22 ZIJMR Vol2 Issue5 May 2012

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International Journal of Multidisciplinary Research

Vol.2 Issue 5, May 2012, ISSN 2231 5780
where the growth of organized retailing and growth in the consumption by the Indian population

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RETAIL SECTOR IN INDIA: ISSUES & CHALLENGES

MS. VIDUSHI HANDA*; MR. NAVNEET GROVER**

*Assistant Professor,
Marketing.
**District Manager,
Mankind, New Delhi.

ABSTRACT

This paper provides detailed information about the growth of retailing industry in India.
It examines the growing awareness and brand consciousness among people across different
socio-economic classes in India and how the urban and semi-urban retail markets are witnessing
significant growth. It explores the role of the Government of India in the industries growth and
the need for further reforms. 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. The paper includes growth of retail sector
in India, strategies, strength and opportunities of retail stores, retail format in India, recent trends,
and opportunities and challenges. This paper concludes with the likely impact of the entry of
global players into the Indian retailing industry. It also highlights the challenges faced by the
industry in near future.

KEYWORDS: Retailing, Unorganized Sector, Organized Sector, Traditional Retail, Modern
Retail.

1. INTRODUCTION

India is the second fastest growing economy in the world. It is third largest economy in the world
in terms of GDP and fourth largest economy in terms of Purchasing Power Parity. India presents
a huge opportunity to the world at age, to use as a hub. Standing on the threshold of a retail
revolution and witnessing a fast changing retail landscape, India is all set to experience the
phenomenon of global village. India is the promised land for global brands and Indian retailers
A Vibrant economy. India tops in the list of emerging market for global retailer and Indias
retail sector is expanding and modernizing rapidly in line with Indias economic growth.

The future is promising; the market is growing, government policies are becoming more
favorable and emerging technologies are facilitating operations.

Retailing in India is gradually inching its way toward 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 in India. Modern retail has entered India as seen in
sprawling shopping centers, multi-storied malls and huge complexes offer shopping,
entertainment and food all under one roof. The Indian retailing sector is at an inflexion point
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is going to take a higher growth trajectory. The Indian population is witnessing a significant
change in its demographics. A large young working population with median 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 growth drivers of the retail sector in
India.

Retailing in India is evolving rapidly, with consumer spending growing by unprecedented rates
and with increasing no of global players investing in this sector. Organized retail in India is
undergoing a metamorphosis and is expected to scale up to meet global standards over the next
five years. Indias retail market has experienced enormous growth over the past decade. The
most significant period of growth for the sector was between year 2000 & 2006, when the sector
revenues increased by about 93.5% translating to an average annual growth of 13.3%.The sectors
growth was partly a reflection of the impressive Indian economic growth and over all rise in
income level of consumers.

Apparels and consumer durables are the fastest growing vertical in the retail sector. Mobile
phone as a product category has witnessed the highest growth in the consumer demand amongst
all retail products offering, with increasing penetration of telecommunication in towns and
villages. The telecommunication sector has been adding on an average 5 million new users every
month. The other product categories are gaining traction predominantly in the urban areas and
emerging cities, with increasing average income and spending power of young urban India.

India remained as the most attractive market for third year in a row in an index prepared by At
Kearney. Retail sector is the largest contributing sector to countrys GDP.
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A COMPARATIVE PICTURE OF GDP CONTRIBUTION BY RETAIL SECTOR OF
YEAR 2010 IS SHOWN BELOW: - TABLE 1

Sr. No. Country Contribution of retail sector to
GDP

1

2

3

4

USA
India
China
Brazil

12%

12%

8% 10%

6%

With all these features and advantages, the opportunity for structural changes from unorganized
retail industry format to organized format has made the Indian markets as a Permissible ground
for global and domestic private players to fetch their goods and fuel the economy to grow.

1.1 DEBATE OVER ENTRY OF ORGANISED SECTOR IN RETAIL INDUSTRY

The Retail Sector of Indian Economy is going through the phase of tremendous transformation.
The retail sector of Indian economy is categorized into two segments such as organized retail
sector and unorganized retail sector with the latter holding the larger share of the retail market.
At present the organized retail sector is catching up very fast. The impact of the alterations in the
format of the retail sector changed the lifestyle of the Indian consumers drastically. The evident
increase in consumerist activity is colossal which has already chipped out a money making
recess for the retail sector of Indian economy.

