumerism; Indian consumers
today are more confident and willing to splurge
Gross Domestic Product
Growth Rate (per cent)
Source: Reserve bank of India

4.2 Young India
 Two-thirds of India’s population is under 35 year’s age and more than 60 per cent of the
population will be in the working age group (15-60) till year 2050.
 The median age of 23, opposed to the world median age of 33, sets the emerging young
India apart
 India is home to about 20 per cent of the global population under 25.
Growing young Population
4.3 Potential Untapped Market

 Organized retail penetration is on the rise and offers an attractive proposition for entry
of new players as well as scope for expansion for existing players
 Diverse needs of the Indian consumer offer a spectrum of opportunities, spanning from
rural retailing to luxury retailing
 India is home to the largest base of consumers, and a steadily rising rich and super rich
population
 Impressive retail space availability and growing trend of consumerism in the emerging
cities and small towns add to the market attractiveness
 Indian Retailing giant, Pantaloon Retail India limited, captures a mere 0.3 per cent of
total market in India, compared to Tesco Plc, England’s 14.3 per cent and Wal-Mart
USA’s 20 per cent, signaling out the large untapped potential

Share of organized and traditional Retail
India 3% 97%
China 20% 80%
Indonesia 30% 70%
Thailand 40% 60%
Malaysia 55% 45%
Taiwan 81% 19%
US 85% 15%
Organised Retail Traditional Retail
S
Source: Ernst & Young Retail Report
4.4 Abundant Availability of Skilled Labor

 Over 37 million students were enrolled in about 150,000 pre-college institutes and over
11.7 million in 14,000 higher education institutions in 2005-06.
 Retail management is a sought after education stream amongst students, with over 15
premier institutes offering specialized courses in Retail Management.
 Indian institute of Retail, New Delhi; RPG institute of Retail Management, Mumbai;
and the Retail academy, Ahmadabad are some of the institutes focusing on the
education needs of the retail sector.
4.5 Low Costs of Operations

 Existing players are increasingly turning to tier ii and tier iii cities for retail
establishments and manpower sourcing
 These cities offer significant cost advantage in the form of low-cost skilled resources
and attractive lease rentals/real estate prices.

 With well-educated small town graduates turning to the urban cities for employment,
these graduates are ideal candidates for sales and marketing executive roles in modern
organized retail formats.
Labor cost per worker across Asian countries
Singapore
Korea
Malaysia
Thailand
Philippines
Indonesia
India
China
0 10000 20000 30000
US$per annum
Source: Department of Industrial Policy & Promotion

Chapter 5
5. Policy and regulatory framework
5.1Policy framework
5.1.1 Related liberalizations for Indian retailing

5. Policy and regulatory framework

5.1Policy framework
FDI up to 100 per cent allowed under the automatic route for cash and carry wholesale
trading and export trading and FDI up to 51 per cent is allowed, with prior government
approval for retail trade in ‘Single Brand’ products. FDI in retailing of goods under multiple
Brands, even if the goods are produced by the same manufacturer, are not allowed under the
current guidelines.
Policy
Source IBEF research

5.2 Related liberalizations for Indian retailing

 Value added tax (vat) has been introduced and implemented in most states and union
territories, and across most industry verticals (except a few like textiles) to resolve the
multiple taxation issues and maintain uniform prices across the countries. Octroi has
been abolished in many states to further trade in the retail sector.
 Labor laws in India are under the scanner for higher liberalization, with the government
relaxing certain norms or permitting flexibility in the laws for emerging retail hubs such
as Bangalore and Hyderabad. laws like restriction on working hours, mandatory closure
of the store once a week etc. are being modified to suit the modern retailing context,
while ensuring no adverse impact on the benefits for employees.
 The government is working towards reducing impediments by introducing a single-
window clearance mechanism. This would reduce the entry and establishment timelines
for new players in the market and facilitate timely and hassle free approvals.
 The government is expected to adopt a calibrated approach in land and rent reforms to
improve the real estate regulatory environment and facilitate easy access to retail space
for international investors.
 The government is releasing large tracts of undeveloped land for retail development in
the Mumbai and national capital Region (NCR). This is soon to be followed by other
State governments, with associated benefits for the governments in the form of access to
impressive revenues from sale of land and tax collection from retail developments.
 Solutions to problems related to lease rentals and pro-tenancy laws, which significantly
deter international investors, are being pursued by the government, with initiatives such
as Special economic zones (SEZs), allotment of government controlled land etc.
 The agricultural Produce Marketing committee act (PMCA), which curtails direct
sourcing of agricultural produce (grocery, food grains etc) is proposed to be amended
soon, with a Draft Model act being legislated by the government. The new act promotes
direct marketing to corporate by farmers, setting up of farmers’/consumers’ market and
contract farming.
 The government is encouraging contract farming, as it provides incentives to both the
farmers and the corporate retailers, with the former gaining access to a larger market

and the latter to a direct raw material procurement source at competitive prices. The
government is currently pursuing development and modernization of eight strategically
located “mandis” with availability of cold storage, sorting and grading facilities.

Chapter 6
6. Key trends & Drivers
6.1Metros leading the way
6.1.1Maturing metros: Delhi and Mumbai
6.1.2Delhi
6.1.3Mumbai
6.2Emerging retail hubs
6.2.1Cities on the Fast–track
6.2.2Metros-in-the-making
6.3Thrust verticals across geographies
6.3.1Maturing Metros
6.3.3Cities on the fast-track
6.4Mall space availability
6.5Evolving consumer behavior
6.5.1Changing face of the Indian consumerism
6.5.2Integrated retailing formats
6.6Growing urbanization and disposable incomes driving retail
6.6.1Higher disposable incomes
6.6.2Increasing urbanization
6.7Easy credit: another key driver
6.8Increasing investment activity
6.8.1International players eyeing the Indian market

6. Key trends & Drivers

6.1 Metros leading the way
6.1.1Maturing metros: Delhi and Mumbai
 Six million Indian households are classified as ‘rich’ with annual income over US$
4,700 and over half of them live in Delhi, Mumbai and Bangalore.
 62 per cent of the market for premium products in India is also concentrated in these
three cities.
 85 per cent of India’s retail market is concentrated in the country’s eight largest cities.
 One million households at the top of India’s income map constitute the ‘super-rich’ in
the country. Growing by 20 per cent every year, this segments’ buying behavior is in
line with its corresponding international counterparts. While this segment is a worthy
target for high-end premium products, it is not the key driver of the organized retail
sector.
Available routes for foreign players to enter the retail sector
1994-95 1999-200 2005-6
• Rich (annual income > US$ 4,700) 1 million 3 million 6 million

Benefit Maxi misers: own cars, Pcs households households households
• consuming (US$ 1,000-4,700)

cost-benefit optimizers: have block of branded 29 million 55 million 75 million
consumers goods, 70% of two-wheelers. households households households
refrigerators, washing machine
• climbers (US$ 500-1,000)

cash-constrained benefit seekers: 48 million 66 million 78 million
have at least one major durable households households households
(mixer, sewing machine/television)
• aspirants (US$ 350 - 500)

48 million 32 million 33 million
new entrants into consumption:
households households households
have bicycles, radios, fans
• Destitute (less than US$ 350)

35 million 24 million 17million
hand-to-mouth existence: not buying
households households households
Source: Rao and Natarajan, National Council for Applied

Economic Research, 1996

6.1.2 Delhi
 Delhi/NCR, the fashion capital of India and home to the highest number of rich and
super-rich households, contributed close to US$ 12,683 million to 2005-06 retail
revenues.
 National capital Region (NCR) contributes US$ 16,342 million of retail revenues in
2005-06, and is projected to open doors to a market worth US$ 19,522 million by 2010-
11.
 NCR has the highest mall space availability and the highest number of affluent
households.
6.1.3 Mumbai
 home to a large percentage of high net worth individuals, Mumbai contributes close to
US$ 10,195 million of the total retail revenue
 The retail opportunity for this metro is projected at US$ 14,927 million for 2010-11
 Mumbai is home to different income groups, from the aspirants to the super rich; each
having significant contribution to the retail revenues through various retailing formats
6.2 Emerging retail hubs

