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1.1 INTRODUCTION TO RETAILING

Retailing involves all activities incidental to selling to ultimate consumer for their
personnel family and household use. It does this by organizing their availability on a
relatively large scale and supplying them to a customers on are latterly small scale.
Retailer is any person/organization instrumental in reaching the goods or merchandise
over services to the end users. Retailer is a must and cannot be eliminated.
The Indian retailing industry is becoming intensely competitive, as more and more
payers are Vying for the same set of customers. The major retail players are Pantaloon
Retail, Shoppers Stop, Reliance, etc.., Retailing is one of the biggest sectors and it is
witnessing revolution in India. The new entrant in retailing in India signifies the
beginning of retail revolution. India's retail market is expected to grow tremendously
in next few years.
Retail means selling goods and services in small quantities directly selling to
customers. Retailing consists of all activities involved in marketing of goods and
services directly to consumer for their personnel family and household use. The
Indian retailing industry is becoming intensely competitive, as more and more payers
are Vying for the same set of customers. The major retail players are Pantaloon Retail,
Shoppers Stop, Reliance, etc. Retailing is one of the biggest sectors and it is
witnessing revolution in India. The new entrant in retailing in India signifies the
beginning of retail revolution. India's retail market is expected to grow tremendously
in next few years. According to AT Kearney, The Windows of Opportunity shows that
Retailing in India was at opening stage in 1995 and now it is in peaking stage in 2006.
India's retail market is expected to grow tremendously in next few years. India shows
US$330 billion retail market that is expected to grow 10% a year, with modern
retailing just beginning. India ranks first in 2005.
In fact, in 2005 and 2006, India is the most compelling opportunity for retailers,
because now India is in peaking stage. This window of opportunity is useful for
executives who plan their market-specific strategies; the four stages or the lifecycle of
this industry is as follows:

Initial Stage
It is the opening phase of a market and is one that is just entering the GRDI, Global
Retail Development Index This index is based on more than 25 macro-economic and

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retail specific variables. For instance, the country risk includes parameters like
political risk, economic performance, debt indicators, credit ratings, access bank
finance and business risk. The market attractiveness covers retail sales per capita,
urban population, laws and regulations and business efficiency. In this stage all, which
are outside the top 30 markets, falls in this stage. At this stage, retailers should
monitor and performing high-level assessments, they should plan for their entry
strategies. India in the late 1990's is a good example in the opening stage, while in
2006, Kazakhstan is the country in introduction stage. Strategy suggested: A rapid
penetration strategy is suggested at this stage i.e. low price and high promotion.

Growth:
In growth stage, the market is developing quickly and also ready for modern retailing.
Countries, which are in Peaking stage, are India, Ukraine and Vietnam. Retailers
entering this stage have the best chance for long-term success. Retailers at this stage
should enter through local representations, sourcing offices and new stores. Wal-Mart
success in china in the late 1990's and early 2000's gives us the importance of
committing to a promising high-growth market at right time. Strategy suggested: The
strategy of adopting quality and styled products with new models and shift of
advertising from product awareness to product preference E.g. the big bazaar
advertisement says surf excel is cheaper than the market price. The idea behind
adopting strategy is to strengthen against competitors.

Maturity:
In this stage the market is still big and growing, but the space for new entrants will
become tighter and retailers should act quickly at this stage because retailers at this
stage have limited time to explore, and also their margin for error is thin. In general ,
they should act according to the established rules and should be open to face the
competition from international retailers. This stage generally lasts longer than the
previous two stages. Strategy suggested: Enter new market segments that is either
enter new geographic areas eg vishal megha mart has opened stores in smaller cities.

Decline:
The window of opportunity is closing fast and modern retail share is reaching 40 to 60
percent. Though the opportunity is closing the existing retailers can enter with new

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formats such as discount models or non-food formats such as consumer electronics
and apparel. Window of opportunity ends for about 5 to 10 years before a market
enters the closing phase and reaches saturation level. India for example, was in the
opening stage in 1995 and entered peaking stage in the year 2003 and reached number
1 rank in 2005. Strategy suggested: Identifying weak segments, maintaining
investment level selectively.

