A Project Report on

RETAIL SECTORIN

INDIA

F.Y.B.COM.-SECTION-3

GROUP: 7

ROLL NO. GROUP MEMBERS245 Niyati Parekh246 Gaurav Parihar247 Binoy Parikh248 Drashti Parikh249 Isha Parikh250 Nirmal Parikh251 Romsha Parikh252 Yatri Parikh253 Nilesh Parmar254 Paresh Parmar

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ACKNOWLEDGEMENTS

This report is a collection of many insights gained from the

tremendous pool of knowledge subsisting on the internet,

the pin-pointed information from which is obtained through

the devotion and clear thinking of the students forming part

of this group. We, the students of GROUP: 7 (F.Y.B.COM-3),

would like to acknowledge the following group of people who

have transformed this abstract idea into reality:

Our respected professors, Parag Patel sir, Abhishek

Shah Sir and Vaibhav Kadia Sir, for guiding us

through the process of building the base of the

project report to the reviewing the report and

helping us draft the final report.

G.K.Choksi & Co. which has provided us with the

hard copies of the project report, well spiral-bound.

Lastly, the group members, ourselves, who have

devoted precious time to this project.

INDEX

SR. NO. CONTENTS PAGE NO.

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1 RETAIL SECTOR IN INDIA:AN OVERVIEW 5

2 SCOPE OF RETAIL SECTOR IN INDIA 7

3 THE GROWTH SO FAR… 8

4 OPERATING ENVIRONMENT-RETAILING FORMAT 13

5 GOVERNMENT POLICY FOR RETAIL SECTOR 15

6 MAJOR PLAYERS IN THE RETAIL FIELD 16

7 THE ROAD AHEAD… 18

8 CONCLUSION 20

9 BIBLIOGRAPHY 25

RETAIL SECTOR IN INDIA: AN OVERVIEW

The Indian Retail Industry is the largest among all the industries,

accounting for over 10 per cent of the country’s GDP and around 8 per cent

of the employment. Many players entered this sector but have not yet tasted

success because of the heavy initial investments that are required to break

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even with other companies and compete with them. The total concept and

idea of shopping has undergone an attention drawing change in terms of

format and consumer buying behavior, ushering in a revolution in shopping

in India.

The retail industry is divided into organised and unorganised sectors. Over

12 million outlets operate in the country and only 4% of them being larger

than 500 sq ft (46 m2) in size. Organised retailing refers to trading activities

undertaken by licensed retailers, that is, those who are registered for sales

tax, income tax, etc. These include the corporate-backed hypermarkets and

retail chains, and also the privately owned large retail businesses.

Unorganised retailing, on the other hand, refers to the traditional formats of

low-cost retailing, for example, the local kirana shops, owner manned

general stores, paan/beedi shops, convenience stores, hand cart and

pavement vendors, etc. 

Most Indian shopping takes place in open markets and millions of

independent grocery shops called kirana. Organized retail such supermarkets

accounts for just 4% of the market as of 2008.

A large young working population with median age of 24 years, nuclear

families in urban areas, along with increasing workingwomen 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

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the India Retail Industry. 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 India Retail Industry

looks promising with the growing of the market, with the government

policies becoming more favorable and the emerging technologies facilitating

operations.

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

it is a family’s livelihood, with their shop in the front and house at the back,

while they run the retail business more than 99% retailer’s function in less

than 500 square feet of shopping space. 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

India has highest number of outlets per person (7 per thousand) Indian retail

space per capita at 2 sq ft (0.19 m2)/ person is lowest in the world Indian

retail density of 6 percent is highest in the world. 1.8 million households in

India have an annual income of over 45 lakh .

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SCOPE OF RETAIL SECTOR IN INDIA

The scope of the Indian retail market is immense for this sector is poised for

the highest growth in the next 5 years. The organized retailing sector in

India is only 3% and is expected to rise to 25- 30% by the year 2010. There

are under construction at present around 325 departmental stores, 300 new

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malls, and 1500 supermarkets.

The growth of scope in the Indian retail market is mainly due to the change

in the consumer’s behavior. For the new generation have preference towards

luxury commodities which have been due to the strong increase in income,

changing lifestyle, and demographic patterns which are favorable. 