6.2.1Cities on the Fast–track
 Bangalore, Hyderabad, Chennai and Kolkata contribute to US$ 15,511 million worth
retail revenues, and projected to touch US$ 25,610 million by 2010-11
 Retail activity in Bangalore, Hyderabad and Chennai is growing at an exceptional rate,
with phenomenal increase in mall space by the day
 Most of the retail sector giants have a footprint in these cities, with future plans of
expanding base, owing to the rapid transition of households from lower income groups
to higher income groups
 With the growth of the IT/ITEs sectors concentrated in these cities, the disposable
incomes have increased rapidly over the years

 Bangalore is considered the Silicon valley of India, with almost all the domestic and
international it giants having a their presence here
 These cities are projected to experience continued robust economic growth in the
coming years
 the emerging and potential cities like Pune, Ahmadabad, Jodhpur, etc. account for about
US$ 15,619 million of retail revenues. The combined retail potential of these cities is
expected to soar to US$ 23,563 million by 2010-11.
 Pune is the fastest emerging destination for the services sector, closely followed by
Ahmadabad. These cities are now among the chosen business destinations by corporate
houses.
 The migration from traditional retail to the modern formats is largely noticeable in these
two cities, with explosive increase in the mall space availability and branded outlets.
 Approximately 315 hypermarkets are expected to come into existence in tier-I and tier-
II cities across India by the end of 2011.
 52 leading towns are likely to emerge as retail hubs by 2011 with tier-iii towns gaining
market potential to host five or more hypermarkets.
Emerging retail hubs

6.3 Thrust verticals across geographies

6.3.1 Maturing Metros
 Delhi and Mumbai offer an attractive market for luxury and lifestyle retailing, with
these cities being home to the highest number of households belonging to the affluent
category (with income greater than US$ 24,000 per annum).
 Delhi and Mumbai are home to the largest percentage of affluent households in the
country, accounting for over 30 per cent of total retail revenues. The affluent household
percentage is expected to double by 2010-11, and is projected to trigger high growth in
the luxury retailing segment.
6.3.2 Metros-in-the-making
 These cities currently are exposed primarily to the “value”
 The consuming class accounts for over 60 per cent of the total households, offering
potential in the food and grocery, consumer goods and apparel verticals.
 Players like the Future group, ITC e-choupal, the aditya Birla nuvo group; Reliance
Fresh, etc. are aiming to tap the agri-produce and allied market to gain the “first-mover”
advantage.
6.3.3 Cities on the fast-track

 Growing disposable incomes, the consuming class and the increasing standard of living
across these cities translate to opportunities across all the retailing formats and verticals.
 The mushrooming lifestyle formats in these cities bolstered the increasing exposure of
consumer base to international brands and willingness to spend for quality.
 These cities most often also serve as the test beds for innovative store formats.

6.4 Mall space availability

 The number of malls in Delhi, Mumbai, Hyderabad and Pune may touch 250 by 2010
against the present 40.
 The total number of malls is projected to increase to 600 by 2010-2011.
Total number of malls in top eight cities
Source: Indian Realty News, 2007

 From the setting up of India’s first mall in 1999, there has been a steady migration of
retail from the traditional to the organized format, the trend being more pronounced in
the urban areas.
 The total mall space across seven cities (NCR, Mumbai, Bangalore, Kolkata,
Hyderabad, Pune and Chennai) was spread over 40 million Sq.ft. in 2006-2007. Mall
space is projected to increase to over 60 million Sq.ft. in 2007-2008.

Mall Space Distribution in top 7 cities (in million sq. ft.)
Mumbai
24% Pune
47% Kolkatta
4% Hyderabad
9% Bengaluru
chennai
10%
4% NCR
2%
Source: Jones Lang LaSalle Meghraj Retail Report
6.5 Evolving consumer behavior

6.5.1 Changing face of the Indian consumerism
 The lifestyle patterns of India’s middle class are getting redefined with exposure to
western values and growing brand consciousness
 From a ‘saving’ to a ‘spending’ mindset, the outlook for Indian consumerism is buoyant
 Marked increase in the number of new entrants and player revenues across all the
verticals.
 Due to increased consumer exposure to the latest trends and brands driven by the mass
media, retail revenues are soaring
6.5.2 Integrated retailing formats
 Retailers are rapidly integrating and diversifying their store formats to cater to emerging
trends in consumer behavior.
 Food Bazaar stocks staples in bulk; weighing and packing them for customers in their
presence keeping in mind the ‘touch and feel’ mindset of buying staples while Reliance
Fresh stocks fresh flowers and vegetables.

 Retailers are expanding into the emerging cities with modest store formats as opposed
to the glitzy mall formats adopted for metros.
Modern retailing formats:

Source: IBEF Research
Malls
Department Stores
6.6 Growing urbanization Discounters
and disposable incomes cash and carry
driving retail
6.6.1 Higher disposable incomes
 Disposable incomes are on the rise with the economy providing new avenues of
employment in IT/ITEs and other sunrise sectors like biotech, hospitality etc.
 Employers are offering attractive compensation packages and perquisites to skilled
Indian professionals
 Indians have an ability to spend over US$ 30,000 a year (PPP terms) on conspicuous
consumption. Disposable incomes are expected to rise at an average of 8.5 per cent per
annum till 2015.
Personal Disposable income
Y-o-y Percentage growth

6.6.2 Increasing urbanization

 India’s urban population is estimated at 286 million, constituting 27.8 per cent of the
total population, as of 2001
 The urban population is projected to increase to 468 million, constituting 33.4 per cent
of the total projected population of 1,200 million by 2010-11.
 Increase in the number of young employed executives and the thinning gender divide is
stimulating growth of modern retailing in urban areas.

6.7Easy credit: another key driver

 Banks and financial institutions have increased their range and amount of retail credit
and service offerings.
 Average exposure of banks to retail loans was at 25.5 per cent of total loans in 2005-06.
 growing acceptance of plastic money across small and medium
Credit card growth (in millions)
Credit card growth (in percentage)

 Disbursal of home loans and personal loans are surging, with banks and institutions
issuing loans with attractive interest rates and easy monthly installment options.
Debit card growth (in millions)]
Debit card growth (in percentage)

6.8 Increasing investment activity

6.8.1 International players eyeing the Indian market
 Wall-Mart has entered into a 50:50 Joint venture and Franchisee agreement with Bhatia
Retail ltd. and plans to set up its first cash-n-carry outlet by 2007-08.
 The Starbucks – Pepsi co. joint venture is expected to provide Indian market access to
the world’s largest coffee chain.
 French retail major, Carrefour, is set to finalize its entry route to India.
target acquirer/investor value in US$

million
Provogue (India) Fidelity, new Vernon, Blackstone, genesis capital, 33.24
artist capital and liberty International
Mudra lifestyle SIDBI venture capital and State Bank 3.27
Flemingo Duty Free citigroup venture capital 22.73
Shops
home Solutions kotak Private equity 12.00
Retail India
S kumars ADM capital 82.00
nationwide
Brandhouse Retail ADM capital 25.00
Source: IBEF Research
Breakup of VC/PE investments in 2006(value)

11%
4% 6% 28%
5%
8%
18%
10%
10%
IT-BPO BFSI
Manufacturing Engg. & Construction
Healthcare & Life Sciences Real Estate
Source: NASSCOM
Breakup of VC/PE investments in 2006(volume)
IT-BPO
20% BFSI
25%
Manufacturing
Engg. &
13% Construction
Healthcare & Life
9%
Sciences
Real Estate
2% 13% Media
8%
3% 7%
F&B and Retail
Source: NASSCOM

Chapter 7
7. Key Players
7.1Pantaloon Retail India Limited
7.2Shoppers Stop Limited
7.3Key players
7.4Players across verticals
7.5International retailers

7 Key Players
7.1 Pantaloon Retail India Limited
 Pantaloon Retail India limited (PRIL), a Future group venture, started its operations
with Pantaloon Shoppe in 1993 and has since emerged to be the retailing giant of India
with over five million square feet of retail space spread over 450 stores across 40 cities
in India.
 The company clocked revenues worth US$ 887 million in 2007-2008, a 75 per cent
increase over 2006-2007. The net profit stood at US$ 29.75 million with a hike of 87
per cent over the previous year.
 Pantaloon Retail has many firsts to its name in the Indian market, with discounted store
formats like Brand Factory etc. setting benchmarks for new players entering the market.
innovative store formats like hometown - a one-stop shop for all the home requirements,
Sports Bar - a sports theme restaurant complete with game courts and screens for match
viewing, health city - a value segment targeted spa and beauty care venture etc., are
hitting the market, consolidating the market position of PRIL.
 the unique selling proposition of Pantaloon Retail is the dual approach to tap both the
“value” segment and ‘lifestyle and luxury’ segment, by establishing retail formats in
each segment like Big Bazaar, Fashion Station etc. aimed at value retailing while
central, Pantaloons etc. captures the lifestyle segment consumers.