1.1.1 Retail Industry

India retail industry is the largest industry in India, with an employment of around 8%
and contributing to over 10% of the country's GDP. Retail industry in India is
expected to rise 25% yearly being driven by strong income growth, changing
lifestyles, and favorable demographic patterns. It is expected that by 2016 modern
retail industry in India will be worth US$ 175- 200 billion. India retail industry is one
of the fastest growing industries with revenue expected in 2007 to amount US$ 320
billion and is increasing at a rate of 5% yearly. A further increase of 7-8% is expected
in the industry of retail in India by growth in consumerism in urban areas, rising
incomes, and a steep rise in rural consumption. It has further been predicted that the
retailing industry in India will amount to US$ 21.5 billion by 2010 from the current
size of US$ 7.5 billion. Shopping in India have witnessed a revolution with the
change in the consumer buying behavior and the whole format of shopping also
altering. Industry of retail in India which have become modern can be seen from the
fact that there are multi- stored malls, huge shopping centers, and sprawling
complexes which offer food, shopping, and entertainment all under the same roof.
India retail industry is expanding itself most aggressively, as a result a great demand
for real estate is being created. Indian retailers preferred means of expansion is to
expand to other regions and to increase the number of their outlets in a city.
In the Indian retailing industry, food is the most dominating sector and is growing at a
rate of 9% annually. The branded food industry is trying to enter the India retail
industry and convert Indian consumers to branded food. Since at present 60% of the
Indian grocery basket consists of non- branded items. India retail industry is
progressing well and for this to continue retailers as well as the Indian government
will have to make a combined effort.
An increasing number of people in India are turning to the services
sector for employment due to the relative low compensation offered by the traditional

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agriculture and manufacturing sectors. The organized retail market is growing at 35
percent annually while growth of unorganized retail sector is pegged at 6 percent. The
Retail Business in India is currently at the point of inflection. Rapid change with
investments to the tune of US $ 25 billion is being planned by several Indian and
multinational companies in the next 5 years. It is a huge industry in terms of size and
according to management consulting firm Technopak Advisors Pvt. Ltd., it is valued
at about US $ 350 billion. Organised retail is expected to garner about 16-18 percent
of the total retail market (US $ 65-75 billion) in the next 5 years.
India has topped the A.T. Kearneys annual Global Retail Development Index (GRDI)
for the third consecutive year, maintaining its position as the most attractive market
for retail investment. The Indian economy has registered a growth of 8% for 2007.
[6]
The predictions for 2008 is 7.9%. The enormous growth of the retail industry has
created a huge demand for real estate. Property developers are creating retail real
estate at an aggressive pace and by 2010, 300 malls are estimated to be operational in
the country. With over 1,000 hypermarkets and 3,000 supermarkets projected to come
up by 2011, India will need additional retail space of 700,000,000 sq ft
(65,000,000 m2) as compared to today. Current projections on construction point to a
supply of just 200,000,000 sq ft (19,000,000 m2), leaving a gap of 500,000,000 sq ft
(46,000,000 m2) that needs to be filled, at a cost of US$15-18 billion.
According to the Icrier report, the retail business in India is estimated to grow at 13%
from $322 billion in 2006-07 to $590 billion in 2011-12. The unorganized retail sector
is expected to grow at about 10% per annum with sales expected to rise from $ 309
billion in 2006-07 to $ 496 billion in 2011-12.
Segments in the Indian Retail Industry
The retailing sector of India can be split into two segments. They are the informal and
the formal retailing sector. The informal retailing sector is comprised of small
retailers. For this sector, it is very difficult to implement the tax laws. There is
widespread tax evasion. It is also cumbersome to regulate the labour laws in this
sector. As far as the formal retailing sector is concerned, it is comprised of large
retailers. Stringent tax and labour laws are implemented in this sector.
If the retail industry is divided on the basis of retail formats then it can be split into
the modern format retailers and the traditional format retailers. The modern format
retailers comprise of the supermarkets, Hypermarkets, Departmental Stores, Specialty
Chains and company owned and operated retail stores.