The debate over the future of India's retail sector has arisen because people are questioning
whether the public land used for these malls, the ultimate symbol of consumerism, is being put to
good use.

The crucial sectors of the economy are on a self trajectory. The IT industry, telecommunication
industry and many other industries have seen unprecedented growth during the last couple of
yeas. but one industry that has caught the eye of the common man at almost every turning on the
road is the Booming Retail Industry.

There is a hue and cry over the entry of private organized retailers entry in Indian retail industry.
The sector faced quite a few hurdles such as controversy over the involvement of FDI in Multi-
Brand Retail and the national wide protest by small traders against the bigger fishes .Instances
are : Entry of reliance fresh and RPG Spencers which faced nationwide protests. Critics argue
they have done nothing to change many people's lives.
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In fact, because the malls are offering attractive prices, they are squeezing out the small traders
who can no longer afford to compete - thereby sharpening the divide between the rich and poor
in India. But according to report of ICRIER, organized and unorganized retail will not only
coexist but also grow substantially. the reason is the retail sector is growing on an overall basis
hence the benefit of this growth will go to both the sectors and both sectors will progress though
the share of organized sector will gradually increase . With the onset of a globalized economy in
India, the Indian consumer's psyche has been changed. People have become aware of the value
of money. Nowadays the Indian consumers are well versed with the concepts about quality of
products and services. These demands are the visible impacts of the Retail Sector of Indian
Economy.

Despite the protests of the local Bania the mighty W is finally here. Wal-Mart will be setting
malls in India in association with Sunil Mittal Bahrti Group. other international big players like
Carrefour, Tesco and Auchan have also shown interest in the industry.

2. INDIAN RETAIL SECTOR: AN OVERVIEW

India represents an economic opportunity both as a global base and as a domestic market. The
real GDP is expected to grow at 8-10 percent per annum in the next five years and consuming
class with annual Household incomes above Rs. 90,000 is expected to rise from about 370
million in 2006-07 to 620 million in 2011-12.

Indias vast middle class and its almost untapped retail industry are key attractions for global
retail giants wanting to enter newer markets.

2.1 MEANING OF RETAIL

The word retail is derived from the French word retailer, meaning to cut a piece off or to break
bulk. In simple terms, it implies a first-hand transaction with the customer.

Retailing can be defined as the buying and selling of goods and services. It can also be defined as
the timely delivery of goods and services demanded by consumers at prices that are competitive
and affordable.

Retailing involves a direct interface with the customer and the coordination of business activities
from end to end- right from the concept or design stage of a product or offering, to its delivery
and post-delivery service to the customer. The industry has contributed to the economic growth
of many countries and is undoubtedly one of the fastest changing and dynamic industries in the
world today.

2.2 CURRENT SCENARIO OF INDIAN RETAIL MARKET

The size of Indian retail industry is more than US $350 billion but it is highly unorganized. The
organized sector has started developing in the past few years. Many International brands have
entered the market. With the growth in organized retailing, unorganized retailers are fast
changing their business models.
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According to study conducted by ICRIER, total retail business in India will grow at 13%

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annually, from US $322 billion in 2006-07 to US $590 billion in 2011-12 and further US $1
trillion by 2016-17.

CHART 1

Size of Indian Retail (in US$ bn)

1200
1011

800
600

400

200

0
322

2006-07 2011-12 2016-17

Source: Technopak Analysis, CSO and other sources.

2.3 FDI NORMS

Regulatory controls on FDI have been relaxed considerably in recent years. Currently the
government allows 51% FDI in single brand retailing and 100% in cash-n-carry business.
However, the governments plan to further open up the retail sector has hit the roadblock after
facing strong political opposition and nationwide protests by small traders against the proposal to
allow FDI in multibrand retailing.

2.4 FACTORS DRIVING THE GROWTH OR RETAIL SECTOR:-

Indian economy is growing at the rate of 8%, indicating a prosperous future. The
consistent economic growth resulted in a decent rise in income level of the middle class. The
thickening of the pocket of the consumer resulted in a revolution of the retail industry. Many
International brands have entered the market. With the growth in organized retailing,
unorganized retailers have brought drastic changes in their business models, many factor are
responsible for the growth of retail sector. These are:
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1) INCREASING DISPOSABLE INCOME: Rising disposable incomes in middle class
Source: Technopak Analysis, CSO and other sources

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and lower middle class with increase in employment opportunities for young adults in IT
& IT enabled sectors are the major cause of retail growth in India.