95.6
2006-07
846
33.2
2005-06
472
21.1
2004-05
264
11.2
2003-04
161
0 100 200 300 400 500 600 700 800 900
OperatingIncome Retail Turnover
Source: Company Reports
7.2 Shoppers Stop Limited

 Shoppers Stop, established in 1991 with its flagship store - Shoppers Stop, has now
expanded to over 100 retail outlets spread across 1.1 million square feet of built-up area,
spanning the entire spectrum of retailing verticals and formats.
 Private labels account for more than 21 per cent of its retail revenues, with Shoppers
Stop registering an impressive total number of transactions to customer footfalls ratio
(conversion ratio) of 27 per cent.
 Strategic partnerships with international retailing players like Mother care Plc of Britain
and leisure & allied industries of Australia, are aiding Shoppers Stop in catering to
niche markets.
 Aggressive expansion plans are in pipeline for formats like time zone, a leisure and
entertainment format venture and Brio - the coffee bar located strategically in their
crossword bookstores.

2006- 16.7
07 202
2005- 11.9
06 155
2004- 8.4
05 109
2003- 3.8
04 84
0 50 100 150 200 250

Retail Turnover OperatingIncome
Source: Company Reports
7.3 Key players
Source: IBEF Reports


7.4 Players across verticals

7.5 International retailers

International retailers are fast expanding their business in India to tap the large
consumer base. Reebok has set up its largest store in the world in Hyderabad, Tommy Hilfiger
and Levis have over 20,000 square feet of retail space and stand-alone stores across major
metros. The fast-food giants like Pizza hut, McDonalds, Subway etc. are expanding at a fast
pace, with the emergence tier ii and tier iii cities and expanding markets in these cities.

Chapter 8
8. Key opportunities
8.1Innovative formats
8.1.1Players taking the “first-mover advantage”
8.1.2Specialty formats
8.2India as the sourcing hub
8.2.1Emergence of India as Retail Sourcing Hub
8.2.2Increasing Technology Adoption
8.3Click-to-buy phenomenon
8.3.1Online Retailing
8.4Emerging rural retailing
8.5Resplendent luxury market
8.6Leisure and entertainment
8.7Cashing-in on the transit channels
8.8Other opportunities
8.8.1Special Economic Zone (SEZ) synergies
8.8.2Tourism Related Opportunities

8. Key opportunities
8.1 Innovative formats
8.1.1Players taking the “first-mover advantage”
 More than 72 per cent of India’s population resides in small towns and rural areas with
agric-produce retailing forming the lion’s share of total retail pie in these areas, offering
immense potential for food and grocery verticals and value retailing
 Players like Reliance Retail, aditya Birla nuvo group’s trinethra Supermarket, etc. have
aggressive plans to tap these emerging cities.
 Players which have established their presence in the top metros are planning their
establishments in these emerging cities to gain the first-mover advantage over other
entrants.
8.1.2Specialty formats
 Formats like ‘wedding Malls’, which are unheard of in the far west are making their
presence in the Indian market. These stores stock the complete range of wedding needs
from apparel to jeweler.
 Khadi & village industries commission (KVIC) is set to roll out a string of swanky
‘khadi Plazas’, which would showcase the handloom textiles in a new form. Over 7,000
existing outlets are to be beefed up to cater to the changing tastes of the young
consumer.
 a latest addition to the diverse formats are the ‘village Malls’, with the fair price shops
being revamped to cater to larger needs of the local populations. Gujarat government
has spearheaded this initiative with 512 “malls” launched and another 508 on the anvil.

8.2India as the sourcing hub

8.2.1Emergence of India as Retail Sourcing Hub
 Riding on the back of a strong manufacturing industry, India is fast emerging as an
important global sourcing hub for top international brands
 wall-Mart’s sourcing operations were estimated at US$ one billion, Tesco’s around US$
100 million and Marks & Spencer around US$ 145 million
 Textiles dominated the sourcing scenario through the 1990s, with the dawn of the new
millennium ushering in wider markets for consumer goods and footwear.
 Unilever sources major chunk of their FMCG products from its wholly owned Indian
subsidiary, hindustanUnilever limited
 Adidas, next and Calvin Klein are expected to increase sourcing from India, with adidas
opening its first office in Bangalore.
8.2.2 Increasing Technology Adoption

 With modern retail store formats growing in size, players are increasingly deploying
advanced information technology tools for managing their supply chain, warehousing
and logistics requirements.
 Retail constituted eight per cent of it export revenues in 2005-06, and was also one of
the key sectors driving the domestic it expenditure.
 Apart from industry giants, the small scale retailers are also embracing it solutions to
spruce up their operations.
 Big league it firms like IBM India, oracle, SAP are developing solutions smaller
retailers, such as merchandising solutions, solutions for store-level point of sale (POS)
needs and hardware requirements, collaboration tools.

8.3Click-to-buy phenomenon
8.3.1Online Retailing
 increase in the number of broadband and dial-up internet connections, limited personal
time, increased use of plastic money, and large young population that spends a
considerable time online are facilitating growth of online shopping.
 Players like Rediff.com, eBay. In, indiatimes.com was the first entrants in the Indian
online retail space, clocking impressive revenues through online transactions. Recent
players to enter this niche market include the Pantaloons Retail India ltd., through its
Futurebazaar.com venture.
 There is a growing trend among retailers maintaining their own portals for easy
consumer access, facilitating online purchase of merchandise like Tata indicom’s i-
choose.in, G&B’s godrejlifespace.com.
 Many smaller retail portals are mushrooming on the World Wide Web, meeting niche
Indian consumer requirements like ethnic apparel, handicrafts and jeweler.
 with value-added services like cash-on-delivery to facilitate online transactions by
consumers without credit/debit card, unique bidding schemes etc, e-commerce is fast
gaining acceptance in India
8.4 Emerging rural retailing

 Rural hypermarkets are growing at a blistering pace, providing multiple services from
creating a platform to buy and sell farm produce to banks and restaurants.
 ITC choupal Saagar: currently there are 14 outlets in operation, and ITC plans to
increase the number to 700 over the next 7-10 years. Choupal Saagar retails products
and also acts as a procurement hub for ITC’s e-choupals where farmers are offered
better rates for their produce, as compared with the prevalent mandi rates for the same.
 DSCL’s hariyali kisan Bazaar: over 70 outlets and proposed to touch 200 over the next
12 months.
 Indian Oil Corporation’s kisan Seva Kendra: offers fuel, agri-produce, FMCG and value
added services across a network of over 1400 outlets.

 Reliance Retail and Pantaloon Retail are expected to venture more aggressively into the
rural retailing space.
 Asian Development Bank would lend US$ 150 million for revival of khadi. This will
bolster employment in the rural areas.
8.5 Resplendent luxury market

 Affluent households account for just about 4.5 per cent of the national population, but
account for more than 22 per cent of the total retail sales, clocking US$ 62,340 million
revenues.
 The number of affluent households is projected to increase to 8.5 per cent, translating
into a retail opportunity worth US$ 152,000 million in 2010-11
 Delhi and Mumbai are the prime contributors to the luxury retail space, with the highest
density of luxury brand outlets
 The location these outlets are typically limited to five-star hotels and high-end mall
spaces, with limited footfalls and consumer exposure.
 Players have aggressive expansion plans in the pipeline, the investor confidence
reinforced by the booming sales.
 The two Louis vuitton stores in Mumbai and Delhi averaged monthly sales of US$ 13
million for 2005-06, and Hugo Boss is expanding to other metros, propelled by its 30
per cent sales growth in India.
8.6 Leisure and entertainment

 Entertainment retail is redefining Indian lifestyles with multiplexes, gaming zones, etc.
mushrooming as much as the malls.
 Huge entertainment and leisure opportunity owing to the fact that that there exist 10
screens per million populations in India compared to 40 screens in the European market
and 117 in the US.
 The total leisure and entertainment revenues were pegged at US$ eight billion for 2005-
06, a 14 per cent increase over 2004-05.

