View of SCENARIO OF RETAIL MANAGEMENT IN INDIA

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Vol. 04, Issue 02, February2019 Available Online: www.ajeee.co.in/index.php/AJEEE

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SCENARIO OF RETAIL MANAGEMENT IN INDIA Prof. (Dr.) A. K. Singh

Dean-Indore Management Institute of Research Center IMIRC- Indore

Abstract - Retailing includes all activities involved in selling the products and services to the ultimate consumers at prices that are competitive and affordable. Retailing has emerged as one of the most dynamic and fast paced industries with several players entering in the market. The Indian retail market is one of the fastest growing industries. Even after recession it has come out fast on recovery. The retail industry is changing rapidly, diversifying their inventories and providing a greater variety of services. It has now turned to one of the largest sectors in the global economy, which is going through a transition phase not only in India but the world over. For a long time, the corner grocery store was the only choice available to the consumer, especially in the urban areas. This is slowly giving way to international formats of retailing. India is ranked on top in the world for retail investment. The potential is so vast that the Indian market just cannot be ignored. This paper attempts to give an in depth view of the retail management, the scenario of retail in India and the opportunities for retailing sector in India.

Keywords: Retail sale, management, category management, marketing, Consumer expectations, Development.

1 INTRODUCTION

The word “Retailing” has come from a French word “Retaillier” which means to cut off a piece. Retailing includes all activities involved in selling the products and services to the ultimate consumers at prices that are competitive and affordable.

Retailing has emerged as one of the most dynamic and fast paced industries with several players entering in the market.

India‟s vast middle class and its retail industry are key attractions for global retail giants wanting to enter newer markets. Retailing includes all the activities in selling goods or services directly to final consumers for personal, non-business use. It consists of the final activity and steps needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer.

As the corporate the Piramals, the Tatas, the Rahejas, ITC, S.Kumar‟s, RPG Enterprises, Ambani group, Adani group and mega retailers- Crosswords, Shopper‟s Stop, and Pantaloons race to revolutionize the retailing sector, retail as an industry in India is coming alive. Retail sales in India amounted to about Rs.7400 billion in 2010, expanded at an average annual rate of 7% during 2008-2011.

With the upturn in economic growth during 2012, retail sales are also expected to expand at a higher pace of nearly 10%.

Across the country, retail sales in real terms are predicted to rise more rapidly than consumer expenditure during 2013- 2014. The forecast growth in real retail

sales during 2013-2014 is 8.3% per year, compared with 7.1% for consumer expenditure. Modernization of the Indian retail sector will be reflected in rapid growth in sales of supermarkets, departmental stores and hypermarts.

Sales from these large-format stores are to expand at growth rates ranging from 24% to 49% per year during 2014-2015, according to a latest report by Euro monitor International, a leading provider of global consumer-market intelligence. The retail industry is changing rapidly, diversifying their inventories and providing a greater variety of services. Larger stores are offering amenities such as dining areas, coffee shops and groceries. Changes will continue as competition increases, presenting new opportunities for those with the proper education and skills.

“India is the most attractive retail market today. Given the diversity of Indian consumers, we need different models of retailing to tap the entire gamut of opportunity that exists, “said Kaushika Madhavan, Manager Retail Practice AT Kearney. India ranks number 1 in the company‟s Global Retail Development Index. Slowing growth and decreasing profits in the domestic markets is pushing foreign retailers to international markets.

India, with its immense market potential, is primed as the most attractive retail market globally. This paper attempts to give an in depth view of the retail management, the scenario of retail in

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2 India and the opportunities for retailing sector in India.

Chart 1-Organised Retail Market Size 2 LITERATURE REVIEW

According to Aaker (1992) the firm‟s competitive advantage is the notion of “who you are” in terms of competencies. Having the right distinctive marketing competencies for choosing an appropriate strategy enables the firm to successfully create a sustainable competitive advantage because either the skills of the firm, it‟s set of value adding assets and/or its core competencies are difficult to copy (Aaker 1992;

Conant et al 1993).