2) INCREASING NO. OF DUAL INCOME NUCLEAR FAMILIES: In India, hefty pay
packets, nuclear family along with increasing working women population and dual
income in family are the factors contributing to prosperous retail sector.

3) CHANGING LIFESTYLE AND CONSUMER BEHAVIOR: Due to increasing
working population, comfortable life, travel and leisure are given importance. These key
factors are growth drivers of retail sector in India which now boast of retailing almost all
the preferences of life apparel and accessories, Appliances, Electronics, cosmetics &
Toilets cries etc.

4) EXPERIMENTATION WITH FORMATS: Due to competition in the market,
retailing is still evolving and the sector is witnessing a series of experiments with new
formats being tested out.

5) STORE DESIGN: Shopping malls and super markets are growing at a very faster rate.
Improvements in infrastructure and enhanced availability of retail space, store design are
the factors increasing the share of organized retail ad thereby contributing to growth of
Indian retail sector.

CHART 2

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2.5 BOOM OF RETAIL IN NCR

The retailing configuration in India is fast developing as shopping malls are increasingly
becoming familiar in large cities. 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.

CHART 3

Source: Technopak Analysis, CSO and other sources

2.6 ISSUES BEFORE RETAIL RECTOR IN INDIA: ENTRY OF ORGANIZED RETAIL
PLAYERS

In Indian retail sector organized retail is a recent phenomenon. It is a zero-sum game
between 2 players:-

a) organized sector &

b) unorganized sector

Indias retail is dominated by a large number of small retailers consisting of the local
kirana shops, owner manned general stores, chemists, footwear shops, apparel shops, paan &
beedi shops, hand-cart hawkers, pavement vendors etc. which together make up the so-called
Unorganized retail.
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Organized retail is reflected in sprawling shopping centers, multiplex-malls & huge complexes
which offer shopping, entertainment and food all under one roof. The last 3-4 years have
witnessed the entry of a number of organized retailers Opening stores in various modern formats
in metros and other important cities. Organized retailing has begun to tap the enormous market
but its share is small. A number of large business houses have entered the retail business with
very ambitious expansion plan.

However, opinions are divided on the impact of growth of organized retail in the country.
Concerns have been raised that growth of organized retail may have an adverse impact on
retailers in the unorganized sector. It has also been that growth of organized retailing will yield
efficiencies in supply chain, enabling better success to markets to producers (including farmers
and small producers) and enabling higher prices, on the one hand and, lower prices to consumers,
on the other.

In India, organized retail contributed roughly 4% of the total Indian retail 2006-07, which is very
small even compared with most of the emerging market economics.

However. During the coming 9 years. It is projected to grow at a compound rate of 40-45 percent
per annum and is estimated to contribute 16% to total Indian retail by 2011-12.

CHART 4

PROJECTION OF THE SHARE OF ORGANIZED RETAIL

2006-2007 2011-2012

organized
4%

unorganized
96%
organized
4%

unorganized
96%

Total Retail: US$ 322 billion
Total Retail: US$ billion

Source: - Technopak Analysis
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Interestingly, this huge growth in organized retail does not involve a decline in the business of
unorganized retail, the sales of the unorganized retail, the sales of the unorganized sector is
expected to grow by 10% p.a., from US$ 308.8 billion 2006-07 to US $ 495.6 billion in 2011-12.

3. UNORGANISED RETAIL SECTOR IN INDIA

Undeniably, around 96% of Indian retail sector is unorganized and hence majority of sales take
place through unorganized stores popularly known as kirana or mom-and-pop stores.

The unorganized retail sector is expected to grow at about 10% per annum with sales rising from
309 billion in 2006-07 to reach US $ 496 billion in 2011-12. Despite the steady expansion of
organized retailers. Though organized sector is growing a faster rate, unorganized sector is still
preferred by the customers as they are more convenient and easy to approach. The kirana shop
owner knows that the buyer buys place first. They offer that utility.

Total number of traditional retailers is estimated to be 13 million by Technopak Advisers Pvt.
Ltd. The classification of the unorganized retail universe by category is shown below:

3.1 CATEGORIES OF TRADITIONAL RETAILERS

Fruit & vegetable sellers Sells fruits and vegetables.

Food stores - Result of bakery products. Also sells dairy and processed
food and beverages.

Non-Vegetable Store -

Sells chicken and mutton.

Kirana I -

Sells bakery products, dairy and processed food, home and
personal care and beverages.