 Organized retail grew at an average rate of 30 per cent over 2004-05, and is expected to
maintain its pace for the coming years, with Indian players investing heavily in this
market.
 Reliance InfoTech’s adlabs and Shopper’s Stop’s time zone have aggressive expansion
plans in the pipeline, with retailers exploring the JV option with international giants
Operator Multiplexes Screens
Operator Multiplexes Screens in Screens projected

2005-06 for 2010-11
Adlabs 22 80 225
cinemas
Cinemax 11 36 141
Dt cinema 3 6 NA
e-city 25 95 1500
ventures
inox leisure 15 54 165
ltd
M2k 2 5 NA
cinemas
PVR ltd 21 82 208
Prasad 2 5 NA
IMAX
Pyramid 290 325 2000
Saimira
Shringar 7 30 235
waves 3 13 200
cinemas
Source: CB Richard Ellis
8.7 Cashing-in on the transit channels

 Fast paced infrastructure development, including development of new international

airports and metro rails is opening up new avenues for retail
 The airport authority of India is embarking on the up gradation of 9 metro airports and
15 non-metro airports, with plans to spruce up the retail space in the airports as well
 the joint-venture between shopper’s Stop and the nuance group-AG has won the
contract for setting up duty-free and duty-paid retailing outlets at the upcoming
Bangalore and Hyderabad international airports
 Mass Rapid transit System, currently in operation in Delhi, and in the pipeline in other
metro cities like Bangalore and Hyderabad is also expected to offer immense retailing
potential
 with 53 metro stations in operation and 79 stations proposed to come up by 2010 in
Delhi’s Metro Rail, several retailers are in the fray to capitalize on the commercial
potential
 After the Delhi Metro Rail corporation awarded omaxe limited, the chawri Bazaar
commercial Development”. Omaxe has entered into a consortium agreement with vishal
Retail, a Delhi based retailing major.
8.8 Other opportunities

8.8.1 Special Economic Zone (SEZ) synergies
 154 Special economic zones are notified as on October 3, 2007, spread over states and
union territories of India.
 SEZs offer ample retail opportunities, with a percentage of SEZ area earmarked for
retailing in the non-processing zone.
 The size of the area in the retailing space is calculated considering various parameters
like type of SEZ, projected size of the residential population in SEZ, and population in
the catchment area.
 IT/ITES based SEZs offer impressive retailing opportunities; the target segment for
such SEZs would be the urban population with high-disposable incomes.

8.8.2 Tourism Related Opportunities

 With tourist’s inflow increasing impressively with each passing year, tourism holds the
key to a large retailing opportunity. In 2005-06, approximately 4.45 million foreign
tourists arrived in India, a 13.5 per cent growth over 2004-05.
 Retailing of regional handicrafts and artifacts has the potential to capture the interest of
foreign tourists, given the rich and diverse cultural heritage of India
 The Indian tourism Board’s Dilli haat (a crafts bazaar located in Delhi) retails the
regional crafts of various states, attracting a large number of tourists.
 The concept is fast gaining traction in other destinations in India such as Jaipur,
Mumbai and Hyderabad.

Chapter 9
9. FDI in Indian retailing sector
9.1Need for larger FDI
9.2Challenges Facing Larger FDI
9.3Benefits of larger FDI
9.4Political impact of larger FDI
9.5Social Impact of Larger FDI

9 FDI in Indian retailing sector
Retailing is the largest private sector industry in the world economy with the global
industry size exceeding $6.6 trillion and a latest survey has projected India as the top
destination for retail investors. And the further upsurge is anticipated in the retail sector as the
Government of opened up 51% FDI in single brand retail outlets. And as the government is in a
process to initiate a second phase of reforms, it is cautiously exploring the avenues for multi-
brand segment. The Government is seeking for these options keeping in view the existing
social framework of India and the will ensure that the entry of global retail giants do not
displace the existing employment in the retail business.
Industry experts are sensitive to the point that local markets have an edge over the retail
investors in India as they have unique advantages such as an understanding of local needs and
extended service like home delivery. As the FDI influence on the Indian retail sector sets in, the
total size of the retail trade is expected to grow extensively in the coming years and the
consumer segments patronizing the big malls will create frenzy for organized retailing
predicting a growth of 25-30 per cent per annum over the next decade. Moreover, Indian retail
chains would get integrated with global supply chains since FDI will bring in technology,
quality standards and marketing thereby, leading to new economic opportunities and creating
more employment generation.
Industry trends for retail sector indicate that organized retailing has major impact in
controlling inflation because large organized retailers are able to buy directly from producers at
most competitive prices. World Bank attributes the opening of the retail sector to FDI to be
beneficial for India in terms of price and availability of products as it would give a boost to
food products, textiles and garments, leather products, etc., to benefit from large-scale
procurement by international chains; in turn, creating jobs opportunities at various levels.
As foreign investors exploring their potentials in the retail sector, are keen on
developing malls in India, the size of organized retailing is expected to touch $30 billion by
2010 or approximately 10 per cent of the total. This has initiated market-entry announcement
from some retailers and has signaled to international retailers about India’s seriousness in
promoting the sector. While there are reports of international retailers like Wal-Mart analyzing
business opportunities in India; Reliance, the largest Indian conglomerate is investing $3.4
billion to become India’s largest contemporary retailer. There are also reports of investments
for ‘Hyper city Retail’ by K.Raheja Group to establish 55 hypermarkets by 2015. All these
factors will contribute in taking Indian retail business to unexpected growth based on the
consumer preference for shopping in congenial environs and also availability of quality real
estate.
9.1 Need for larger FDI

The need for larger FDI is because India is at a stage where it needs US investments,
technology, and management policies to sustain and enhance its economic growth. In 2006,
Foreign Direct Investment (FDI) in India amounted to US$37 billion, out of which only $5
billion was from the US.
This was not a very encouraging figure in view of the goal of increasing the GDP by
34-36%. Therefore, there is a need for larger FDIs.
India still requires an FDI component equal to 4% of the GDP. The US needs to invest
more in various sectors of the Indian economy. There is a potential to attract more FDIs in
areas like infrastructure, IT hardware, automobiles, leather, textiles, gems, jeweler, and the
financial sector. As such, India is rated as the 2nd best economy to invest in, after China.
Surprisingly, the US is rated 3rd in this domain!
Focus is on the insurance and banking sector, in context with Foreign Direct
Investments. Only 10% of the insurance sector has been tapped for foreign
investment. Foreign companies need to persuade the parliament for increasing Foreign Direct
Investment capital.
The banking sector is in the process of liberalization which will continue till 2009. The
insurance sector is looking forward to increase in the capital as more and more FDIs happen.
So the insurance sector is also planning on liberalization, taking a cue from the banking sector.

The need for larger FDI calls for major issues and areas to be taken into consideration, such
as:
 Market potential and accessibility
 Political stability
 Market infrastructure
 Easy currency conversion
India is the ideal country to make Foreign Direct investments in because of its features like:
 Developing economy
 Low salaried employees
 Low wage workers
 Abundant human resources
 Big private economy
India is looking forward to a high growth rate of almost 16% – double that of the
current 8%. Hence, there is a distinct need for larger FDI.
Further, FDI prospects are expected to be bright if liberalization is initiated in the

telecom sector as well. Already, brands like Hutchison, Vodafone, and SingTel are in the
Indian market and thanks to these investors, the FDI capital in this sector has been raised to
74%.
There are others necessities which a larger FDI will cater to viz., employment
generation, income generation, technology transfer, and economic stability. Hence, the need for
larger FDI is a pressing situation these days in India. Foreign countries are well aware of this,
and many of them are taking extra initiative to invest in the Indian economy
9.2 Challenges Facing Larger FDI