Creating a fit between competencies and functional strategies not only provides the possibility of a sustainable competitive advantage but can lead to the achievement of high levels of performance (Day &

Wensley 1988). Although the literature contains research in the area of strategies that can impact upon retail performance, most of the studies have often been concerned with retail structure (eg Bates 1989), retail positioning (e.g. King & Ring 1980), service orientation (Homburg et al 2002) and a range of marketing mix strategies (e.g. Walters 1988;

Lowson, 2001; Lynch, Keller, &

Ozment 2000; Palmer & Markus 2000; Radder 1996; Leung & Taylor 2002). Little or no study particularly in Australia has examined whether or not the marketing competencies possessed by small to medium sized retail organizations can influence their level of business

performance. This study was designed to determine if there are significant differences in the competitive marketing competencies possessed by the high level performing and low level performing small to medium sized retail businesses.

RNCOS, in its market research report “Indian Retail Sector – An Outlook (2010- 2015)” analyzes the greatly divided Indian retail market and the trends in its business.

Issues such as foreign investment restrictions, modern merchandizing in India, logistics and payment terms for distribution, role of channel members and growth trends in different regions are discussed. The market research report further analyzes the sustainability of the Indian retail sector and on the basis of 25 domestic and international companies the report has given a suitable business model.

3 INDIAN RETAIL INDUSTRY–THEN AND NOW

In India, retail is largest sector accounting for 10% of the countries GDP and around 15% of the employment. It has emerged as one of the most dynamic sector with several players like as the corporates Piramals, TATA, Rahejas, ITC, S. Kumar‟s RPG enterprises and mega retailers- Crosswords, Shoppers Stop and Pantaloons and it attracts foreign retailers like Wall-Mart, Carefour-SA, Tesco etc.

Retail sales in India amounted to about Rs.7400 billion in 2002, expanded at an average annual rate of 7% during 1999- 2002 with the upturn in economic growth during 2003, retail sales are also expected to expand at a higher pace of nearly 10%.

Across the country retail sales in real terms are predicted to rise more rapidly than consumer expenditure during 2003- 2008. The forecast growth in real retail sales during 2003-08 is 8.3% per year, compared with 7.1% for consumer expenditure.

Retail in India has always been a lucrative business. Traditionally, the Vaishya‟s were the trader class and their businesses were passed on from father to son. Even now, small family-run stores, also called Kiranas, offer consumers low prices, convenient locations, longer store

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3 hours and home delivery at no extra charge. Not surprising that they have traditionally dominated the Indian retail sector. These stores have low operating costs as they employ household labor and usually pay no taxes. According to a Research and Markets study, in 2003 there were over 12 million retail stores in India, of which about 78% were small family run enterprises using family labor.

Contemporary India is breaking this age- old norm and basing success only on modern marketing principals. Retail in India is at a transient stage at present, somewhere between the traditional and modern. India‟s retail industry has traditionally followed no recognizable format, but has grown organically, attuned to local needs. This has made it hard for traditional retailers to adapt to new ways of doing business and competing with international retailers.

India occupies sixth place in a Global Retail Development Index (GRDI) and consist of highest percapita outlets in the world covering 5.5 outlets per 1000 population. Around 7% of the population in India is engaged in retailing as compared to 20% in the USA.

Chart 2-Organized Retailing in India – 2018

Source: Indian retail report

3.1 Functions of Retiling Retailing is Supposed To Provide

1. Product Utility: It includes all activities involved in providing goods and services to the ultimate consumers. So it provides final end products to the consumers, not raw

materials, end products in usable form to the consumers.

2. Place Utility: This is provided at the place where it is required by the consumer. That is, retailing outlets are open in the places according to the convenience of the customer and also based on the demand of the consumer.

3. Time Utility: It creates Time Utility.

The shops are open as per the requirement of the consumer that is between 10 and 8 or 10 to 5.

Whenever the consumers want to go and shop they can go and shop at a particular period convenient to the customer.

4. Ownership Utility: When the product is sold finally it creates Ownership Utility. So, we can conclude that retailing is a marketing intermediary which creates

5. Product Utility, Place Utility: Time Utility and Ownership Utility in providing goods and services to the Consumers.

3.2 Types of retail chains operating in India

The Indian retail sector can be broadly classified into:

1. Food and Beverage Based: There are large number and variety of retailers in the food-retailing sector.

Traditional types of retailers, who operate small single- outlet businesses mainly using family labour, dominate this sector.

