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    INTRODUCTION

    The retail industry in India is the largest among all the industries, accounting for over

    10 per cent of the countrys GDP, and around 8 per cent of the employment. The retail

    industry in India has come forth as one of the most dynamic and fast paced industries with

    several players entering the market. But all of them have not yet tasted success because of the

    heavy initial investments that are required to break even with other companies, and compete

    with them. The retail industry in India is gradually inching its way towards becoming the next

    boom industry. The total concept and idea of shopping has undergone an attention drawing

    change in terms of format and customer buying behaviour, ushering in a revolution in

    shopping in India. Modern retailing has entered into the retail market in India as is observed

    in the form of bustling shopping centres, multi-storied malls, and the huge complexes that

    offer shopping, entertainment and food all under one roof. A large young working population

    with medium age of 24 years, nuclear families in urban areas, along with increasing working

    women population and emerging opportunities in the services sector are going to be the key

    factors in the growth of the organized retail sector in India.

    The growth pattern in organized retailing and in the consumption made by the Indian

    population will follow a rising graph helping the newer businessmen to enter the retail

    industry in India. In India the vast middle class and its almost untapped retail industry are the

    key attractive forces for global retail giants wanting to enter into newer markets, which in

    turn will help the India retail industry to grow faster. Indian retail is expected to grow 25 per

    cent annually. Modern retail in India could be worth US$ 175-200 billion by 2016. The food

    retail industry in India dominates the shopping basket. The mobile phone retail industry in

    India is already a US$ 16.7 billion business, growing at over 20 per cent per year. The future

    of the retail industry in India looks promising with the growing of the market, with the

    government policies becoming more favourable, and the emerging technologies facilitating

    operations. Retail and real estate are the two booming sectors of India in the present times.

    And if industry experts are to be believed, the prospects of both the sectors are mutually

    dependent on each other. Retail, one of India. largest industries, has presently emerged as one

    of the most dynamic and fast paced industries of our times with several players entering the

    market. Accounting for over 10 per cent of the country GDP, and around eight per cent of the

    employment, retailing in India is gradually inching its way toward becoming the next boom

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    industry. As the contemporary retail sector in India is reflected in sprawling shopping centres,

    multiplex- malls and huge complexes offering shopping, entertainment and food all under

    one roof, the concept of shopping has altered in terms of format, and consumer buying

    behaviour, ushering in a revolution in shopping in India. This has also contributed to large-

    scale investments in the real estate sector with major national and global players investing in

    developing the infrastructure and construction of the retailing business.

    MAJOR INDIAN RETAILERS

    Indian apparel retailers are increasing their brand presence overseas, particularly in

    developed markets. While most have identified a gap in countries in West Asia and Africa,

    some majors are also looking at the US and Europe. Arvind Brands, Madura Garments,

    Spykar Lifestyle and Royal Classic Polo are busy chalking out foreign expansion plans

    through the distribution route and standalone stores as well. Another denim wear brand,

    Spykar, which is now moving towards becoming a casualwear lifestyle brand, has launched

    its store in Melbourne recently. It plans to open three stores in London by 2008-end.[35]

    The low-intensity entry of the diversified Mahindra Group into retail is unique because it

    plans to focus on lifestyle products. The Mahindra Group is the fourth largest Indian business

    group to enter the business of retail afterReliance Industries Ltd, the Aditya Birla Group,

    and Bharti Enterprises Ltd. The other three groups are focusing either on perishables and

    groceries, or a range of products, or both.

    REI AGRO LTD Retail: 6TEN and 6TEN kirana stores Future Groups-Formats: Big Bazaar, Food Bazaar, Central, Fashion Station, Brand

    Factory, Home Town, E-Zone etc.

    Raymond Ltd.: Textiles, The Raymond Shop, Park Avenue, Park Avenue Woman, Parx,Colourplus, Neck Ties & More, Shirts & More etc.