Kirana II -

Sells categories available at a kirana I store plus cereals,
pulses, spices and edible oils.

Apparel -

Sells mens wear, womens wear, innerwear, kinds &
infant wear.

Footwear -

Sells mens wear, womens wear, kids wear

Customer durables & IT- Sells electronics, durables & IT products.

Furnishing -

Sells home lines & upholstery.

Hardware -

Sells sanitary ware, door fitting, tiles.

General mechanize -

Includes lighting, stationery, toys, gifts & crockery.
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3.2 FUTURE TRENDS UNORGANISED SECTOR

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1. The unorganized sector will grow @10% per annum but given the relatively weak
financial of the unorganized sector and the space constraints on their compansion
prospects, this sector alone will not be able to meet the growing demand.

2. The unorganized sector will expand further due to its proximity, goodwill, credit sales,
bargaining, loose items, convenient timings and romedelivery.

4. ORGANISED RETAIL SECTOR IN INDIA

The Indian retail sector is highly fragmented, consisting predominantly of small, independent,
and owner managed shop. The domestic organized retail industry is at a nascent stage.

India got started with organized chain retailing just a few years ago. There are just very few
categories, the most prominent being apparel, where organized retail chains have had a
significant presence for more than 3-4 years. Indian retailers have done very well. Particularly
after taking into account the various obstacles and hindrances like real estate costs, lack of
trained manpower etc.

Growth of organized sector of retailing will yield efficiencies in the supply chain, enabling better
access to markets, to producers and to customers. The strength of organized retail lies in resource
availability. It can translate into efficient supply chain management, leading to faster inventory
turnaround, resulting in improved button lines. It is anticipated that the further belongs to
organized sector in India. Indias organized sector is all set to explode. While the existing players
such as future group, Bharti, Reliance Retail, Essar, Shoppers stop and Aditya Birla group are
endeavouring to consolidate their markets, others such as Mohindra & Mohindra, Parsavnath &
DLF, Hero Honda & Indiabulls have announced plans to enter the retail sector.

Organised sector is going to grow at a much faster rate of 45-50 percent per annum and
quadruple its share in total retail to 16% by 2011-12. Government is also apprehensive about the
uncertain future of this sector considering the vote bank attached to retail, political environment
is quite willing to take the risk of 100% FDI in retail.

The Major challenge facing the organised sector is competition from unorganised sector
Traditional retailing has been established in India for some centuries. It is a low cost structure,
mostly owner-operated, negligible real estate & labour costs & little or no taxes to pay.
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CHART 5

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Source: Economics times retail knowledge series

4.1 SHARE OF ORGANISED SECTOR IN RETAIL SECTOR

The increasing growth of retail sector is going to affect organised sector positively. Presently the
organised sector does not enjoy a significant chunk of market share. When compared with
developed countries, it is very low, a meager 4%.
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TABLE 2

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SHARE OF ORGANIZED RETAIL IN SELECTED COUNTRIES, 2006

Country Total Retail Sales

(US$ bn)
Share of Organized Retail (%)
USA 2,983 85
Japan 1,182 66
Chinba 785 20
United kingdom 475 80
France 436 80
Germany 421 80
India 322 4
Brazil 284 36
Russia 276 33
Korea, south 201 15
Indonesia 150 30
Poland 120 20
Thailand 68 40
Pakistan 67 1
Argentina 53 40
Philippines 51 35
Malaysia 34 55
Czech republic 34 30
Vietnam 26 22
Hungary 24 30
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Source: Planet Retail and Technopak Advisors Pvt. Ltd.

4.2 MODERN RETAIL FORMATS IN INDIA

The face of India retail sector is changing, new & innovative business models are being adopted.
The formats prevalent in retail sector are:-

1. HYPER MARKET Hypermarket offer a large basket of products, ranging from
grocery. Fries & processed food, beauty & healthcare products etc. Example Spencers,
Big Bazaar

2. CASH & CARRY These are large B2B focused retail formats, buying & selling in
bulk for various commodities and carry several thousand stock-keeping. Example Mito,
a Germany based C&G.

3. DEPARTMENT STORES - Department stores have a large layout with a wide range of
merchandise mix, usually in cohesive categories, such as showed towards garments.
Example:- Ebony, Shoppers stop, Westside

4. SPECIALITY STORES Speciality stores are single category, focusing on individuals
and group clusters of the same class with high product loyalty. Examples Footwear
stores, gift stores etc.