According to the McKinsey FAIDA report, India produces 146 million tones of fruit and vegetables, second only to China. According to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the food processing industry, which is currently worth USD 325.4 billion, is likely to grow at 8% per year till 2007 and 10% per year by 2015. Modern format retail stores are growing at over 30% per year currently and the trend will continue for the next few years as the number of these outlets increases due to consumer demand.

This is due to an increasing number of Indians who prefer to shop at these stores due to higher levels of hygiene, comfortable ambience and

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4 convenient locations. The increase in sales at these modern retail formats will continue as they spread across the country to medium and smaller cities. Leading multi-outlet food retailers are Foodworld, Food Bazaar, Nilgiris, Subhiksha, MTR, RCM and Easyday etc.

2. Clothing and footwear based:

Numerous clothing and footwear shops in shopping centers and markets operate all over India.

Traditional outlets stock a limited range of cheap and popular items and have little or no space for visual merchandising and in-store aesthetic. In contrast, modern clothing and footwear stores have modern products and attractive displays with spacious interiors to lure customers. Leading retailers on a national level are Westside, Reliance Trends Shopper‟s Stop, Lifestyle, Pantaloon, Piramyd, Ebony and Globus etc. A winning strategy used by Pantaloons, Lifestyle, Shopper‟s Stop and Westside is private labels. Pantaloons private labels account for 70% of the ready- to-wear products offering customers prices that are 30% lower than competitors. Footwear retailers include Liberty, Catwalk, Metro, Regal, Bata, lakhani, Relaxo, Miss, Inblu, Mochi and Loft.

3. Health and Beauty based: Health and beauty stores are a new phenomenon in the retail industry in India and are usually single- outlet stores. These stores are gaining in popularity as a one-stop shop for all health and beauty products. With growth in income levels, Indians have started spending more on health and beauty products .Here also small, single-outlet retailers dominate the market .However in recent years, a few retail chains specializing in these products have come into the market. Kaya Skin Clinic and Ayush Therapy Centres are one of the major players in this sector.

Although these retail chains account for only a small share of the total market , their business is expected to grow significantly in the future due to the growing quality consciousness of buyers for these

products.

4. Home Furniture and Household Goods: Small retailers dominate this sector although the potential for growth is enormous. This is the most underdeveloped sector in Retail Industry. The furniture industry in India is estimated to be USD10billion, employing approximately 300,000 workers. The handicraft industry accounts for 85% of furniture production in the country. While the bulk of the industry is highly fragmented and dominated by small manufacturers and retailers, the organized sector is estimated to grow by 20% a year, according to a World Bank study.

The home furnishings industry is estimated to be worth USD 173.6 billion, consisting mostly of the unorganized sector. The large base of potential customers in India, the aspirational quality of consumers who are purchasing more western styles of furniture and a steady increase in home sales. The major players are Spaces, Zeba and fabIndia focus on soft furnishings while Style Spa and Kian (Malaysian firm) focuses on furniture.

5. Consumer Durables Based: The Indian durable goods sector has seen the entry of a large number of foreign companies during the post liberalization period. There is a strong competition among companies to increase their sales.

Total increase in the demand of Air Conditioners is 20% while the demand for colour TVs segment has recorded and increases by 10-15%.

6. Personal and Leisure goods Based:

Increasing household incomes due to better economic opportunities have encouraged consumer expenditure on leisure and personal goods in the country. There are specialized retailers for each category of products (books, music products, jewellery, gift items etc.) in this sector. The major players are Hallmark, Archies and China Baazar etc.