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The traditional format retailers comprise of Kiranas, Kiosks, Street Markets and the
multiple brand outlets. The retail industry can also be subdivided into the organized
and the unorganized sector. The organized retail sector occupies about 3% of the
aggregate retail industry in India.
Size and contribution of the retail industry in India
In terms of value, the Indian Retail industry is worth $300 billion. Its contribution to
the Gross Domestic Product is about 10% , the highest compared to all other Indian
Industries. The retail sector has also contributed to 8% of the employment of the
country. The organised retail sector is expected to triple its size by 2010. The food and
grocery retail sector is expected to multiply five times in the same time frame. The
major reason behind the low participation in the Indian retail sector is the need for
lumpy investments that cannot match up their break even points. The government
policies are being revised from time to time to attract investments in this sector.

1.1.2 Scope of the Retail Sector

Retail is clearly the sector that is poised to show the highest growth in the next
five years. The sector is set for a revolution, as both the present players and
new entrants are gearing up to explore the market. This sector contributes
10% of India's GDP and the current growth rate is 8.5%. The present size
of the organized retailing sector is approximately 3% and is expected to
grow to 25-30% by the year 2010. There are about 300 new malls, 1500
supermarkets and 325 departmental stores currently under construction.
Many players are coming up with huge investments, due to which the
present 12 million mom-and-pop shops and kirana stores fear losing their
business. Most predictions say that the sector might reach to US$ 400-600
billion by the year 2010.
Retail Landscape
Modern retail development in India is focused on the following cities:
West
Mumbai
Pune
North
Delhi and the National Capital Region
South

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 Chennai
Banglore
Hyderabad
East
Kolkata

Leading Indian Retailers

Bata India Ltd, Big Bazaar, Crossword, Ebony Retail Holdings Ltd., Food Bazaar,
Globus Stores Pvt. Ltd., Liberty shoes Ltd., Music World Entertainment Ltd.,
Pantaloon Retail India Ltd., Shoppers Stop, Subhiksha, Titan Industries, Trent and the
new entrants penetrating the market soon will include Reliance Retail Ltd, Wal-Mart
Stores, Carrefour, Tesco, Boots Group, etc.
Current Scenario
A glimpse of the International Retail
One of the world's largest industries exceeding US$ 9 trillion
47 global fortune companies & 25 of Asia's top 200 companies are retailers
Dominated by developed countries
US, EU & Japan constitute 80% of world retail sales.
Biggest player in India is Pantaloon Retail India Limited.

Percentage of Organized Retail

USA - 85%
Taiwan - 81%
Malaysia - 55%
Thailand - 40%
Brazil - 36%
Indonesia - 30%
Poland - 20%
China - 20%
India - 3%

Key Trends
The existing players like Big Bazaar, Shoppers' Stop, Piramyd are expanding to
smaller towns and cities. Many other business houses are planning to enter the retail

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sector either on their own or through partnerships. New entrants like Reliance Retail
Ltd and Wal-Mart are going to enter the market soon.

Estimates and Predictions

The industry is estimated to be more than US$ 400 billion by a study of
McKinsey.
The Economist Intelligence Unit (EIU) estimates the retail market in India to
increase to US$608.9 billion in 2009 from US$394 billion in2005.
A KPMG report says that the organized retail would grow at a higher rate than
GDP in the next five years.
The retail sector would generate employment for more than 2.5 million people by
the year 2010, says an analysis by Ma Foi Management Consultants Ltd.

Benefits of FDI in Retail Sector

Higher competition would lead to higher quality in products and services.
Better lifestyle as better products would be introduced.
Exports would increase due to greater sourcing of major players.
Investment in whole supply chain would increase.
Technology would be upgraded in terms of logistics, production, and distribution
channels.
The markets of the sector would flourish and develop.
Employment would increase and skills & manpower will develop.
A strong retailing sector would promote tourism.
Economies of scale would help lower consumer prices and increase the
purchasing power of the consumer.

1.1.3 The Indian Retail Market

Indian market has high complexities in terms of a wide geographic spread and distinct
consumer preferences varying by each region necessitating a need for localization
even within the geographic zones. 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. Delving further into consumer buying

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habits, purchase decisions can be separated into two categories: status-oriented and
indulgence-oriented. CTVs/LCDs, refrigerators, washing machines, dishwashers,
microwave ovens and DVD players fall in the status category. Indulgence-oriented
products include plasma TVs, state-of-the-art home theatre systems, iPods, high-end
digital cameras, camcorders, and gaming consoles.
Consumers in the status category buy because they need to maintain a position in their
social group. Indulgence-oriented buying happens with those who want to enjoy life
better with products that meet their requirements. When it comes to the festival
shopping season, it is primarily the status-oriented segment that contributes largely to
the retailers cash register. 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.