    Fabindia: Textiles, Home furnishings, handloom apparel, jewellery RP-Sanjiv Goenka Group Retail-Formats: Spencers Hyper, Spencer's Daily, Music

    World, Au Bon Pain, Beverly Hills Polo Club

    The Tata Group-Formats: Westside, Star India Bazaar, Steeljunction, Landmark,Titan,Tanishq, Croma.

    http://en.wikipedia.org/wiki/Africahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/Retailing_in_India#cite_note-35http://en.wikipedia.org/wiki/Retailing_in_India#cite_note-35http://en.wikipedia.org/wiki/Retailing_in_India#cite_note-35http://en.wikipedia.org/wiki/Mahindra_Grouphttp://en.wikipedia.org/wiki/Reliance_Industries_Ltdhttp://en.wikipedia.org/wiki/Aditya_Birla_Grouphttp://en.wikipedia.org/wiki/Bharti_Enterpriseshttp://en.wikipedia.org/wiki/Fabindiahttp://en.wikipedia.org/wiki/Fabindiahttp://en.wikipedia.org/wiki/Bharti_Enterpriseshttp://en.wikipedia.org/wiki/Aditya_Birla_Grouphttp://en.wikipedia.org/wiki/Reliance_Industries_Ltdhttp://en.wikipedia.org/wiki/Mahindra_Grouphttp://en.wikipedia.org/wiki/Retailing_in_India#cite_note-35http://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Africa
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    Reliance Retail-Formats: Reliance MART, Reliance SUPER, Reliance FRESH, RelianceFootprint, Reliance Living, Reliance Digital, Reliance Jewellery, Reliance Trends,

    Reliance Autozone, iStore

    K Raheja Corp Group-Formats: Shoppers Stop, Crossword, Hyper City, Inorbit Mall

    Nilgiris-Formats: Nilgiris supermarket chain Shri Kannan Departmental Store (P) Ltd ., : Groceries, Clothing, Cosmetics [Western

    Tamil Nadu's Leading Retailer]

    Lifestyle International-Lifestyle, Home Centre, Max, Fun City and InternationalFranchise brand stores.

    Pyramid Retail-Formats: Pyramid Megastore, TruMart

    Next retail India Ltd (Consumer Electronics)(www.next.co.in) Vivek Limited Retail Formats: Viveks, Jainsons, Viveks Service Centre, Viveks Safe

    Deposit Lockers

    PGC Retail -T-Mart India [4], Switcher, Respect India, Grand India Bazaar,etc., Aditya Birla Group- Formats: more., acquiured Pantaloon from Future group, acquired

    Trinetra (Fabmall and Fabcity)

    Vishal Retail Group-Formats: Vishal Mega Mart BPCL-Formats: In & Out Shoprite Holdings-Formats: Shoprite Hyper Paritala stores bazar: honey shine stores Kapas- Cotton garment outlets AaramShop - a platform which enables hybrid commerce for thousands of neighborhood

    stores.

    Gitanjali- Nakshatra, Gili, Asmi, D'damas, Gitanjali Jewels, Giantti, Gitanjali Gifts, etc.

    ORGANIZED RETAILING IN INDIA

    The recent years have witnessed rapid transformation and vigorous profits in Indian

    retail stores across various categories. This can be contemplated as a result of the changing

    attitude of Indian consumers and their overwhelming acceptance to modern retail

    formats. Asian markets witness a shift in trend from traditional retailing to organized retailing

    http://en.wikipedia.org/wiki/Shoppers_Stophttp://en.wikipedia.org/wiki/Inorbit_Mallhttp://www.next.co.in/http://www.tmartindia.com/tmartindiahttp://www.tmartindia.com/tmartindiahttp://www.next.co.in/http://en.wikipedia.org/wiki/Inorbit_Mallhttp://en.wikipedia.org/wiki/Shoppers_Stop
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    driven by the liberalizations on Foreign Direct Investments. For example, in China

    there was a drastic structural development after FDI was permitted in retailing. India has

    entered a stage of positive economic development which requires liberalization of the retail

    market to gain a significant enhancement.

    Domestic consumption market in India is estimated to grow approximately 7 to 8% with

    retail accounting for 60% of the overall segment. Of this 60%, organized retail is just

    5% which is comparatively lesser than other countries with emerging economies. In

    developed countries organized retailing is the established way of selling consumer products.

    Despite the low percentage, Indian textile industry has grown noticeably in organized

    retailing of textile products. The negative phase in exports may have compelled the Indian

    textile retailers to explore the opportunities in the domestic market substantially causing the

    outstanding growth in the concerned segment. These indications give a positive notion that

    organized retailing has arrived in the Indian market and is here to stay. It is expected to grow

    25-30 per cent annually and would triple in size from Rs35,000 crore in 2004-05 to

    Rs109,000 crore ($24 billion) by 2010.