3.3 Opportunities for Retailing Sector in India

In a developing country like India, a large chunk of consumer expenditure is on

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5 basic necessities. The Indian retail sector is estimated to have a market size of about $ 180 billion; but the organized sector represents only 2% share of this market. Indian retail industry accounts for 10% of the GDP. The sheer size of the population demands attention from retailers worldwide and the potential for growth is tremendous. From the following points the potential opportunities for Retailing in India can easily be understood:

1. India is at the top position amongst 30 emerging markets as per the annual Global Retail Development Index (GRDI) for 2015. Developed by AT Kearney, this index measures the attractiveness of retail investment According to a study conducted by the Associated Chambers of

Commerce and Industry

(ASSOCHAM), the annual retail sale is close to USD 6 billion currently and is expected to reach USD 17 billion by 2015.

2. India is the world‟s 4th largest economy in terms of Purchasing Power Parity, after USA, China and Japan.

3. International retail giants like Wal- Mart, Tesco, Spencer, and Sainsburys have openly expressed interest in opening stores in India.

The German retailer, Metro, is already operating in India, as a cash and carry business-to-business operator and has been very successful.

4. India has the largest population of young people in the world, with 867 million people under the age of 45.

According to the Indian Retail Report 2016 conducted by IMAGES- KSA Technopark India, there will be 550 million people under the age of 20 by 2018. This huge segment of kids and youth will translate to another boom in products targeted specially at them.

5. The internet revolution is making the Indian consumer more accessible to the growing influences of domestic and foreign retail chains. Reach of satellite T.V.

channels is helping in creating awareness about global products for local markets. The young population is technology-savvy who watches more than 50 TV satellite channels,

and display the highest propensity to spend, will immensely contribute to the growth of the retail sector in the country. As India continues to get strongly integrated with the world economy riding the waves of globalization, the retail sector is bound to take big leaps in the years to come.

6. The number of women workforce has increased during the past decade. Due to independent income and no family responsibilities (due to late marriages) their shopping habits have a markable impact on current retail scenario in India. The demands for products like apparels, cosmetics, watches, accessories and mobile phones etc. has increased dramatically. The average shopping bill for young women is estimated to be $55-$60.

7. A study conducted by Fitch, expects the organized retail industry to continue to grow rapidly, especially through increased levels of penetration in larger towns and metros and also as it begins to spread to smaller cities and B class towns. Fuelling this growth is the growth in development of the retail- specific properties and malls.

According to the estimates available with Fitch, close to 25mn sq. ft. of retail space is being developed and will be available for occupation over the next 36-48 months. Fitch expects organized retail to capture 15%-20% market share by 2016.

8. The increasing per capita income will lead to a boom in Indian Retail Industry. There is a scope of gains from the cities like Chandigarh, Delhi, Ludhiana, Mumbai, Pune, Shimla and Goa with the highest per capita annual income.

Global Retail Development Index for 2005, India is ranked on top in the world for retail investment. The potential for growth is so vast that the Indian market just cannot be ignored. The Indian Government should formulate favorable rules for this prominent sector as it is the largest creator of employment. A strong retail front-end can also provide the necessary fillip to agriculture & food processing, handicrafts, and small &

medium manufacturing enterprises, creating millions of new jobs indirectly.

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6 Through its strong linkages with sectors like tourism and hospitality, retail has the potential of creating jobs in these sectors also.

3.4 Challenges of Retailing Sector In India

Retailing is the ancient most sectors in India. It is a flourishing industry which is facing problems and needs to cross so many hurdles to be most profitable industry in India.

The Indian Retailres have to learn the art and science of organizing, managing and coping up with the changes in Retail Industry.

India is land of variety of cultural variations. The Indian retailers have to learn about the varying demands according to changing consumers attitudes. Retail marketing efforts have to improve in the country - advertising, promotions, and campaigns to attract customers; building loyalty by identifying regular shoppers and offering benefits to them; efficiently managing high-value customers; and monitoring customer needs constantly.

3.5 The Major Challenges to be Crossed are:

1. Lack of trained work force and there is no provision for training.

2. Low skill level for retailing management.

3. Regulations restricting real estate purchases, and cumbersome local laws.

4. Absence of developed supply chain and integrated IT management in Distribution; restrictions of purchase and movement of food grains, absence of cold chain infrastructure

5. Multiplicity and complexity in Taxation policies; Differential sales tax rates across states

6. Rapid price changes

7. Constant threat of product obsolescence and low margins 8. Automatic approval is not allowed

for foreign investment in retail. This has largely limited capital investments in supply chain infrastructure, which is a key for development and growth of food retailing and has also constrained

access to world-class retail practices.

