INDIAN RETAIL REALISM: IS IT REALLY GROWING?

Transcription

1 INDIAN RETAIL REALISM: IS IT REALLY GROWING? BY PAYAL SHARMA Lecturer Mahakal Institue of Management-Ujjain (M.P.) - Mobile No ABSTRACT Indian retail business values at around US$ 550 billion as of now and about four per cent of it accounts for the organized sector. A report by Boston Consulting Group (BCG) has revealed that the country's organized retail is estimated at US$ 28 billion with around 7 per cent penetration. It is projected to become a US$ 260 billion business over the next decade with around 21 per cent penetration. The Indian retail industry is the fifth largest in the world. Comprising of organized and unorganized sectors, India retail industry is one of the fastest growing industries in India, especially over the last few years. Though initially, the retail industry in India was mostly unorganized, however with the change of tastes and preferences of the consumers, the industry is getting more popular these days and getting organized as well. With growing market demand, the industry is expected to grow at a pace of 25-30% annually. 10 In this paper main focus on the reality facts of retail industry in India like: is Indian retail industry is growing according to researcher expectation or just an artificial boom? What are the reasons or challenges behind unhurried growth in this industry after knowing the existing opportunities? Why other country are interested to enter into the Indian market. Suggestions for the retailer to clutch the opportunity and lastly conclusion will drown. Key Words: Retail, Retailers, Challenges, Foreign Direct Investment.

2 INDIAN RETAIL REALISM: IS IT REALLY GROWING? BY PAYAL SHARMA Lecturer Mahakal Institue of Management-Ujjain (M.P.) - Mobile No INTRODUCTION Retail industry is the one of the largest private sector in the world which contributes to 8% of the GDP and provide employment to the on sixth of the labor force. The projected retail trade is expected to be approx 7 trillion US $. The Indian retail evaluation was started with the barter system and grown slow with the Mella s, Kirana store known as unorganized sector. In other side organized retail came in existence in India with the commence of First Malls in The start of Ansal s plaza in Delhi and Crossroads in Mumbai, this stores lightened the sudden increase of organized retails in India. Even renowned news journals have reported that merely three shopping malls existed till 2002 in India. However, if one were to define shopping centre s or malls as enclosed shopping spaces, then Mumbai's Crawford Market (opened in 1869) and Kolkata's New Market (1874) surely have the pride of place as the pioneering malls in India. Delhi's Connaught Place (opened in 1931) should also definitely be considered, with its covered arcades. Recently, New Delhi's partially underground Palika Bazaar, the mini-malls of the late 1980s on Bangalore's Brigade Road, and shopping centers built by private developers in Ahmadabad and other cities have all had a role to play in the evolution of organized retail spaces in the country. So, it would be accurate to view the most recent offspring of a long lineage or organized shopping centers.

3 In India there are major three types of retail or available traditional, established and emerging formats. Figure: 1 Major Retail Formats Traditional Format Established Formats Emerging Format Salesman Kirana stores Exclusive Retail Outlet Haats Mandies Company/Multi Brand store Convenience/Departmental Store Pan/Beedi Shop Malls/Special Malls Company/Multi Brand Store Hypermarket International Retailer Malls/Special Malls Multiplexes As far as Indian context retail industry contributes 14% of our GDP and the second largest industry next to agriculture which provide employment to good number of persons. Now according to a survey, India is classified in to the fifth most attractive retail destination and second among the countries in Asia. Worldwide it is ranked as fifth most attractive retail destination. 1. LITERATURE REVIEW Sonia (2010), author has mainly covered the growth rate in the retail sector as well as current trends, planning, key strategies adopted by the retail store. She wants to explore the ethical beliefs and practice of retail industry in India. She is suggested the methods to support sales people how to deal with new condition in the retail marketing to satisfy customer and as well as increase self satisfaction in retail jobs. Mohan Guruswamy et al (2011), author investigated the impact of FDI in retail sector in India, they have analyzed the facts related to FDI and found that it will created bad economy in India. They were found that retail sector is facing financial problem in India and suggested that RBI is need to provide proper fund to the unorganized retails to grow there business as organized. They are also suggested that Indian government has to enter through national commission to create policy to hake it the FDI problem in retails. R. N. Wakchaure (2011), in this paper author has analyzed the positive aspects retailed to new job opportunity if FDI will enter into in Indian retail sector. Because the retails sector is the second largest source for employment in India, if it will grow than job opportunities also grow equally but another important aspect discussed by the research is that, if FDI will enter into the retail sectors which is the organized retails, what will going to happened with the unorganized