The challenges facing larger FDI in India are in spite of the fact that more than 100 of
Fortune 500 companies are already investing in India. These FDIs are already generating
employment opportunities, income, technology transfer and economic stability.
India is focusing on maximizing political and social stability along with a regulatory
environment. In spite of the obvious advantages of FDIs, there are quite a few challenges
facing larger FDIs in India, such as:
 Resource challenge: India is known to have huge amounts of resources. There is
manpower and significant availability of fixed and working capital. At the same time,
there are some underexploited or unexploited resources. The resources are well
available in the rural as well as the urban areas. The focus is to increase infrastructure
10 years down the line, for which the requirement will be an amount of about US$ 150
billion. This is the first step to overcome challenges facing larger FDI.
 Equity challenge: India is definitely developing in a much faster pace now than before
but in spite of that it can be identified that developments have taken place unevenly.
This means that while the more urban areas have been tapped, the poorer sections are
inadequately exploited. To get the complete picture of growth, it is essential to make
sure that the rural section has more or less the same amount of development as the
urbanized ones. Thus, fostering social equality and at the same time, a balanced
economic growth.
 Political Challenge: The support of the political structure has to be there towards the
investing countries abroad. This can be worked out when foreign investors put forward
their persuasion for increasing FDI capital in various sectors like banking, and
insurance. So, there has to be a common ground between the Parliament and the foreign
countries investing in India. This would increase the reforms in the FDI area of the
country.
 Federal Challenge: Very important among the major challenges facing larger FDI is
the need to speed up the implementation of policies, rules, and regulations. The vital
part is to keep the implementation of policies in all the states of India at par. Thus,
asking for equal speed in policy implementation among the states in India is important.
India must also focus on areas of poverty reduction, trade liberalization, and banking
and insurance liberalization. Challenges facing larger FDI are not just restricted to the ones
mentioned above, because trade relations with foreign investors will always bring in new
challenges in investments.
9.3 Benefits of larger FDI

The benefits of larger FDI can be tangibly felt in the domains pertaining to
technological advancements, generation of export, production improvements, and hastening
of manufacturing employment.
Capital inflow into India has increased and so have the exports from the country.
Thanks to the economic boom India is experiencing, some Indian companies are doing better
than even the multinational corporations.
The benefits of larger FDI have been briefly elaborated below:

 Improved human capital: Indian industries are predominantly labor based but there is
also a significant number of capital based companies. A capital intensive set up is
indeed an expensive proposition but with the existing as well as potential labor
intensive industries, India can look forward to more professional and sophisticated
number of workers and employees at every level. Human capital, in terms of quantity
was never a big problem in India, thanks to its huge population and quality and
efficiency in work has been ushered in by the MNCs.
 Competition Effect: The benefits of larger FDIs will include the launching and
marketing of new products and brands in the Indian market. New products are used by
the multinational corporations and then demonstrated in the Indian market. The
processes followed by MNCs in India serve to have a demonstration effect on Indian
companies which in turn improves market competition and the standard of products.
This had started in the 1980s due to Japanese firms and as a result, Indian firms started
inculcating the practices of QC, JIT, and QA.
 Manufacturing Employment: Larger FDIs definitely generate more and

more employment opportunities. The opportunities are highly experienced in the
manufacturing area. This not only includes the quality human resource but also provides
for quick and efficient work and effective outcomes.
 New Technology: Technological advancements take place as larger FDIs come in. In
fact, three-fifths of the FDIs result in new and advanced technologies. The local
industry is benefiting from this to a large extent. This as a result, would encourage more
and more foreign firms for investment.
The benefits of larger FDI are, however, very few in number but as India capitalizes on the
above mentioned benefits, there will be more competition in the market at large and the rural
sector of the country will be in the process of reformation, thus bringing about a socio-
economic stability
9.4 Political impact of larger FDI

The political impact of larger FDI in India has transformed the Indian investment
scenario in various areas. The fact that more multinational corporations are investing in India
signifies that India is increasingly focusing on the industrial sector.
The increase in Foreign Direct Investments resulted in the Government of India

making critical reforms in 1991 and since then, the emphasis on Indian industry has been
constantly on the rise.
The political impact of larger FDI is influencing the government to initialize and
support concepts like liberalization. The political climate is focusing on liberalization of
banking, telecom, infrastructure, and insurance sectors. The political scenario is changing
gradually, and is accepting the concept of Foreign Direct Investment widely within the country.
The government is looking forward to working on the rural areas and bringing about equality in
terms of investment and wealth distribution with the urban areas.

In November, 1991 there was tremendous activism against opening up the Indian
market to multinational corporations. But now, the situation is completely different since there
has been an increase in the investment of multinational corporations. The political scenario too
is learning to accept globalization and privatization with an open and progressive outlook.
Reformation in this regard is taking place in the public sector, financial services, and tax
structures as well.
The political scenario of India is looking forward to Foreign Direct Investment as a

mechanism for development. In fact, there has been development in the fields of land use,
water, power generation, and roads. This point towards the great political impact of larger FDI.
The increase in FDI flow has strengthened the foreign political relations and now
foreign companies are trying to persuade the Indian Parliament to increase FDI capital
depending on the sector. There are some chief bodies and boards that have been set up for the
purpose of Foreign Direct Investment, such as:
 Project Approval Board (PAB)
 Licensing Committee (LC)
 District Industries Centers
 Investment Promotion and Infrastructure Development Cell
 Foreign Investment Promotion Board (1991)
 Foreign Investment Promotion Council (1996)
 Foreign Investment Implementation Authority (1999)
 Investment Commission (2004)
Thus, the political impact of larger FDI has made prospects for India's future relationships with
foreign companies really bright and exciting.
9.5 Social Impact of Larger FDI

The social impact of larger FDI is dependent on India's policies and institutions. The
flexibility of the labor market would determine employment opportunities. The extents to
which the lower income groups can take advantage of the growth policies determine the
growth-poverty relationship.
The production in the fields of physical and social infrastructure determines the regional
developments. The Indian industries are predominantly labor based but there are also many
capital based companies. Capital intensive set up is an expensive proposition but India can look
forward to more professional and sophisticated number of workers and employees at all levels.
Human capital in terms of quantity was never a big problem in India due to its huge population
added emphasis must be laid on the quality and efficiency in work. This is brought about
by MNCs.
Foreign Direct Investments foster relations, co-operation, and harmony between India
and foreign countries. The social impact of larger FDI includes the product market as well
because many new products come into the market as a consequence of FDIs. As a result, the
people of India enjoy unprecedented exposure to branded and quality goods. In fact, various
training methods, personality grooming, and soft skills are given by multinational
corporations which impart value to human resources.
Owing to social impact of larger FDI, India also enhances its educational system. Since
2003, the Indian government has been allowing 100% FDIs in education, which means that
foreign schools, colleges, and universities can set up wholly owned subsidiaries in India.
Students passing out of these institutes will be awarded foreign degrees and certificates. The
social impact of larger FDI in education is such that the number of foreign students pursuing
higher education in India has increased by a large margin. Also, the 'brain-drain' issue has also
been checked to a significant extent since the number of students going out of India has also
reduced.
Even the civil society can work with the government and help in reducing bureaucratic
hassles and interferences. The increase in FDI in India is also helping in the liberalization of
labor through which the inequality in wage earnings will be reduced.
There is implementation of higher education and training for the laborers. The health
facilities also increase with better and sophisticated products and processes. India is definitely
developing in a much faster pace now than before but in spite of that, it can be identified that
developments have taken place unevenly. This means that while the more urban areas have
been tapped, the poorer sections are inadequately reached out to. To get the complete picture of
growth, it is essential to make sure that the rural section has equal amount of development as
the urbanized ones. FDI helps to focus in this area thus, fostering social equality and at the
same time a balanced economic growth.
The social impact of larger FDI brings about a more broadminded outlook in the Indian
society, leaving alone a few who would be a bit conservative. However, the condition of the
Indian urban sector has improved drastically thereafter, which we still await the developments
from other areas of the Indian economy

Chapter 10
10. Challenges facing the Indian Organized Retail sector
10.1 E-Retailing in India
10.1.1 Problems with the Payment System
10.1.2 Problems with Shipping
10.1.3 Offline presence
10.1.4 Products offered at discounted rates
10.1.5 Language Problem
10.1.6 Some online retailing sites in India
10.1.7 Future of E-retailing in India

10 Challenges facing the Indian Organized Retail sector

The challenges facing the Indian organized retail sector are various and these are
stopping the Indian retail industry from reaching its full potential. The behavior pattern of the
Indian consumer has undergone a major change. This has happened for the Indian consumer is
earning more now, western influences, women working force is increasing, desire for luxury
items and better quality. He now wants to eat, shop, and get entertained under the same roof.
All these have lead the Indian organized retail sector to give more in order to satisfy the Indian
customer.
The biggest challenge facing the Indian organized retail sector is the lack of retail space.
With real estate prices escalating due to increase in demand from the Indian organized retail
sector, it is posing a challenge to its growth. With Indian retailers having to shell out more for
retail space it is effecting there overall profitability in retail.
Trained manpower shortage is a challenge facing the organized retail sector in India.
The Indian retailers have difficultly in finding trained person and also have to pay more in
order to retain them. This again brings down the Indian retailers profit levels.
The Indian government has allowed 51% foreign direct investment (FDI) in the India
retail sector to one brand shops only. This has made the entry of global retail giants to
organized retail sector in India difficult. This is a challenge being faced by the Indian organized
retail sector. But the global retail giants like Tesco, Wal-Mart, and Metro AG are entering the
organized retail sector in India indirectly through franchisee agreement and cash and carry

wholesale trading. Many Indian companies are also entering the Indian organized retail
sector like Reliance Industries Limited, Pantaloons, and Bharti Telecoms. But they are facing
stiff competition from these global retail giants. As a result discounting is becoming an
accepted practice. This too brings down the profit of the Indian retailers. All these are posing as
challenges facing the Indian organized retail sector.
The challenges facing the Indian organized retail sector are there but it will have to be
dealt with and only then this sector can prosper.