    India is on the radar screen in the retail world and global retailers and at their wings

    seeking entry into the Indian retail market. The market is growing at a steady rate of 11-12

    percent and accounts for around 10 percent of the countrys GDP. The inherent attractiveness

    of this segment lures retail giants and investments are likely to sky rocket with an estimate of

    Rs 20-25 billion in the next 2-3 years, and over Rs 200 billion by end of 2010. Indian retail

    market is considered to be the second largest in the world in terms of growth potential.

    A vast majority of India's young population favours branded garments. With the

    influence of visual media, urban consumer trends have spread across the rural areas also. The

    shopping spree of the young Indians for clothing, favourable income demographics,

    increasing population of young people joining the workforce with considerably higher

    disposable income, has unleashed new possibilities for retail growth even in the rural areas.

    Thus, 85% of the retail boom which was focused only in the metros has started to infiltrate

    towards smaller cities and towns. Tier-II cities are already receiving focused attention

    of retailers and the other smaller towns and even villages are likely to join in the coming

    years. This is a positive trend, and the contribution of these tier-II cities to total organized

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    retailing sales is expected to grow to 20-25%.

    THE INDIAN RETAIL SCENE

    India is the country having the most unorganized retail market. Traditionally it is a

    familys livelihood, with their shop in the front and house at the back, while they run the

    retail business. More than 99%retailers function in less than 500 square feet of shopping

    space. Global retail consultants KSA Techno pak have estimated that organized retailing in

    India is expected to touch Rs 35,000 crore in the year 2005-06. The Indian retail sector is

    estimated at around Rs 900,000 crore, of which the organized sector accounts for a mere 2

    per cent indicating a huge potential market opportunity that is lying in the waiting for the

    consumer-savvy organized retailer.

    Purchasing power of Indian urban consumer is growing and branded merchandise in

    categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and even Jewellery,

    are slowly becoming lifestyle products that are widely accepted by the urban Indian

    consumer. Indian retailers need to advantage of this growth and aiming to grow, diversify and

    introduce new formats have to pay more attention to the brand building process. Theemphasis here is on retail as a brand rather than retailers selling brands. The focus should be

    on branding the retail business itself. In their preparation to face fierce competitive pressure,

    Indian retailers must come to recognize the value of building their own stores as brands to

    reinforce their marketing positioning, to communicate quality as well as value for money.

    Sustainable competitive advantage will be dependent on translating core values

    combining products, image and reputation into a coherent retail brand strategy.

    There is no doubt that the Indian retail scene is booming. A number of large corporate

    houses Tatas,Rahejas,Piramalss,Goenkas have already made their foray into this arena,

    with beauty and health stores, supermarkets, self-service music stores, new age book stores,

    every-day-low-price stores, computers and peripherals stores, office equipment stores and

    home/building construction stores. Today the organized players have attacked every retail

    category. The Indian retail scene has witnessed too many players in too short a time,

    crowding several categories without looking at their core competencies, or having a well

    thought out branding strategy

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    Retailing is the world's oldest and largest sector with global sales around US $ 9

    trillion sales annually. In India, retailing is the largest employer after agriculture employing

    over 8% of the population. India has the highest number of retail outlets in the world with

    over 12 million outlets. The Indian Retail sector is slowly evolving as an industry, and it still

    has a long way to go.

    For centuries now, India has been operating within her own unique concept of

    retailing .Retailing in its initial period was witnessed at the weekly hats or gathering in a

    market place where vendors put on display their goods of course , this practice is still

    prevalent in many towns and cities in India . Then the market saw the emergence of the local

    banyan and his neighbourhood kirana shops These were the common local mummy daddy

    or multipurpose departmental stores ,located in residential areas . Such shops stocked goods

    with multipurpose utility and were built with the vision of providing convenience at the

    doorstep of the consumer.

    However, the post liberalisation era, saw retail industry undergoing a revolutionary

    change. the changes in the organised retail industry is visible in the form of new retailing

    formats ,modern techniques ,exclusive retail outlets ,emergence of retail chains etc.Acceptance of consumers of innovative retailing trends can be attributed to

    The rapidly growing middle class consumers. Increase in per capita spending by consumers. Growth in the number of double income households. Less time at the disposal of double income families. Through media and other communication networks, exposure to work class tastes and

    preferences of products and brands.