Judging the scope for growth in the India retail industry many global retail

giants are also entering the Indian retail market. They are :

Tesco

Metro AG

Wal- Mart

The scope for growth in the Indian retail market is seen mainly in the

following cities:

Mumbai

Delhi

Pune

Ahmedabad

Bangalore

Hyderabad

Kolkata

Chennai

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THE GROWTH SO FAR…

EVOLUTION OF THE SECTOR

Traditionally retailing in India can be traced to the emergence of the

neighborhood ‘Kirana’ stores catering to the convenience of the

consumers

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Era of government support for rural retail: Indigenous franchise model of

store chains run by Khadi & Village Industries Commission

1980s experienced slow change as India began to open up economy.

Textiles sector with companies like Bombay Dyeing, Raymond's, S

Kumar's and Grasim first saw the emergence of retail chains

Later Titan successfully created an organized retailing concept and

established a series of showrooms for its premium watches

The latter half of the 1990s saw a fresh wave of entrants with a shift from

Manufactures to Pure Retailers.

For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet

M and MusicWorld in music; Crossword and Fountainhead in books.

Post 1995 onwards saw an emergence of shopping centers,

Mainly in urban areas, with facilities like car parking

Targeted to provide a complete destination experience for all segments of

society

Emergence of hyper and super markets trying to provide customer with 3

V’s - Value, Variety and Volume

Expanding target consumer segment: The Sachet revolution - example of

reaching to the bottom of the pyramid.

At year end of 2000 the size of the Indian organized retail industry is

estimated at Rs.13000 crore

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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.

The trends that are driving the growth of the retail sector in India are

Low share of organized retailing

Falling real estate prices

Increase in disposable income and customer aspiration

Increase in expenditure for luxury items (CHART)

Weekly MarketsVillage FairsMelas

Convenience StoresMom and Pop/Kiranas

PDS OutletsKhadi StoresCooperatives

Exclusive Brand OutletsHyper/Super MarketsDepartment StoresShopping Malls

Traditional/Pervasive Reach

Government Supported

Historic/Rural Reach

Modern Formats/ International

Source of Entertainme

nt

Neighborhood Stores/Convenienc

e

Availability/ Low Costs / Distribution

Shopping Experience/Efficiency

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Another credible factor in the prospects of the retail sector in India is the

increase in the young working population. In India, hefty pay packets,

nuclear families in urban areas, along with increasing working-women

population and emerging opportunities in the services sector. These key

factors have been the growth drivers of the organized retail sector in India

which now boast of retailing almost all the preferences of life - Apparel &

Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home &

Office Products, Travel and Leisure.etc.. When it comes to development of

retail space specially the malls, the Tier II cities are no longer behind in the

race. If development plans till 2007 is studied it shows the projection of 220

shopping malls, with 139 malls in metros and the remaining 81 in the Tier II

cities. The government of states like Delhi and National Capital Region

(NCR) are very upbeat about permitting the use of land for commercial

development thus increasing the availability of land for retail space; thus

making NCR render to 50% of the malls in India.

RECENT TRENDS

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Retailing in India is witnessing a huge revamping exercise as can be seen

in the graph

India is rated the fifth most attractive emerging retail market: a potential

goldmine.

Estimated to be US$ 200 billion, of which organized retailing (i.e.

modern trade) makes up 3 percent or US$ 6.4 billion

As per a report by KPMG the annual growth of department stores is

estimated at 24%

Ranked second in a Global Retail Development Index of 30 developing

countries drawn up by AT Kearney.

Multiple drivers leading to a consumption boom:

Favorable demographics

Growth in income

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Increasing population of women

Raising aspirations: Value added goods sales

Food and apparel retailing key drivers of growth

Organized retailing in India has been largely an urban phenomenon with

affluent classes and growing number of double-income households.

More successful in cities in the south and west of India. Reasons range

from differences in consumer buying behavior to cost of real estate and

taxation laws.

IT is a tool that has been used by retailers ranging from Amazon.com to

eBay to radically change buying behavior across the globe.

‘E-tailing’ slowly making its presence felt.