10.1 E-Retailing in India

E-retailing, most commonly known as e-tailing is nothing but shopping through the
Internet and other media forms. There are many things that are common between direct retail
stores and online retail stores. Both have the process of billing of the customers and have to
maintain a relationship with the suppliers.
Bottlenecks Faced By E-Retailing in India
10.1.1 Problems with the Payment System

People in India are not used to the online shopping system and moreover the online
payment system through the credit card is also totally alien to them. Most of them do not avail
of the transaction facilities offered by the credit cards. They are also dubious regarding the
online payment system through the credit cards. Hence different payment options should be
made available to them like the credit card, cash on delivery and net banking to give them
further assurance.
10.1.2 Problems with Shipping

lack of prompt delivery is there as it can be a fake side or a fake retailer be sitting on
next end
10.1.3 Offline presence

The customers should be assured that the online retailers are not only available online
but offline as well. This gives them the psychological comfort that these companies can be
relied upon.
10.1.4 Products offered at discounted rates

All the product are offered at a lower price as middleman’s role doesn’t happen there.
10.1.5 Language Problem

Most internet retail shops use English as their mode of communication. English may not
be comprehensible to the majority of the Indian population . To increase the customer base,
content in the online retail shops should be provided in local language.
10.1.6 Some online retailing sites in India

E Bay is heading the race of online retailers. In this race it has become very difficult to
determine the online retail store that makes the products available at convenient and cheap
rates. From this very difficulty has cropped up comparison sites. Comparison is done on the
basis of an index which is constructed from the data available from different shopping sites.
The bechna.com and the ultop.com are such sites though many more sites are entering this
zone.
10.1.7 Future of E-retailing in India

There are divergent views on the future of e-retailing in India. Some experts are of the
opinion that the giant, big brand retailers would dominate the small ones due to their wider
investment capacities. It would be next to impossible for the small retailers and the kiranas to
prove their existence in the battlefield of online retailing

Chapter 11
11. Case Study of Pantaloon Retail Sector
11.1The lines of business of Future Group are
11.1.1 E-Commerce
11.1.2 Food
11.1.3 Fashion
11.1.4 Home & Electronics
11.1.5 Leisure & Entertainment
11.1.6 Wellness & Beauty
11.1.7 Books & Music
11.1.8 Major Achievements of Pantaloon Retail
11.2Major Achievements of Pantaloon Retail
11.3Major Milestones of Pantaloon
11.3.1- In 1987 11.3.10- In 2000
11.3.2- In 1991 11.3.11- In 2001
11.3.3- In 1992 11.3.12- In 2002
11.3.4- In 1993 11.3.13- In 2003
11.3.5- In 1994 11.3.14- In 2004
11.3.6- In 1995 11.3.15- In 2005
11.3.7- In 1996 11.3.16- In 2006
11.3.8- In 1998 11.3.17- In 2007
11.3.9- In 1999
11.4Financial Performance of Pantaloon in (2006-2007)
11.4.1Net Profit in 2006-2007
11.4.2Review of Performance

11 Case Study of Pantaloon Retail Sector
Pantaloon Retail (India) Limited is India's leading retailer that operates multiple retail
formats in both the value and lifestyle segment. Pantaloon has ushered a retail revolution in
India and its founder Kishore Biyani is known as India's "King of Retail". Pantaloon's
headquarter is in Mumbai. The company currently operates over 5 million square feet of retail
space and has plans to increase it to 30 million sq. ft. by 2011. Pantaloon has plans to open over
3000 new stores by 2010.
Pantaloon's origin can be traced to 1987 when the company was incorporated as Man's
Wear Private Limited. The company launched Pantaloons trouser, India's first formal trouser
brand. In 1992, Pantaloon launched its IPO. In 1994 the Pantaloon Shopee - exclusive
menswear store in franchisee format was launched across the country. Pantaloon started
distribution of distribution of branded garments through multi-brand retail outlets across the
nation. In 2001, Big Bazaar, India's first hypermarket chain was launched. In 2002, Food
Bazaar, the supermarket chain was launched. In 2006, Future Capital Holdings, the company's
financial arm launched real estate funds, "Kshitij" and "Horizon" and private equity fund
"Indivision". The company is also planning forays into insurance and consumer credit.
Pantaloon Retail is the flagship company of Future Group.
11.1 The lines of business of Future Group are:

11.1.1 E-Commerce
Pantaloon's website Futurabazaar.com has revolutionized the e-commerce business in
India. It offers a wide range of products at affordable prices. It has been named as Best Indian
Website 2007 in the Shopping category by PC World.
11.1.2Food
In food business, the group offers a host of options. Food Bazaar- a chain of large
supermarkets. Brew Bar- a beer bar; cafe Hollywood - a national chain of eateries; Chamosa - a
pan-Indian chain of snack counters, and Sports Bar - a bistro focused on the world of sports.
11.1.3Fashion
The group offers a variety of options in fashion. Its brands include ALL; blue Sky,
Central, Etam, Fashion Station, Gini & Jony, Navaras, Pantaloons and Top 10.
11.1.4Home & Electronics

Options include: collection I - a lifestyle furniture store; Electronics Bazaar - offers
branded electronic goods and appliances; e-zone-trendiest electronics items; Furniture Bazaar -
entire range of Home Furniture; Home Town - one stop destination for all the home needs.
11.1.5 Leisure & Entertainment

Options are: Bowling Co. - state-of-the-art premium family entertainment centre,
offering multiple, novel and unique leisure and entertainment options; F 123 - offers a wide
range of gaming options ranging from bowling and pool to redemption and interactive video
games to bomber cars.
11.1.6 Wellness & Beauty

Options are: Health Village - a state-of-the art spa and yoga centre; Star & Sitara;
Beauty salon for men and women: Tulsi- provides access to the best allopathic, ayurvedic and
homeopathic medicinal products; Turmeric offers beauty products like color cosmetics,
fragrances, herbal and specialty skin items, hair products and bath accessories.
11.1.7 Books & Music

Future Group's brand - "Depot" offers Books, CDs, and stationery items.
11.2 Major Achievements of Pantaloon Retail

 Chosen as International Retailer for the Year 2007.
 Chosen as Emerging Market Retailer of the Year 2007.
 Best Employers in India (Rank 14th) in the Hewitt Best Employers 2007 survey.
 Best Managed Company in India (Mid-cap) for the year 2006.
 Won images Retail Awards 2006 for Best Value Retail Store, Best Retail Destination,
and Best Food & Grocery Store.
11.3 Major Milestones of Pantaloon
11.3.1- In 1987
 The Company was incorporated on the 12th October, under the name of Man’s Wear
Private Limited.
11.3.2- In 1991
 The Company was converted into a Public Limited Company under the name of Man's
Wear Limited on 20th September.
 The Company name was changed to Pantaloon Fashions (India) Limited vide certificate
of incorporation dated the 25th September.
 The Company is engaged in the manufacture and marketing of quality Ready-made
Garments for men, including Trousers, Shirts, Denims, Blazers and Slepp Suits, at its
units located at Andheri in Bombay.
 The Company's Products are being marketed under the brand name PANTALOON and
BARE NECESSITTIES through a network of over 300 dealers spanning the Metro and
Class I cities in the country.
 The Company is promoted by Shri Kishore Biyani, friends and associates.
11.3.3- In 1992
 The Company has successfully launched the Pantaloon Trousers, Shirts, Denims,
Sleep Suits and other ready-made garments.
11.3.4-1993
 The Company recently made a Public of 25, 55,000 equity shares of Rs. 10/- each
for cash at par in May. The Company Has allotted 36, 57,100 Equity Shares on 28th
July in consultation with the Stock Exchange Bombay.