1.1.4 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. 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

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 RPG Retail-Formats: Music World, Books & Beyond, Spencers Hyper,
Spencers 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
Lifestyle International-Lifestyle, Home Centre, Max, Fun City and
International Franchise brand stores.
Pyramid Retail-Formats: Pyramid Megastore, TruMart
Nilgiris-Formats: Nilgiris supermarket chain
Subhiksha-Formats: Subhiksha supermarket pharmacy and telecom discount
chain.
Trinethra- Formats: Fabmall supermarket chain and Fabcity hypermarket
chain
Vishal Retail Group-Formats: Vishal Mega Mart
BPCL-Formats: In & Out
Reliance Retail-Formats: Reliance Fresh
Reliance ADAG Retail-Format: Reliance World
Shoprite Holdings-Formats: Shoprite Hyper
Paritala stores bazar: honey shine stores
Aditya Birla Group - more Outlets

1.1.5 Different types of Retailing in India

Unorganized Retailing in India
In India, the most of the retail sector is unorganized. In India, the retail business
contributes around 11 percent of GDP. Of this, the organized retail sector accounts
only for about 3 percent share, and the remaining share is contributed by the
unorganized sector. The main challenge facing the organized sector is the competition
from unorganized sector. Unorganized retailing has been there in India for centuries,
theses are named as mom-pop stores. The main advantage in unorganized retailing is

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consumer familiarity that runs from generation to generation. It is a low cost structure,
they are mostly operated by owners, has very low real estate and labor costs and has
low taxes to pay.
Organized Retailing in India
In late 1990's the retail sector has witnessed a level of transformation. Retailing is
being perceived as a beginner and as an attractive commercial business for organized
business i.e. the pure retailer is starting to emerge now. Organized retail business in
India is very small but has tremendous scope. The total in 2005 stood at $225 billion,
accounting for about 11% of GDP. In this total market, the organized retail accounts
for only $8 billion of total revenue. According to A T Kearney, the organized retailing
is expected to be more than $23 billion revenue by 2010. In organized retailing will
grow faster than unorganized sector and the growth speed will be responsible for its
high market share, which is expected to be $ 17 billion by 2010-11.
Retailing will show good prospects in cities like Mumbai, Delhi, Chennai, kolkata,
Banglore and Kanpur. After Dubai, Singapore and Hong Kong, In India Delhi will be
the next big retail destination, According to Confederation of Indian Industries whose
findings have shown that Delhi has the good resources and good conditions for the
retail sector. Out of the total earnings of the Government of Delhi Rs 11,000 crore, Rs
6,500 crore is achieved from the retails sector.

The organized sector is expected to grow faster than GDP growth in next few years
driven by favorable demographic patterns, changing lifestyles, and strong income
growth. This organized retail sector mix includes supermarkets, hypermarkets
discounted stores and specialty stores, departmental stores. For example, Spencer
network has 69 stores, which includes seven Spencer hypermarkets, three Spencer
super markets and 49 Spencer Dailys. Now the company is planning to open 20 stores
in 10 cities in six months. The top 10 retailers account only for 2% of total market,
today modern retailing is expected to enter a boom phase, which has major players
and these players might capture 10% of total market, within next five years. The retail
sales in India for future are shown below (data from 2005-2008 is based on
estimates):