    Rising workforce with global travel. Increasing usage of credit/debit cards. Growing youth population with the ability to study and work simultaneously. The younger population who are comfortable to transact on online retailing

    Retailing in India is one of the pillars of its economy and accounts for 14 to 15 percent

    of its GDP. The Indian retail market is estimated to be US$ 450 billion and one of the top five

    http://en.wikipedia.org/wiki/1000000000_(number)http://en.wikipedia.org/wiki/1000000000_(number)
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    retail markets in the world by economic value. India is one of the fastest growing retail

    market in the world, with 1.2 billion people.

    India's retailing industry is essentially owner manned small shops. In 2010, larger format

    convenience stores and supermarkets accounted for about 4 percent of the industry, and these

    were present only in large urban centres. India's retail and logistics industry employs about 40

    million Indians (3.3% of Indian population).

    Retailing is one of the oldest businesses that human civilization has known. It acts as an

    interface between the producer and consumer, improves the flow of goods and services and

    raises the efficiency of distribution in an economy. For a strong, stable and consistently

    growing economy, a well-organized and efficient retail sector is a must. Most of the

    developed and even emerging economies had adopted the organized retail long ago and

    percentage share of organized retail in total retailing has increased over the years.

    However, India, a land of self-sufficient villages, has continued to rely primarily on

    small, close to home shops. It is only off-late with pick-up in pace of urbanization and rising

    disposable incomes that the country started to take a few steps towards the organized

    retailing. A good progress has been made in the last few years, and the retail industry is off

    late being hailed as one of the sunrise sectors in the economy. Interestingly, for many years,retailers have been administering surveys to their customers to measure both their overall

    level of satisfaction and their opinion of various details of their store experience, service and

    merchandise provided at organized retail outlets but they are not able to retain all their

    customers by providing solutions to them. Satisfying customers is one of the main objectives

    of every business. Businesses recognize that retaining the existing customers is more

    profitable than having to win the new ones to replace those lost.

    ISSUES AND CHALLENGES

    The organised retail sector in India has been witnessing various issues and challenges

    which are proving to be a hurdle for its fast-paced growth. Even though the organised retail

    sector is in a very nascent stage in India, it provides ample opportunities for retailers, and

    mitigation of a few challenges will help the sector attain higher economies of scale and

    growth. Elucidated below are the challenges and risks that the sector faces:

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    Global economic slowdown Competition from the unorganised sector Retail sector has no recognition as an industry High real-estate costs Lack of basic infrastructure Supply-chain inefficiencies Challenges with respect to human resources Margin Pressure

    Global economic slowdown impacting consumer demand

    The current contraction in overall growth has not been so severe ever since the onewitnessed during World War II. The sub prime-triggered crisis in the US during end of 2007

    gradually spread across other parts of the world; as a the fallout of this crisis, credit

    availability dropped sharply in advanced economies and their GDP growth contracted

    incessantly during the last quarter of 2008. The financial crisis continued to trouble

    advanced and developing economies in spite of policymakers attempts to replenish liquidity

    in these markets. Many financial institutions collapsed and filed for bankruptcy, as the

    situation got from bad to worse. Many banks/institutions made massive write-downs

    following this turn of events. During 2007-10, the write-downs on global exposures are

    expected to be worth US$ 4 trillion while the write downs on the US-originated assets alone

    are likely to be worth US$ 2.7 trillion11. Such massive write-down will affect the financial

    system to a grave extent, as it is likely to further strain banks funding capabilities. Already

    these write-downs are turning into a major challenge for banks/financial institutions because

    of solvency issues, and deepening risk of failure of banks/ financial institutions. Failure of

    the US investment bank Lehman Brothers, for instance, has had an enormous impact on the

    overall global financial system, and has consequently shaken the confidence of banks,

    investors, households etc.

    According to IMFs World Economic Outlook (Apr 2009), the global GDP contracted

    by 1.8% in the first quarter of 2009 as compared with the 4.5% growth recorded during the

    same period in the previous year. Likewise, the advanced economies witnessed contraction

    in GDP growth (by 1.7%) during the last quarter of 2008 while the US, Euro area and Japan

    witnessed a recessionary trend12. According to IMF estimates, the world GDP will continue

    to contract by 2.4% during the third quarter of 2009. Going ahead, policymakers face a

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    daunting task as they need to put back things as early as possible; according to IMFs World

    Economic Outlook (Apr 2009), the world economy is expected to recover gradually only in

    2010 by 1.9% , by corroborating demand, with appropriate monetary and fiscal measures.