Examples- Archies, Woodlannd etc.

5. DISCOUNT STORE A discount store is a retail store offering a wide range of
products, mostly branded, at discounted prices or apparel or footwear brands. Example
Subhiksha, Koutons, Nike, Levis

6. CONVENIENT STORE A convenience store is a relatively small retail store located
near a residential area (closer to consumer), open long hours, 7 days a weak and carrying
a limited range of staples and groceries. Example In & Out, Safal, 6ten.

4.3 MAJOR PLAYERS IN ORGANISED SECTOR AND THEIR BUSINESS
STRATEGIES
High population density in the Metropolitan cities and surrounding tier I towns is driving the
geographic penetration of modern retail.

Typically, firms are positioning themselves in one or both of the segments: Lifestyle & value
retailing under multiple retail formats. Retail firms are adopting a combination of formats:-
Mega - (hyper and / or super)
Medium - (deptt. and / or speciality)
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Small - (convenient and / or discount)

It does not make any difference that what route is being followed by the retailer, the domestic
retail industry of India has benefitted in terms of

Investment

Technical know how an expertise

Improvements in supply chain and logistics

Demand for store brand private labels.

Business strategy of organised retail players are explained below:-

TABLE 3: ORGANISED RETAIL MODEL

Retailer Segment Business Strategy
Subhiksha Value Low-price high-volume strategy: by keeping no
fancy frills front-end and by becoming an
intermediary at the back end, Subhiksha leverages
on discounted prices on bulk purchases and cash
payments.
Trent Limited Lifestyle & value Single- brand strategy: leverages on high margins in
private labels, and targets consumers in socio-
economic class B and C.
Future Group:
PRIL
Lifestyle & value Strategic JVs and subsidiaries around retail has
enabled PRIL to develop retailing across age--
groups, all product categories, the entire customer
segments under multiple retail formats.
ITC Choupal
Sagar & Choupal
Fresh
Value Backward integration through IT-based business
model: leverages by building direct relationship
with the supply service, the fanners, to sell as well
as purchase products and services.
Spencers Retail Value The "duck and the duckling" model: by having two-
or three- value segment stores, backed by a cluster
of small-sized Fresh, Daily, and Express stores, to
leverage, on economies of scale at back-end value
chain.
NDDB: Mother Value Operates on a co-operative model with the objective
of increasing farmers' welfare, Has a strong
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Dairy presence in Delhi's NCR region. Strategically
located in residential areas and follows a low-price
strategy for fruit and vegetables.

5.IMPACT OF ORGANISED SECTOR ON OTHER SECTORS

Report of ICRIER published in Sept.-08 has concluded that the growth of organised retail headed
by large corporate houses does not significantly impact small mom-n-pop retailers. ICRIER
Director and CEO Rajiv Kumar elucidated that the turnaround occurs as the unorganised sector
adapts to new challenges and formulative their own strategies in firms of technology upgrade &
improvement in the supply chain.

The organised retailing has created a niche for itself by successfully overcoming drawbacks of
unorganised retailing such as poor inventory management insensitivity to customer expectations,
and reluctance to invest or human capital.

Impact on consumer

Impact on unorganised sector

Impact on employment
Impact on manufactures
Impact on Technology
Impact on Government Revenue
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5.1 IMPACT ON CONSUMERS

Consumers have gained on multiple counts. The impact is

i. Consumer spending has increased with the entry of organised retail.

ii. Consumers are provided with wider variety under one roof at competitive prices.

iii. All income groups have gained through organised retail purchases but the lower
income consumers saved more.

5.2 IMPACT ON UNORGANISED SECTOR

The unorganised sector is affected in the following manner:-

1. Unorganised sector has not lost due to entry of organised sector. It has rather gained
in terms of business as the overall retail economy is growing.

2. It has also gained in terms of its quality enhancement due to competition given by
organised sector.

3. Some businesses have closed. The closure rate is 4.2% p.a. which is much lower than
international rate of closure of small business, out of which only 1.7% closure is due
to organised sector.

4. Small retailers have adopted the policy of extending more credit to customers to
attract and retain customers.

5. They have become competitive by adopting improved business practices &
technology upgradation.

5.3 IMPACT ON EMPLOYMENT

Employment potential of the Indian economy has increased. By providing direct employment to
people in various sectors like small manufacturing sector especially food processing, textiles &
apparel the unemployment rate will be reduced besides this construction packing, IT, transfer &
other infrastructure sectors will also offer employment opportunities.