Present Indian Scenario

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 Unorganized market: Rs. 583,000 crores
Organized market: Rs.5, 000 crores
5X growth in organized retailing between 2000-2005
Over 4,000 new modern Outlets in the last 3 years
Over 5,000,000 sq. ft. of mall space under development
The top 3 modern retailers control over 750,000 sq. ft. of retail space
Over 400,000 shoppers walk through their doors every week
As India surges high with its growth story, the retail sector in the country is bound to
come across opportunities like never before. Till a few years back, the retail sector in
India was more of an unorganized one with petty vendors dominating the chunk of the
industry but now the scenario has fast been changing. Finally, the sector is converting
into what we call as organized retailing. Not only Indian corporate majors like
Reliance, ITC and Pantaloon have entered into the segment but more and more
foreign players are also showing interest in USD 350 billion Indian retail markets.
Today, we turn around and find huge shopping malls and multiplexes all the way.
Perhaps thats why the retail revolution is said to be spearheading the real estate boom
in India.
The retail sector boom
While the Indian real estate markets boom with organized retailing, the segment
ensures a fluffy growth pad for itself. According to the estimations of KSA-
Technopark, a retail consulting and research firm, organized retailing in India will
grow three-fold in the next 3-years, achieving the size of USD 21.5 billion from the
current one of USD 7.5 billion. Given the favourable growth patterns, expanding
middle class and easing economic policies, India is ranked as the most attractive
emerging markets for retail investment, even above Russia and China.
Growth drivers in India for retail sector
Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes.
Liberalization of the Indian economy
Increase in spending Per capita Income.
Advent of dual income families also helps in the growth of retail sector.

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 Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic,
etc.
The Internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains. Reach of satellite T.V.
channels is helping in creating awareness about global products for local markets.
Policy Reforms
The Indian government allows 51 per cent Foreign Direct Investment (FDI) in single
brand retailing owing to which foreign multinationals like Reebok and Louis Vuitton
can now operate directly in the Indian markets instead of going through franchise
route of earlier.
The Road Ahead
While Indian telecom major Bharti is all set to foray in the retail segment, a number
of companies from the US, England and Australia have laid plans to sell their
products directly at the retail outlets. As many as 12 Australian food producers have
tied up with India-based distributor AB Mauri for the same. World

1.1.6 Challenges of Retailing in India

In India the Retailing industry has a long way to go, and to become a truly flourishing
industry, retailing needs to cross the following hurdles:
The first challenge facing the organized retail sector is the competition from
unorganized sector.
In retail sector, Automatic approval is not allowed for foreign investment.
Taxation, which favors small retail businesses.
Developed supply chain and integrated IT management is absent in retail
sector.
Lack of trained work force.
Low skill level for retailing management.
Intrinsic complexity of retailing- rapid price changes, threat of product
obsolescence and low margins.
Organized retail sector has to pay huge taxes, which is negligible for small
retail business.
Cost of business operations is very high in India.

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Entry of MNCs
The world's largest retailer by sales, Wal-Mart Stores Inc and Sunil Mittal's Bharti
Enterprises have entered into a joint venture agreement and they are planning to open
10 to 15 cash-and-carry facilities over seven years. The first of the stores, which will
sell groceries, consumer appliances and fruits and vegetables to retailers and small
businesses, is slated to open in north India by the end of 2008. Carrefour, the worlds
second largest retailer by sales, is planning to setup two business entities in the
country one for its cash-and-carry business and the other a master franchisee which
will lend its banner, technical services and know how to an Indian company for direct-
to-consumer retail. The worlds fifth largest retailer by sales, Costco Wholesale Corp
(Costco) known for its warehouse club model is also interested in coming to India and
waiting for the right opportunity.
Opposition to the retailers' plans have argued that livelihoods of small scale and rural
vendors would be threatened. However, studies have found that only a limited number
of small vendors will be affected and that the benefits of market expansion far
outweigh the impact of the new stores. Tesco Plc., plans to set up shop in India with a
wholesale cash-and-carry business and will help Indian conglomerate Tata group to
grow its hypermarket business.