Following figure shows penetration of organized retail across categories:

OPERATING ENVIRONMENT-RETAILING FORMAT

Malls:

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This is the largest form of organized retailing today, located mainly in metro

cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000

sq ft and above. They lend an ideal shopping experience with an

amalgamation of product, service and entertainment, all under a common

roof. Examples include Shoppers Stop, Piramyd, and Pantaloon.

Specialty Stores:

Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer

Crossword, RPG's Music World and the Times Group's music chain Planet

M, are focusing on specific market segments and have established

themselves strongly in their sectors.

Discount Stores:

As the name suggests, discount stores or factory outlets, offer discounts on

the MRP through selling in bulk reaching economies of scale or excess stock

left over at the season. The product category can range from a variety of

perishable/ non-perishable goods

Department Stores:

Large stores ranging from 20000-50000 sq. ft, catering to a variety of

consumer needs. These are further classified into localized departments such

as clothing, toys, home, groceries, etc. Departmental Stores are expected to

take over the apparel business from exclusive brand showrooms. Among

these, the biggest success is K Raheja's Shoppers Stop, which started in

Mumbai and now has more than seven large stores (over 30,000 sq. ft)

across India and even has its own in store brand for clothes called Stop.

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Hyper marts/Supermarkets:

Large self-service outlets, catering to varied shopper needs are termed as

Supermarkets. These are located in or near residential high streets. These

stores today contribute to 30% of all food & grocery organized retail sales.

Super Markets can further be classified in to mini supermarkets typically

1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft

to 5,000 sq ft. having a strong focus on food & grocery and personal sales.

Convenience Stores:

These are relatively small stores 400-2,000 sq. feet located near residential

areas. They stock a limited range of high-turnover convenience products and

are usually open for extended periods during the day, seven days a week.

Prices are slightly higher due to the convenience premium.

MBO’s OR MULTI BRAND OUTLETS:

Multi Brand outlets, also known as Category Killers, offer several brands

across a single product category. These usually do well in busy market

places and Metros. Example:- Promart

GOVERNMENT POLICY FOR RETAIL SECTOR

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Current Government policy prohibits foreign direct investment in retail

trading except for single brand retail that fulfils the following conditions:

Foreign equity does not go beyond 51 percent

Foreign Investment Promotion Board (FIPB)/Department of Industrial

Policy & Promotion (DIPP) approval has been issued

Products to be sold are of a ‘single brand (branded during

manufacturing)’ only

Products are sold under the same brand internationally

Additions to the product categories to be sold under ‘single brand’

require fresh Government approval. Intense debate currently centres on

what percentage of foreign ownership should be allowed and whether

further liberalisation of the FDI rules should occur, particularly in the

retail sector.

The Government’s stance has vacillated for years. In 1993, in the first flush

of economic reforms, the law was changed to permit foreign-owned

operations, but no big player secured the requisite approvals. Three years

later the restriction was re-imposed and maintained when the Hindu

nationalists won power in 1998 with the support of many small shopkeepers.

Hypermarkets planned by groups such as Reliance and Bharti would be

directly affected by a regime along these lines. These retailers would only be

allowed to operate in specified catchment areas, minimising the scope of

competition between them and local stores.

Franchise agreements have not escaped similar scrutiny. The Foreign

Investment Promotion Board (FIPB) is currently examining the entire

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franchise sector to ensure that multi-brand retailers are not entering India

under jointly-owned franchise agreement.

Regulations prevent most foreign investment in retailing. Moreover, over

thirty regulations such as "signboard licences" and "anti-hoarding measures"

may have to be complied before a store can open doors. There are taxes for

moving goods to states, from states, and even within states

There is no other significant policy for the retail sector apart from that

relating to FDI. Apart from that, the local entrepreneurs wishing to enter this

sector have to undergo the normal licensing procedure as prescribed and

required by various statutes

MAJOR PLAYERS IN THE RETAIL FIELD

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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.

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 large Indian business group to enter the business of retail

after Reliance 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.

Vivek Limited Retail Formats: Viveks, Jainsons, Viveks Service

Centre, Viveks Safe Deposit Lockers

REI AGRO LTD Retail-Formats:6TEN Hyper & 6TEN Super

RPG Retail-Formats: Music World, Books & Beyond, Spencer’s

Hyper, Spencer’s Super, Daily & Fresh

Pantaloon Retail-Formats: Big Bazaar, Food Bazaar, Pantaloons,

Central, Fashion Station, Brand Factory, Depot, aLL, E-Zone etc.