11.3.5- In 1994
 The Company is launching a new brand of shirts called 'John Miller' at affordable
prices.
11.3.6- In 1995
 Pantaloon Fashions (India) Limited has launched John Miller shirts.
11.3.7- In 1996
 Pantaloon Fashions (India) Ltd. has launched the Yorker to concede with the world
cup.
 The Company has issued 10, 00,000 Non-Cumulative preference Shares Rs. 10/-
each aggregating Rs. 1, 00, 00,000/- on Private Placement asis.
11.3.8- In 1998
 The Company has introduced Shrishti range of Salwaar Kameez. The Company has
also added Knitted T-shirts to its range of products.
11.3.9- In 1999
 The Company opened a state-of-art family store at prestigious Crossroads, Haji Ali,
Mumbai, spread over an area of 4,500 sq.ft.
 The name of the Company was changed with the approval of the Members to
Pantaloon Retail (India) Ltd.
 The company has recently set up a state-of-the-art trouser manufacturing plant in
Mumbai with a capacity of 1,200 pieces per day.
 Entrepreneurial Jadeja is setting up a joint venture sports Wear Company with the
promoters of Pantaloon Retail (India) Ltd.

11.3.10- In 2000
 The Company share transfer committee, have allotted 10, 00,000 No. of equity
shares of Rs. 10/- each at a premium of Rs. 33/- per share on private placement basis to
ICICI Ltd. A/c. Structured Products Fund.
 The total paid up capital of the company is 1, 25, 19,413 No. of equity share of Rs.
10/0 each, ICICI Ltd. A/c. Structured Products Fund will be holding 7.99% of the
enhanced share capital.
 Pantaloon Retail (India) Ltd. has launched stainfree with scotchgard, a new range of
formal shirts and trousers.
11.3.11- In 2001
 Retail major Pantaloons has forged as alliance with Arvind Mills for the supply of
fabric and apparel for its in-house brands.
 Finalized a leasing deal to occupy 50,000 sq.ft. Of space for Rs. 25 lakh.
 Issue of 4 million equity shares of Rs. 10/- each to the Promoters of the company on
a preferential basis at a price as per SEBI Guidelines.
 Tied up with Andhra Pradesh Handloom Weavers Co-operative Society and
National Institute of Fashion Technology.
11.3.12- In 2002
 Pantaloon Retail India Ltd. has informed that the Board or Director of the company
has allotted 40 lac equity shares to the promoters and their associates on preferential
basis at a price of Rs. 31.50 per share.
 Promoters sell 584098 shares.
 Pantaloon has launched a range of the movie-specific merchandise such as
notebooks, folders, pens, mouse pads etc.
 Incidence of fire occurred at one of ATM centre in Maheshwari Plaza Mall/Big
Bazaar at Abids, Hyderabad.
 Preferential Issue of 8, 65,000 Equity shares of Rs. 10sach at a premium of Rs. 40
per share to Promoters & Associates.

11.3.13- In 2003
 Allotment of 8,65,000 equity shares to the promoters and their associates on
preferential basis at a price of Rs. 50/- per shares as approved by the members of the
company at their meeting held on December 20, 2002.
 Acquires the trademark and exclusive licensing rights for apparel brand Norules in
India, from US-based Norules Inc.
 Forged an alliance with ICICI Lobard to offer one year free insurance cover to
customers acquiring gold from Gold Bazaar.
 Teams up with Italian apparel behemoth Moda & Musica to market its casual
sportswear brand UMM in the domestic market.
 Received a letter from ICICI Venture Funds Management Company Limited, in
which they have stated that they have sold 2, 71,083 shares aggregating to 2.04% of the
total paid-up capital of the Company as on September 12, 2003.
 Promoters sell 4.6% stake of the company.
 American Funds insurance Series Global Small Capitalization Fund have acquired
2,09,500 shares of Pantaloon Retail India Ltd. representing 1.152% of the total paid up
capital of the Company.
11.3.14- In 2004
 Pantaloon Retail (I) Ltd. enters into Strategic alliance with Arvind Brands Ltd.
 Pantaloon Retail calls off strategic alliance with Arcus Ltd.
 Ties up Arvind Brands ltd. for Ruf & Tuf brand at its Big Bazaar outlets across the
country.
 Pantaloon Retail (India) ltd. has signed a memorandum of understanding (MoU)
with K.J. Somaiya Institute of Management & Research Studies to offer a specialized
course in retail management.

11.3.15- In 2005
 The Pantaloon Retail has made an offer under Regulation 10 of the SEBI (SAST)
Regulations to the Public shareholders of Galaxy Entertainment Corporation Ltd.
(Target Company) to acquire up to 2,542,400 fully paid equity shares of Rs. 10/- each,
representing in the aggregate 20% of the Post issue voting capital at a price of Rs. 51/-
(Rupees Fifty One only) per share (the Offer price) payable in cash subject to the terms
& conditions mentioned.
 Pantaloon sets up restaurant at Bangalore Central hall.
11.3.16- In 2006
 Pantaloon Retail enters into an agreement with Capital and Singapore.
 Pantaloon Retail joins hands with management schools across the country.
 Pantaloon Retail India Ltd. launched its newest retail venture 'Depot'.
 Pantaloon Retail - Strategic alliance agreement with Ruchi Soya Industries.
 Pantaloon Retail signed MOU with Blue Foods on July 31, 2006.
 Pantaloon Retail signs MOU with Manipal Health Systems on August 05.
11.3.17- In 2007
 Pantaloon Retail India Ltd. has entered into a 50:50 joint venture (JV) with
Axiom Telecom LLC, UAE, to do sourcing and wholesale distribution of mobile
handsets, accessories and setting up service centre's and Authorized After Sales Service
Centre's for mobile handsets in India.

11.4Financial Performance of Pantaloon in (2006-2007)
11.4.1 Net Profit in 2006-2007

Net profit of the Company for the year under review stood at Rs. 119.99 crores as
compared to Rs. 64.16 crores in the previous year, an increase of Rs. 55.83 crores and 87.01%
over the previous year.
11.4.2 Review of Performance

During the year, your company recorded growth in both top line as well as bottom line.
Income from operations went up from Rs. 1868.97 Crores in FY05-06 to Rs. 3236.74 Croresin
FY06-07 recording a growth of 73.18 percent. Profit before Depreciation, Interest and Tax
stood at Rs. 307.62 Crores in 06.07, an increase of 105.58 percent over the preceding year.
Profit after Tax for FY06-07 was Rs. 119.99 Crores, an increase of 87.03 percent over FY05-
06. The Company has doubled its retail space from 2.50 million square feet to 5.2 million
square feet during FY06-07. The company has increased its presence from 23 cities to 42 cities
during FY06-07.

Chapter 12
12. SWOT Analysis
12.1 Strength:
12.2Weakness
12.3Opportunity
12.4Threat

12 SWOT Analysis
A SWOT analysis of the Indian retail industry is presented below.
12.1 Strength:
 Retailing is a "technology-intensive" industry. It is technology that will help the
organized retailers to score over the unorganized retailers. Successful organized
retailers today work closely with their vendors to predict consumer demand, shorten
lead times, reduce inventory holding and ultimately save cost.
 On an average a super market stocks up to 5000 SKU's against a few hundreds stocked
with an average unorganized retailer.
 Increase in per capita income which in turn increases the household consumption.
Demographical changes and improvements in the standard of living Change in patterns
of consumption and availability of low-cost consumer credit.
 Improvement in infrastructure and enhanced availability of retail space.
 Urbanization: increased urbanization has led to higher customer density areas thus
enabling retailers to use lesser number of stores to target the same number of customer.
Aggregation of demand that occurs due to urbanization helps a retailer in reaping the
economies of scale.
12.2 Weakness
 Less Conversion Level: Despite high footfalls, the conversion ratio has been very low in
the retail outlets in a mall as compared to the standalone counter parts. It is seen that
actual conversions of footfall into sales for a mall outlet is approximately 20-25%. On
the other hand, a high street store of retail chain has an average conversion of about 50-
60%. As a result, a stand-alone store has a ROI (return on investment) of 25-30%; in
contrast the retail majors are experiencing a ROI of 8-10%.
 Customer Loyalty: Retail chains are yet to settle down with the proper merchandise mix
for the mall outlets. Since the stand-alone outlets were established long time back, so
they have stabilized in terms of footfalls & merchandise mix and thus have a higher
customer loyalty base.