    The financial crisis and global economic slowdown resulted in job losses around the

    world, which weakened consumer demand. The unemployment rate remained high in the US

    during first quarter of 2009, Europe and emerging economies like Brazil; for instance, the

    annual unemployment rate in the US reached 5.8% in 2008 from 4.6% in 2007, which

    further went up to 9.4% in May 2009. In future, the rising unemployment rates in advanced

    economies as well as economies that are heavily export-oriented will further dampen

    consumer spending; as a result, the retail sectors growth will remain under threat. In the US,

    the retail trade sales growth (both retail and food services) contracted by 0.7% in 2008 from

    3.3% growth in 2007. The downward trend in retail trade sales continued during the first six

    months of 2009 (Jan- June), as it went down by 9.3%13 as compared with the previous year.

    In EU27 countries, the total retail trade in volume terms continued to contract during the

    first five months of 2009; for instance, during May 2009, the retail trade in volume terms in

    EU27 contracted by 3.1% against the same period in the previous year.

    Consumption declines in the advanced economies

    Private consumption expenditure is an important indicator of overall economic growth. In

    the last couple of quarters, the decline in consumption has further affected the global

    economic downturn. Moreover, widespread financial crisis severely hit credit availability

    and household disposable income. For instance, US households lost 20% (US$ 13 trillion)14of their net worth as a percentage of disposable income from the second quarter of 2007 to

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    the fourth quarter of 2008. The stock prices across the world started falling during the

    second quarter of 2007 and continued its losses throughout 2008; the global stock markets

    lost between 40-60% in dollar terms that translated to a huge loss of global wealth in 2008.

    The personal disposable income (at current prices) in the US registered negative growth

    (3.9% and 2.1%) during the last two quarters of 2008, respectively. The consumer demand

    situation was aggravated further by reduced capital availability and consequent fall in

    investments.

    As mentioned earlier in the section, the financial crisis triggered massive layoffs

    globally, which pushed up the unemployment rates. Further, uncertain future market

    conditions raised precautionary household savings that curtailed investments and consumer

    demand. The investment activities in 27 high income countries out of 30 countries fell by

    4.4% (at a 16.5% annualised rate) during the fourth quarter of 200815. On the other hand, in

    an uncertain situation like this, the household savings would go up as a precautionary

    measure with the global economy trying hard to rebuild in the coming months. For instance

    the household savings rate (not seasonally adjusted) in EU27 jumped to 12.5% during Q4-

    2008 from 8.6% in Q1-2008, while investments dipped to 9.0% from 9.9% during the same

    period.

    The personal consumption expenditure in the US registered merely 0.2% y-o-y growth in

    2008, down from 2.8% growth in 2007. Further, the personal consumption expenditure

    growth turned negative during the second half of 2008 and first quarter of 2009. The

    personal consumption expenditure in the US contributes over 70% of its GDP at constant

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    prices. The severity of the current recession (slowdown) can also further be measured from

    previous recessions in 1975, 1982 and 199116. For example, the average per capita

    consumption in the previous three recessions (1975, 1982 and 1991) grew by 0.28%, while

    in 2009, it is estimated that the per capita consumption will contract by 1.1% as compared

    with the previous year. India is not entirely insulated from this weakening demand. For

    example, during the first half (H1) of FY09, PFCE (at constant prices) grew by 3.3%, which

    was less than half (7.9%) of that witnessed in the corresponding period of previous year.

    During the second half (H2 FY09), the trend continued as PFCE further slowed down to

    2.5% as compared with 9.0% in the corresponding period in the previous year. An

    interesting observation on the economic slowdown and its effects on consumption in India

    can be made from the volume of credit card transactions growth, which declined from 34.6%

    in FY08 to 13.7% in FY09.

    Competition from the unorganised sector

    Organised retailers face immense competition from the unorganised retailers or kirana stores

    (mom-and-pop stores) that generally cater to the customers within their neighbourhood. The

    unorganised retail sector constitutes over 94% of Indias total retail sector and thus, poses a

    serious hurdle for organised retailers. If put numerically, the organised retailers are facing

    stiff competition from over 13 million kirana stores that offer personalised services such as

    direct credit to customers, free home delivery services, apart from the loyalty benefits.