4 retails and there family business. He has find out that FDI will create new jobs opportunities for the young generation, so government should be liberalize with the FDI in retail. Santosh Kumar Yadav (2010), this paper is covering the current trends, strategies, opportunities, challenges of the retail sector, it also investigating the consumer knowledge for the brands awareness in different social economic segments in India and the growth of retail in urban and semi urban retail markets. Chirag B.Rathod (2006), this paper is covering the emerging patterns in Indian retail industry and comparing present to its past trends, its growth patterns and the challenges faced by the Indian retail industry. The find that the retail industry is growing rapidly many giant business enterprises are planning to enter into the retail sector, even foreign companies are also interested to invest in Indian retail sector. Its have huge scope for new investors as well as existing companies both. Retail sector is the best method of 100% utilization of promotional tools. India Report (2010), in this report research has been conduct to understand the retailer problem. Mainly retail respondents interviewed to understand the reason of late line up in retail sector as compare to other sectors. Research found that the although organized retail sector have only 6% market share potential but the growth rate is speedy, sudden growth 0% to 6% so it s a good sign for the future growth in retail sector. Ketan Dewan (2010), article mainly focusing on the challenge facing by the Indian retail industry. In his article he is providing the strategies which should be adopted to face challenges by the retailers Like : proper promotional techniques, interaction and engagement with consumers at store level and also serve after sales services to the customers. Kamaljit Anand (2010), his article on the best use of promotional tools for maximizing the retails industry efficiency. He suggested that if retailer will optimize the right use of sales promotion in FMCG sector they can easy grow there market share. He is also suggested that campaign and customer relation management will also increase best way to handle the challenges and expand the market. Mathew Joseph (2008), this study is survey of the economy where large cooperates are entering onto the retail business. This survey is based on a survey of 2020 unorganized small retailers across major cites: 1318 consumers shopping at both organized and unorganized retail outlets; 100 intermediaries; and 197 farmers. In addition, a control sample survey was done of 805 unorganized retailers who are not in the vicinity of organized retail outlets in four metro cities. Detailed interviews were also carried out for 12 large manufacturers, 20 small manufacturers and six established modern retailers. They have found impact on unorganized retailer there is less amount of fall down in there market share. There is no fall down for employment in unorganized sector. The impact on customer is that they are benefited with the offers given by the organized retailers. There is no adverse impact on intermediary of organized sector. Farmers getting benefit from direct selling through organized sectors.

5 2. OBJECTIVES OF STUDY The present study is based upon the conceptual approach to identify the reasons of slow growth rate in retail industry and strategies for the retailers try to win the challenges of the industry. Specifically the objectives of the study are: 1. To identify the cause slow growth in India. 2. To identify the role of Indian government, to support for grow this industry 3. RESEARCH METHODOLOGY The study is based upon secondary data covering the period when retail marketing was started till date. The study is related to comparison between Indian retail industries versus other countries those much involved in the retail. The data has been collected from the different Indian government websites, articles, news related to retail industry, through review of many researches related to retail marketing. 4. ANALYSIS AND FINDINGS First part of this section is analysis; it covers the reasons of slow growth rate of retail industry after apple opportunities. Second part will cover two subsection first present step by step strategies for the Indian retailers and second sub section will provide the suggestion to convert growth into speedy from the steady growth. 4.1 REASONS OF STEADY GROWTH NOT SPEEDY GROWTH Over the past few years, the retail sales in India are hovering around 33-35% of GDP compared to around 20% in the US. The table gives the picture of India s retail trade as compared to US and China. Figure: 2 India s retail trade as compared to US and China Country Trade (US $) Employment (%) Shops (million) Organized (%) sector Share India China US Source: The Economist Figure: 3 Asia retail sales growth by volume (%pa) Territory Australia China Hong Kong