Besides giving employment to Professionals & skilled labour organized retail sector also
generates a number of jobs for unskilled labour for the tasks of sorting, grading, labeling etc.

It may adversely affect employment in unorganized retail and the trade intermediaries associated
with traditional supply channels but the additional jobs created will be much higher than those
that are lost
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5.4 IMPACT ON MANUFACTURERS

The impact on manufacturers is:-

(i) Large manufacturers have started feeling the competitive impact of organized retail
through price and payment pressures.

(ii) Entry of organized retail is transforming the logistics industry. This will create
significant positive externalities across the economy.

(iii) Manufacturers have started building and responding their brand strength and set up
dedicated teams to deal with modern retailers.

Thus, the overall impact of organized sector on other sectors is positive. According to a
report prepared by FCRIER, unorganized retailers in the vicinity of organized retailers
experienced a decline in sales and profit in initial years of the entry of organized sectors. The
adverse impact, however, weakens over time.

5.5 IMPACT ON GLOBAL PLAYERS

It will help global players by providing them with the avenues for investments. Favorable
demographic and psychographic changes in Indias consumer class and the rising affluence of
young India population is an important attraction that is attracting the global players to enter in
Indian market

5.6 IMPACT ON RURAL POPULATION

Rural population is also going to be benefited by retail revolution i.e. organized retail. Retail
market is estimated to cross US$ 45.32 BILLION ON MARK BY 2010 and US 60.43 mark by
2012 according to a study by CII and YES bank

The entry of organized sector into rural areas will provide them with experience of urban
lifestyle, quality, producers, and employment opportunities.

ITC Champal sagar (Indias first rural mall), DCM shriram groups maryali bazaar, retail giants
like reliance, spencers and subhiksha are already expanding and semiurban and rurak areas.

5.7 IMPACT ON TECHNOLOGY

Retailing is a technology intensive industry. Successful retailers are using their distribution and
information systems work closely with their vendors to predict consumer demand, shorten lead
time, and reduce inventory holding and thereby saving cost .today online system link point of
sales terminals to the main office .where detailed analysis on sales by item, classification stores
or vendor are carried out online. Data warehousing, data base retailing help in tracking
information on existing and potential customers. Thus the development and use of technology is
also an important benefit or organized retailing. The technological facilities used by organized
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retailers e.g. computerized accounting/ inventory control. Air conditioning also help the
customers in time saving at the purchase point.

5.8 IMAPCT ON GOVERNMENT REVENUE

Another significant advantage of organized retailing is its contribution to government revenue
.unorganized retailers doesnt normally pay taxes and most of them are not even registered for
sales tax, vat and income tax. Organized retailers by contrast, are corporate entities and hence fill
tax returns regularly .the growth of organized retail has contributed in steady rise in tax receipts
for the central , state and local government.

5.9 IMPACT ON INVESTMENTS

Organized retail is attracting inward both at domestic level and global level and several support
industries like IT industries, cold chain infrastructure and logistics and warehouse distribution
services in order to strengthen the supply chain . thus overall investment in retail sector is
increasing and it helps in economic growth of the country.

6. RECENT TRENDS

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:

o Favorable demographics

o Growth in income

o Increasing population of women

o 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.
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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.

Rural markets emerging as a huge opportunity for retailers reflected in the share of the
rural market across most categories of consumption

o ITC is experimenting with retailing through its e-Choupal and Choupal Sagar
rural hypermarkets.

o HLL is using its Project Shakti initiative leveraging women self-help groups to
explore the rural market.

o Mahamaza is leveraging technology and network marketing concepts to act as an
aggregator and serve the rural markets.

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-retailing slowly making its presence felt.

6.1 CHALLENGES BEFORE ORGANIZED RETAIL SECTOR.

Organized sector has only recently emerged from its nascent stage and yet has to become a
preferred career option for most of Indias educated class. The roadblocks in the success of
organized sector are:-

1. Talent shortage & lack of trained manpower.

2. Supply chains are not yet so efficient and the kind of quality that customers
demand is not being provided yet.

3. There are too many intermediaries. These long intermediaries chains are in turn
driving up their costs.

4. A plethora of clearances are required for setting up retail outlet. It limits the
expansion of retail outlets at a faster pace.