9. The Government does not recognize the industry. There is restriction on growth and scaling up.

10. The biggest hurdle is wastage of almost 20-30% of farm produce due to poor transportation infrastructure.

11. The stores should be situated near to the markets but it requires more space to display large variety of things hence it is difficult to find good real estate in terms of location and size.

12. There is backlash from manufacturer‟s side. They refuse to dis-intermediate and pass on intermediary margins to retailers.

3.6 The Mall Phenomenon in India Ten years ago there was not even a single mall in India. Over the last 2-3 years, the Indian consumer market has seen a significant growth in the number of modern-day shopping centers, popularly known as „malls‟. Factors such as availability of physical space, population densities, city planning, and socio- economic parameters have driven the Indian market to evolve, to a certain extent, its own definition of a „mall‟. There is an increased demand for quality retail space from a varied segment of large- format retailers and brands, which include food and apparel chains, consumer durables and multiplex operators.

A suburb of New Delhi, Gurgaon, Chandigarh and Mumbai is the leader in both mal development and BPO offices.

The urban consumer has overwhelmingly accepted the retail format and now expects the newer concepts to enter.

Rising affluence level among the urban consumers, along with an increase in international travel are factors that rises these expectations. The retailers seems to be rushing in to target, what are termed, Tier 2 cities like Chandigarh, Bhopal, Ludhiana and Tier 3 cities like Surat, Lucknow, Dehradun, Coimbatore, Nasik, Indore and Vadodra for items like personal computers, mobile phones, consumer durables and financial services.

Table 1 gives the classification of Towns in India.

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Table-1Classification of Cities

Classification Characteristics Cities

Tier 1 Good Quality of life, High Skills availability, Premier

destination similar Banglore, New Dehli, Mumbai

Tier 1-1 Capabilities as tier 1 Cities but with lower visibility Noida, Gurgaon, Indore, Hyderabad, Pune Tier 2 attractive new & high Tech industries, emerging

cities Ludhiyana, Chandigarh, Mohali, Bhopal

Tier 3 City focusing on it as a key growth industry but do not have the requisites or faculties and quality of life geared as yet

Nagpur, Jaipur, Shimla, ahamdabad, Coimbatore, Lucknow, Patna etc.

Source: Gartner.

Shopping Malls in India need to have a clear positioning through the development of differential product assortment and differential pricing, in order to compete effectively in a growing mall market.

Segmentation in malls, like up-market malls, mid-market malls, etc., proper planning, correct identification of needs, quality products at lower prices, the right store mix, and the right timing, would ensure the success of the „mall revolution‟

in India.

4 CONCLUSION

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. The retail revolution, 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. Increasing 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. Accordance of

„industrial status‟ to retail in India is an issue that needs to be addressed soon.

Recognition would ease financing prospects, as well as standardize and unify taxes for the industry. An alignment of the retailer sector with the tourism sector could also promote India as a global shopping hub.

Retailing, one of the largest sectors in the global economy, is going through a transition phase not only in India but the world over. Retailing in India is gradually inching its way to becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping. Modern retail

has entered India as seen in sprawling shopping centers, multistoreyed malls and huge complexes offer shopping, entertainment and food all under one roof. The Indian retailing sector is at an inflexion point where the growth of organized retail and growth in the consumption by Indians is going to adopt a higher growth trajectory.

Establishment of Retailer co- operatives, which will maintain warehouses etc. to work as a distribution centre for the member retailers can help Indian retailer attain a respectable position. Inefficiency in retailing leads to lower profitability of the retailers and lower service outputs for the consumers.

Global equations are changing so fast.

The global scenario has seen an economic roller coaster ride in few months.

Accordance of „industry status‟ to retail in India is an issue that needs to be addressed soon. Recognition would ease financing prospects, as well as standardize and unify taxes for the industry. An alignment of the retail sector with the tourism sector could also promote India as a global shopping hub.

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