The Tata Group-Formats: Westside, Star India Bazaar, Steeljunction,

Landmark, Titan Industries with World of Titans showrooms, Tanishq

outlets, Chroma.

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

City, Inorbit

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Lifestyle International-Lifestyle, Home Centre, Max, Fun City and

International Franchise brand stores.

Pyramid Retail-Formats: Pyramid Megastore, TruMart

Subhiksha-Formats: Subhiksha supermarket pharmacy and telecom

discount chain.

Vishal Retail Group-Formats: Vishal Mega Mart

Reliance Retail-Formats: Reliance Fresh

Reliance ADAG Retail-Format: Reliance World

Aditya Birla Group - more Outlets

THE ROAD AHEAD….

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According to industry experts, the next phase of growth is expected to come

from rural markets, with rural India accounting for almost half of the

domestic retail market, valued over US$ 300 billion. Rural India is set to

witness an economic boom, with per capita income having grown by 50 per

cent over the last 10 years, mainly on account of rising commodity prices

and improved productivity.

According to retail and consumer products division, E&Y India, basic

infrastructure, generation of employment guarantee schemes, better

information services and access to funding are also bringing prosperity to

rural households. The rural market, product design will need to go beyond

ideas like smaller sizes (such as single use sachets) to create genuinely new

products, according to Ramesh Srinivas, national industry director

(consumer markets), KPMG India.

According to the Investment commission of India, the overall retail market

is expected to grow from US$ 262 billion to about US$ 1065 billion by

2016, with organised retail at US$ 165 billion (approximately 15.5 per cent

of total retail sales). India is expected to be among the top 5 retail markets in

the world in 10 years.

According to new market research report by RNCOS titled, "Booming Retail

Sector in India", organised retail market in India is expected to reach US$ 50

billion by 2011.

Number of shopping malls is expected to increase at a CAGR of more

than 18.9 per cent from 2007 to 2015.

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Organised retailing of mobile handset and accessories is expected to

reach close to US$ 990 million by 2010.

Driven by the expanding retail market, third party logistic market is

forecasted to reach US$ 20 billion by 2011.

While India presents a large market opportunity given the number and

increasing purchasing power of consumers, there are significant challenges

as well given that over 90% of trade is conducted through independent local

stores. Challenges include: Geographically dispersed population, small

ticket sizes, complex distribution network, little use of IT systems,

limitations of mass media and existence of counterfeit goods.

To become a truly flourishing industry, retailing needs to cross the following

hurdles:

Automatic approval is not allowed for foreign investment in retail.

Regulations restricting real estate purchases, and cumbersome local

laws.

Taxation, which favours small retail businesses.

Absence of developed supply chain and integrated IT management.

Lack of trained work force.

Low skill level for retailing management.

Intrinsic complexity of retailing – rapid price changes, constant threat

of product obsolescence and low margin

CONCLUSION

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The following figure represents the story so far and the story

imagined/expected!

India’s retail sector is truly one of the basic pillars towards India’s

development. It is an indispensable sector that will earn the economy the

desired returns to support development. Looking at the current trend, this

sector is set to grow and grow behemoth-ly so as to provide the required

push to the economy. The rural areas will also flourish due to development

and establishment of such stores in these areas. This development will surely

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attract the foreign giants to invest in India and the growth of this sector will

be unimaginable mainly due to the changing thought patterns in the young

generation and the craze for the foreign brand. Surely the small retailers will

face an unfair competition and the government will have to protect them but

the government should also see to it that the money which the foreign brands

will earn and the benefit received from the same will be larger than that of

protecting the small retailers. The Indian retail market has to e rought out of

the protectionist cocoon so that India can flourish under the retail umbrella.

BIBLIOGRAPHY

1. www.wikipedia.org

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2. www.fibre2fashion.com

3. An Indian retail outlook report-2005-06

4. www.scribd.com-retail project

5. www.siadipp.nic.in/policy

6. www.naukri.com

7. www.cii.in

8. www.retaildigest.uk

9. www.commerce.gov.in

10. www.pantaloon.com

NOTE:

All the search material was obtained through www.google.com

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