 Trained manpower shortage is a challenge facing the organized retail sector in India.
The Indian retailers have difficultly in finding trained person and also have to pay more
in order to retain them. This again brings down the Indian retailers profit levels.
12.3 Opportunity
 The Indian middle class is already 30 Crore & is projected to grow to over 60 Crore by
2010 making India one of the largest consumer markets of the world. The IMAGES-
KSA projections indicate that by 2015, India will have over 55 Crore people under the
age of 20 - reflecting the enormous opportunities possible in the kids and teens retailing
segment.
 Organized retail is only 3% of the total retailing market in India. It is estimated to grow
at the rate of 25-30% p.a. and reach INR 1, 00,000 Crore by 2010.
 Percolating down: In India it has been found out that the top 6 cities contribute for 66%
of total organized retailing. While the metros have already been exploited, the focus has
now been shifted towards the tier-II cities. The 'retail boom', 85% of which has so far
been concentrated in the metros is beginning to percolate down to these smaller cities
and towns. The contribution of these tier-II cities to total organized sales is expected to
grow to 20-25%.
 Rural Retailing: India's huge rural population has caught the eye of the retailers looking
for new areas of growth. ITC launched India's first rural mall "Chaupal Saga" offering a
diverse range of products from FMCG to electronic goods to automobiles, attempting to
provide farmers a one-stop destination for all their needs. "Hariyali Bazar" is started by
DCM Sriram group which provides farm related inputs & services. The Godrej group
has launched the concept of 'agri-stores' named "Adhaar" which offers agricultural
products such as fertilizers & animal feed along with the required knowledge for
effective use of the same to the farmers. Pepsi on the other hand is experimenting with
the farmers of Punjab for growing the right quality of tomato for its tomato purees &
pastes.
 Potential for Investment: The total estimated Investment Opportunity in the retail sector
is around US$ 5-6 Billion in the Next five years.

12.4 Threat
 If the unorganized retailers are put together, they are parallel to a large supermarket
with no or little overheads, high degree of flexibility in merchandise, display, prices and
turnover.
 Shopping Culture: Shopping culture has not developed in India as yet. Even now malls
are just a place to hang around with family and friends and largely confined window-
shopping.

Chapter 13
13. Conclusion

13 Conclusion
The Indian retail sector is largely traditional but stores in modern format are emerging.
The contribution of organized retailing in the share of retail sales in India is currently very
small. Based on an analysis of retail developments in countries such as Thailand. Brazil and
Greece, and some experience in India, it is possible to conclude that modernization of retailing
in India would be influenced by some important factors. There factors include economic
development; improvements in civic situation; changes in consumer needs, attitudes and
behavior, changes in government policies; increased investment in retailing and rise in the
power of organized retail. The development of 18 modern retail will have several implications
for managerial practice in manufacturing firms. Firms will need to proactively review and their
sales structures, brand activities, logistics policy and price structure to cope with pressures from
powerful/retailers.
In India the retail sector is the second largest employer after agriculture, although it is
highly fragmented and predominantly consists of small independent, owner-managed shops.
There are over 12 million retail outlets in India, and organized retail trade is worth about Rs.
12, 90,000 crore . The country is witnessing a period of boom in retail trade, mainly on account
of a gradual increase in the disposable incomes of the middle and upper-middle class
households. More and more corporate houses including large real estate companies are coming
into the retail business, directly or indirectly, in the form of mall and shopping center builders
and managers. New formats like super markets and large discount and department stores have
started influencing the traditional looks of bookstores, furnishing stores and chemist shops. The
retail evolution, apart from bringing in sweeping, positive changes in the quality of life in the
metros and bigger towns, is also bringing in slow changes in lifestyle in the smaller towns of
India. Increase in literacy, exposure to media, greater availability and penetration of a variety of
consumer goods into the interiors of the country, have all resulted in narrowing down the
spending differences between the consumers of larger metros and those of smaller towns.

However, the supply of quality real estate space would be instrumental in propelling the
future growth momentum of the retail sector in India. The addition of better and affordable
retail space would enable retailers to deliver better quality products and services to the
consumers, resulting in increase in operational efficiencies and decline in costs for the supply
chain. India is one of the complex real estate markets in the world due to the large degree of
variation and inconsistence in the market practice and regulatory norms.
A combined effort by both central and state government in terms of appropriate zoning
laws, transparency in ownership, and availability of loans for retail land, is very much
necessary for reducing existing bottlenecks. Accordance of industry status to retail in India is
an issue that needs to be addressed soon. Recognition industry. An alignment of the retail
sector with the tourism sector could also promote India as a global shopping hub. For the retail
sector to achieve further growth, the spread of organized retailing has to become a national
phenomenon. According to KSA Technopak, a leading consulting firm the organized sector
will grow to almost Rs. 30,000 crores by 2005, representing 6% of the total retail market. The
top 6 cities will account for 66% of total organized retailing. Although many international
retailers and brands still regard India as too difficult, they felt India was changing. The growth
of the organized retail industry in the country will mean thousands of new jobs, increasing
income levels and living standards, better products, and services, a better shopping experience,
and more social activities.

Chapter 14
14. Reference
14.1Book Reference
14.2Web Reference

14 References
14.1Book Reference
Book Authors
Retail Management Chetan Bajaj, Rajnish Tuli, Nidhi Shrivastava
Indian Garments industry V Subbulakshmi
How to export garments successfully R.S. Shukla
Garments export Darlie O Kashy
Export Policy, procedures
and Documentation M. I. Mahajan
14.2Web Reference
Sides Dated Timed
 www.indiaretailing.com 6/4/2009 23.45
 www.ibef.com 9/4/2009 22.00
 www.business.mapsofindia.com 14/4/2009 12.20
 www.indiafdiwatch.org 24/4/2009 00.25
 www.indianground.com 23/4/2009 01.00
 www.indiaretailing.com 25/4/2009 18.35

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“INDIAN RETAIL INDUSTRY ITS PROSPECTS AND CHALLENGES”

INTERNATIONAL INSTITUTE OF FOREIGN TRADE AND RESEARCH 1

1. An Overview of Indian Retailing

INTERNATIONAL INSTITUTE OF FOREIGN TRADE AND RESEARCH 2

1. An Overview of Indian Retailing

INTERNATIONAL INSTITUTE OF FOREIGN TRADE AND RESEARCH 4

INTERNATIONAL INSTITUTE OF FOREIGN TRADE AND RESEARCH 5

INTERNATIONAL INSTITUTE OF FOREIGN TRADE AND RESEARCH 6

2.History of Indian Retail Market

However, Distribution continues to improve but it still remains a major inefficiency.

Growth of retail Market in India

INTERNATIONAL INSTITUTE OF FOREIGN TRADE AND RESEARCH 10

INTERNATIONAL INSTITUTE OF FOREIGN TRADE AND RESEARCH 11

3.2 Indian retail revolution

INTERNATIONAL INSTITUTE OF FOREIGN TRADE AND RESEARCH 12

Total Retail Sales

0 100 200 300 400

Source: Data monitor

 The market is witnessing a migration from traditional retailing to modern/organized

Projected Retail growth

0 100 200 300 400 500

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Source: Crisis Research Exchange Rate: US$ 1 = INR 41

3.3Transition from traditional to modern retailing

3.4Growth across segments

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FoodandBeverages clothingand textile

Source: Crisil Research

3.5Increasing penetration of organized retail

Size of Indian retail market across segments, 2007

Increasing penetration of organized retail

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Source: Ernst & Young research

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Changing Paradigm: The Confidence of Modern and Traditional Retail

1st Phase 2nd Phase 3rd Phase 4th Phase

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Segmental size of Indian retail market

Source: IBEF research

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Gross Domestic Product

Growth Rate (per cent)

Source: Reserve bank of India

4.3 Potential Untapped Market

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Share of organized and traditional Retail

China 20% 80%

Indonesia 30% 70%

Thailand 40% 60%

Malaysia 55% 45%

Taiwan 81% 19%

4.4 Abundant Availability of Skilled Labor

4.5 Low Costs of Operations

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Labor cost per worker across Asian countries

0 10000 20000 30000

Source: Department of Industrial Policy & Promotion

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5. Policy and regulatory framework

Source IBEF research

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5.2 Related liberalizations for Indian retailing