6 India Indonesia Japan Malaysia New Zealand Philippines Singapore South Korea Taiwan Thailand Vietnam Source: Economist Intelligence Unit Actual Estimates Forecasts These are the facts that show Indian retail sector is grooming year by year. This comparative chart shows the growth rate world wide and specific Asia reason. But still there are some reasons or challenges which restrict the path of Indian retail industry those reasons are as follows: Governmental Policy: Tax Policy: government is planning to implement uniform value-added tax all over India, currently Differential tax rate system is used by the different states. It will increase the cost burden of retail investors. Restriction on FDI: government is restricting FDI in this industry which create a limited exposure for the best practices. Land availability: Governmental land and zonal constraint creating hurdles for establishing organized mall, shopping zone. Stamp duties, lack or ownership are also the one more factor of challenge faced by the retail industry. Location: Scarcities of land availability also demoralize the retail investors, because unorganized retails are near by the homes and organized store are far from the reach of the customer. Location is the essential factors for the success retail stores. Funds availability: Retail sector is still legging to get a tag of Industry which makes difficult environment to get funds from banks and other financial organization. Infrastructural Development: improper infrastructural development like roads, logistic service, electricity, pan India suppliers, warehouses all these things are restricting the speedy growth of the industry. Talented Professionals: retail industry requires talented, knowledgeable professionals for the proper use of there scar resource for profit maximization, especially in the middle level management. Indian is lagging to provide proper quality education to make trained professional for this industry.

7 Supply Chain: many of the Indian retailers are facing supply chain facility, because of that there are using long supply chain or many intimidators are involved to reach end customer, it will increase the over all cost by 15% it create impact of the price of the products. Competition from Kirana Stores : this sector is struggling competition from the local kirana stores those are grabbing the location benefits near by the customer s homes. Personal attention, good personal customer relationship, and other facility is create shopping easy for the customers. Right Customer: industry is still not able to identify the right customer for them. Need of the customer, though for retail store, paying capacity this knowledge is unavailable with the retail players. Retail contraction: retail contraction refers to the unaccounted loss of retail goods. This loss includes theft by employees, administrative errors, shoplifting by customers or vendor fraud. IT facilitated techniques such as CCTV and software solutions dedicated to the retail sector can be implemented so as to increase employee morale but it includes cost which creates adverse effect on profit margin. Low margin: complexities of retailing such as quick price fluctuation constant threat of product obsolescence and low margins makes it a persistent industry which shows extraordinary growth but less attractive for investment. Manufactures are still using intermediates to Retailers and so margins remain low to Retailers. Large Geographical area: India is having large geographical area which includes different languages, cultural, norms and value boundaries, this scattered marked arise the problem of customer identification for their product. 5. STRATEGIES OR SUGGESTIONS TO MAKE GROWTH SPEEDY Industry like retail which is still struggling to achieve its position as Industry, the major player of this industry firstly they have to identify the current or future opportunities, trends and prospects in this industry. Current and Future Scenario of Retail Organized retail market in India is expected to reach US$ 50 Billion mark by Number of shopping malls is expected to increase at a CAGR of more than 18.9% from 2007 to Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50%. Organized retailing of mobile handset and accessories is expected to reach close to Rs Crore by Driven by the expanding retail market, third party logistic market is forecasted to reach US$ 20 Billion by 2011.

8 Apparel, along with food and grocery, will lead the organized retailing in India. Growth of Retail and its Distribution The NCAER, based on its Market Information Survey of Households (MISH), has projected that the consuming class consisting of the aspirers, the middle class and the rich with annual household income of above Rs. 90,000 will rise from about 336 million in to 505 million in This implies a huge growth potential of retail in the country. The sales of the Indian retail industry have been about US$ 322 billion (Rs. 14,574 billion) in , amounting to about 35 per cent of India s GDP. It is the seventh largest retail market in the world. Indian retail industry is projected to grow to about US$ 590 billion by and further to over US$ 1 trillion by (Figure- 4). Figure -4 Size of Indian retail (in US $ bn) This works out to an annual compound growth rate of about 13 per cent during and a slower 11 per cent during The major drivers of growth of Indian retail Industry are: Rising income levels A large segment of young population Nuclear family structure Growing literacy A rapidly expanding middle class Increasing number of working women Growing urbanization increasing media penetration Growing consumer acceptance of modern retail formats