    During the current economic slowdown, the traditional kirana stores adopted various

    measures to retain their customers, which directly affected organised retailers. Generally, it

    has been observed that customers shop impulsively and end up spending more than what

    they need at organised retail outlets; however, in kirana stores, they stick to their needs

    because of the limited variety. During a downturn, many customers may not like to spend

    more as is evident from the past few months trend that shoppers are increasingly switching

    from organised retail stores to kiranas.

    Retail sector yet to be recognised as an industry

    The retail sector is not recognised as an industry by the government even though it is the

    second-largest employer after agriculture. Lack of recognition as an industry affects the

    retail sector in the following ways:

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    Due to the lack of established lending norms and consequent delay in financingactivity, the existing and new players have lesser access to credit, which affects their

    growth and expansion plans

    The absence of a single nodal agency leads to chaos, as retailers have to oblige tomultiple authorities to get clearances and for regular operations

    High real estate costs

    Even though the real estate prices have subsided recently due to the slowdown in economies

    and the financial crises, these prices are expected to go up again in the near future. Presently

    the sector faces high stamp duties, pro-tenancy acts, the rigid Urban Land Ceiling Act and

    the Rent Control Act and time-consuming legal processes, which causes delays in openingstores.

    Earlier on the lease or rents on properties were very high (among the highest in the world) at

    some prominent locations in major cities. The profitability of retail companies were affected

    severely because real estate costs constituted a major part of their operating expenses. Now

    companies are moving out from prominent malls of tier I cities and are re-negotiating the

    rental agreements with landlords to reduce costs. Some are even focussing on setting up

    shops in tier II and tier III cities.

    Lack of basic infrastructure

    Poor roads and lack of cold chain infrastructure hampers the development of food retail in

    India. The existing players have to invest substantial amounts of money and time in building

    a cold-chain network.

    Supply-chain inefficiencies

    Supply chain needs to be efficiently-managed because it has a direct impact on the

    companys bottomlines. Presently the Indian organised retail has an efficient supply chain

    but it appears efficient only when compared with the unorganised sector. On an international

    level the Indian organised retailers fall short of international retailers like Wal-Mart and

    Carrefour in terms of efficiencies in supply chain. In the following paragraphs some key

    challenges that the retailers face during procuring goods from suppliers to delivering the

    same to end-customers are discussed.

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    Inventory management is the first challenge that retailers face at the local store level as well

    as at the warehouse level. Excess inventory often leads to an increase in inventory costs, and

    then to lower profits, so retailers like Pantaloons and Shoppers Stop have IT systems in

    place for inventory management. SCM-IT has helped retailers to plan their stock outs,

    replenish their stock on time, move stock from warehouse to stores, maintain adequate stock

    at a store to match consumer preferences etc. However, the retailer may still face a big

    challenge in terms of efficiently implementing the supply-chain software across stores and

    integrating it with the central warehouse, which can be a time-consuming process, requiring

    trained personnel.

    Logistics is another challenge related to the supply chain. It is imperative for any organised

    food and grocery retailer to establish a robust cold chain. Amul is the best example of this

    scenario, as it has developed a cold storage chain across India. Until and unless organised

    retailers like Reliance and Food Bazaar fully develop integrated-cold chains, they would

    continue to incur loss of considerable amount of money through wastages of perishable

    items while moving huge quantities from one place to another.

    The third challenge related to the supply chain is procurement. Big organised retailers enjoy

    economies of scale based on their size and expansion plans. The economical benefits of

    scale in procurement are achieved when procurement is made in thousands or millions of

    units; however, the main challenge here is to procure adequate amount of stock according to

    customer requirements, failing which the resultant rise in inventory can affect bottomlines.

    Challenges with respect to human resources

    The Indian organised retail players shell out more than 7% of sales towards personnel costs.

    The high HR costs are essentially the costs incurred on training employees as there is asevere scarcity for skilled labour in India. The retail industry faces attrition rates as high as

    50%, which is high when compared to other sectors also. Changes in career path, employee

    benefits offered by competitors of similar industries, flexible and better working hours and

    conditions contribute to the high attrition.

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    Shrinkage

    Retail shrinkage is the difference between the book value of stock and the actual stock or the

    unaccounted loss of retail goods. These losses include theft by employees, administrative

    errors, shoplifting by customers or vendor fraud. According to industry estimates, nearly 3-

    4% of the Indian chains turnover is lost on account of shrinkage. The organised industry

    players have invested IT, CCTV and antennas to overcome the problem of shrinkage.