5. Inadequate infrastructure, such as roads, electricity, cord chains and posts,
hampers going for a pan-India network of supplies. Due to this, retailers have to
resort to multiple vendors for their requirements which is raising their costs and
prices.

6. Organized sector does not have industry status. It is further making it difficult for
the players to raise funds for their expansion plans.

7. Government restrictions on FDI limit are resulting in limited exposure to
international best practices.
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especially in U.P., Jharkhand etc. is not appreciable, it is the major hindrance in the growth of

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7. FUTURE ROADMAP

Indian Government seems determined to go ahead and gradually liberalize the retail sector
despite continuing opposition from the Left parties. The tortoise-like slowness with which the
retail sector is being opened up is due to objections by the Communists, but the amazing fact is
that some movement is taking place. This seems to be due to Prime Minister Manmohan Singh's
conviction that bringing in the big retail chains will unleash a wave of employment in rural and
urban areas. The fears of the Left, on the other hand, are that the entry of retail giants will mean
job losses as small mom-and-pop retailers get pushed out of existence. The fact is there is merit
in both arguments. On the plus side, it is clear that agriculture is not providing enough jobs for
the economy and there is an unprecedented wave of migration to urban areas. The entry of retail
chains, which buy straight from the farmer, is bound to bring about greater purchasing power as
the producer will get much better prices. This has already been felt in parts of the country like
Jharkhand where farmers have held demonstrations protesting the withdrawal of Reliance Retail
by the state government. Similarly, this gives a bonanza to the consumer who gets food products
sourced directly from the farmer without having to pay the middleman's commission. Clearly, a
win-win situation for all. But the Agitators have a point too. They are worried that the 15 million
small retailers in the country may be forced out of existence. India has the largest retail economy
in the world, according to a study by the CII (Confederation of Indian Industry) and A.T.
Kearney. It pegs the size of the retail industry currently at about $270 billion with the Closure of
the countless tiny retail outlets that dot the countryside can mean severe hardship for the families
working in them. At the same time, as the saying goes, no one can stop an idea whose time has
come. And the time has certainly come for retail chains to enter this country. The process has
been gradual, as mentioned earlier, but even so large retail has made a dramatic impact in the
areas where it has been allowed to make an entry.

In the long run, it is clear that the entry of large retail chains will benefit the agricultural sector,
which is in dire need of resuscitation. They will also have a long-term effect on agricultural
unemployment, which is the big worry for policymakers right now. Besides, Indian consumers
are not likely to desert heir neighborhood grocers en masse immediately. Therefore the hue and
cry over loss of jobs is somewhat premature. domestic retail chains have already been allowed to
set up business and it is now merely a matter of allowing bigger foreign players into the country
Multinational giants like Walmart and Carrefour also have deep pockets and their huge investible
funds are meant for sourcing products from rural areas, which in turn will provide more jobs.
The thinking in the commerce ministry right now seems to be that the existing policy of allowing
only single brand retailing can be extended in a phased manner to multi-brand retailers.
Incidentally, as much as 96 percent of the Indian retail economy remains in the unorganized
sector.

8 CONCLUSION

India at the crossroads with regard to the retail sector. Several emerging market
economics have gone ahead and reaped the benefits of modern retail. Politics is an unfortunate
reality that has been coming in the way of success of organized sector and ultimately the overall
retail sector. The hue and cry created by unorganized sector against Reliance Fresh, Wal-Mart
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retail sector. There is need of balanced approach to retail & govt. has to play a very vital role in
shaping the future course. Though tradition retail has been performing a vital function in the
economy, but it has to shed off its shortcomings and inefficiencies and this is actually happening.
Thus, the organized sector is not only impacting the other sectors positively but also it has
benefited its own competition i.e. unorganized sector. So, organized sector becomes the growth
mantra of Retail sector.

9 REFERENCES

A.T. Kearneys Report on Indian Retail, 2008

Agarwal Pulkit, Tyagi Esha, Foreign Direct Investment In retail Sector- An Analysis, 2010
Indian Retail sector, Dec 2010 http://www.cci.in/pdf/surveys_reports/indias_retail_sector

Krafft M and Mantrala, Murali K (eds), (2010), Retailing in the 21
st
Century: Current and Future
Trends, US

Dhanabhakyam M, Shanthi A Indian Retail Industry Its Growth, Challenges and Opportunities,
2010

Sanjeev Kumar Retail Industry: Where does India Stand? at
http://www.coolvenues.net/forum/viewforum.php? F=9

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