9 Changing lifestyles of the Indian households Better shopping experience and larger verity goods Secondary they have to Thorley identify the challenges and problem faced by their retail segment in which they dealing. And identify the difference between myths and reality of retail industry. Figure: 5 Bursting retail Myths and Reality Bursting Retail Myths Common Assumption Myths Reality Luxury retail is an over-hyped segment in the Indian context Highway mall will be successful in India Discount formats should be located outside city limits Organized F & G retail is challenged by India s traditional home delivery system Mega developer retailer collaboration are required in India Mega malls and huge stores are best for Indian consumers India s tier-iii towns will experience a major boom Trend professional are available in good number Source: Cushman & Wakefield Research 5.1 SUGGESTION FOR RETAIL PLAYER Government should be liberal: government should take liberal steps to provide financial support for the small retailers so, can they will convert their unorganized store into organized stores. Increasing manufacturer s own retail presence. Manufacturers are also entering to increasing their own retail presence in order to compete with modern retailers. Apparel manufacturers, for example, are opening exclusive showrooms to give their brands more visibility and to strengthen their position in this competitive scenario. Helping small retailers. Most of the FMCG companies interviewed stated that their companies were available to assist small retailers by adopting them and helping them upgrade service levels, systems, and operations. They anticipate that, in the next few years, the number of such adopted stores would almost double. Compete with Kirana stores: implement customer loyalty programs for new product ideas, brand building, proper promotional techniques, and enhanced customer services. It can be achieved through: Face to face interaction with customer ate ever level of the store Qualitative after sales services.

10 Creating image on the consumer mind with quick services. Identify customer: they have to identify the right customer for their retail stores to increase demand. To identify they have to search the answers of these questions: Who will be my customer? Why customer will pay? What is value to him? What should be the degree of after sales services? Who are the influencing groups? Chain Supply should be smaller: to reduce cost manufacturer have to reduce the size of suppliers or using the less number of intermediates. It will increase the profit margin and the profit margin will support to grow the market. Specialized Training Institutes: if major players want the growth in the right direction in retail they have to establish their own training institute, where they can make a team of qualitative professionals especially for the middle level management. 6. CONCLUSION There are plenty of opportunities for organized retailing, the unorganized sector does cash in on the tax advantage. The uneven and unstructured segment makes it difficult to administer the tax system. This is a macro issue from the organized retailing side. The other obstacle is to change the mind block of customers, who tend to perceive organized retailers to be far more expensive than unorganized ones with no specific distinction between the two in terms of the clear value. Retailer has to adopt adequate strategies to come over from the challenges and pitfalls of the retail industry like they have to identify the right way to make customer ready to except that organized retails are also providing quality products with reasonable prices. Appropriate promotional strategy is used to aware consumer from the benefits of the organized retail stores. Research should be conducted before deciding the location for their retail malls, shopping centers. As far as Indian context retail industry contributes 14% of our GDP and the second largest industry next to agriculture which provide employment to good number of persons. Now according to a survey, India is classified in to the fifth most attractive retail destination and second among the countries in Asia. Worldwide it is ranked as fifth most attractive retail destination. There is a significant growth is assumed by the retailer in next couple of years which is the basic reason of attractiveness of domestic investors as well as foreign investors. 7. REFERENCES A report by Boston Consulting Group (BCG) A research report on Booming Retail In India available at: Chirag B.Rathod and Devang J.Desai (2006), Indian Retail Industry: Emerging Trends and Challenges, SCMS Journal of Indian Management, Pp

11 Devangshu Dutta,article available at: India Report (2010), India Report Retail Reality: The Way Ahead for India s Retail Business. Ketan Dewan (2010),Challenges faced by the retail industry in India, FICCI NEWS, Vol. 4, Pp. 6-8 Kamaljit Anand (2010), promotions optimizations in FMCG retail,vol. 4, Pp Mathew Joseph, Nirupama Soundararajan, Manisha Gupta, Sanghamitra Sahu (2008),A Report: Impact Of Organized Retailing On The Unorganized Sector, Indian Council For Research On International Economic Relations. Mohan Guruswamy, Kamal Sharma, Jeevan Prakash Mohanty and Thomas J. Korah, FDI in India s Retail Sector More Bad than Good?, R. N. Wakchaure(2011), Foreign Direct Investment And Emploment Opportunities In Indian Retail Sector, Indian Streams Research Journal, Vol. 1, pp Sonia(2010), Changing Face of Indian Retail Sector: Ethics, Challenges and Opportunities Journal of Economics and Sustainable Development, Vol. 2, Pp Santosh Kumar Yadav, Hitendra Bargal, Ashish Sharma, Rajeev Shukla, Bhanu Saxena, Manish Phalke, and Nitish Ghune (2010), Growth And Challenges Of Retail Market In India, A journal of University of Kelaniya Shri Lanka.