1.1.7 Employment Opportunities in Retail Sector in India

India's retail industry is the second largest sector, after agriculture, which provides
employment. According to Associated Chambers of Commerce and Industry of India
(ASSOCHAM), the retail sector will create 50,000 jobs in next few years. Retail
companies are starting retail management courses in partnership with management
institutes, roping in talent from other sectors and developing comprehensive career
growth and loyalty plans for existing employees.Top players like Pantaloon Retail
India Limited, Trent, Shopper's Stop, RPG Group and ebony are virtually on their
toes. Consider the plans of largest player, The Pantaloon Retail India Ltd, the
company has developed a comprehensive strategy, where in it expects that in 2years,
it will not recruit any new managers from outside.
"The estimated need is 1 lakh of employees till 2011", said Mr. Sanjoy Jog, HR Head
at Pantaloon Retail India Ltd. Pantaloon has the concept of partnership with

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educational Institute to run retail courses across the entire chain. The company has
tied up with 11-B schools including K J Somaiya , Welinkars, Narsee Monjre and
IISWBM. "The students joins the course and they are given an appointment letter by
Pantaloon to become employees" said Mr. Jog, Pantaloon. Pantaloon is also planning
to tie up with Ahmedabad-based National Institute of Design to start a course in visual
merchandising. "The apex body of Indian organized retailers, ReThe globalization of
the Indian Economy has brought forward a change in the Indian consumerism psyche
with the consumer becoming more aware of his/her value of money strength and their
economic purchasing power becoming more evident than in the previous generations.
The concept of product quality and service delivery which were earlier not very
engraved in the consumer psyche are now very much demanded and delivered for in
the new age format of organized product retailing in the Indian consumer goods
market. These changes have led to the overall increase of professionalism in the
service delivery as well as the consumer purchase patterns shifting from need only
based to extended storage-based bulk purchase characteristics.

These have led to the entry and expression of interest by many global retail majors in
the Indian organized retail market wherein many products and services are offered to
the same consumer at the same location which present multiple attractions to their
monthly disposable incomes. The middle class has been a leading adaptor of this
change process by its changing lifestyles, strong income growth and changing
demographic patterns which are placing the growth projections for this industry
comfortably at 25% annually. Today, synergies based on huge consumer bases
developed in unrelated industries like telecom to retail are being seen in the Indian
market as the combined purchase affinity of the middle class far outstrips the
specialist purchase patterns of the higher income strata in the Indian sub continent;
with the industry projected to become a US$175-200 billion business by 2016 and the
economy playing a comfortable upswing role, the competition in the marketplace is
expected to be fierce.
The present scenario of the industry is focused on forward buying of retail real estate
in order to reap balance sheet advantages later in the business cycle and also rapid
ramping of operations in presently operating outlets in order that the loyalty purchase
habits of consumers are built over a period of time before the world majors enter the
market with deeper pockets and buying power. The Asian retailers are not willing to

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give in an easy competitive fight on their home turf as well as the smart small time
mom & pop store retailer known as the kirana store in India is also wizening up to
the challenge and building personal relationships apart from increasing the service
spectrum like never before. The market in all seems to be ready for a big explosion of
intense competitive activity over ridden by social and economic considerations which
will make it one of a kind business study in the corporate universe as an economy
which did not open up till the early 1990s where in the industry was dominated by
unorganized retailer till then and any kind of central purchase or retail formats where
only propagated by the government for which the awareness as well as effort were
low.

An in-depth explanation of the industry retail formats segregation is also provided in

this report which also comprises of the study of the important regional retail
contributors in this sector which are known for either their long standing in the market
or any kind of specialty product retail developed over the years, which has
differentiated them for the overall market. The report also compares this with the
early development of organized retail by the Indian players and the coupled
emergence of the multi-format retail in India. The recent trends of jumbo sized
retailers establishing themselves as super saver locations in the consumer psyche and
consumer acceptance of these stores as discount destinations are also explained in this
report. The role of e-commerce-based retail though small in volumes but important in
terms of growth is also elaborated in this report along with a profiling of the major
players in this market. Rural Retailing is elaborated in this report in detail wherein the
doubled up sourcing to selling cycles are explained in this report wherein the report
also takes up the example of some of the successful rural retail ventures of the Indian
market most financed by traditional business houses in India and some of the ventures
which also did not succeed in the Indian rural market. A contrasting view of the
growth of luxury brands in the Indian market is also explained in this research report
wherein the increased consumerism is apparent in the stupendous increase in sales of
apparels, lifestyle products etc which have started to carve a profit making niche for
themselves as also the trends apparent in these products are elaborated in this report.
The factors powering growth and the contesting issues are explained in this report in a
macroeconomic scenario wherein the growth opportunities are compared with the
issues which are process either legal or union or even logistics oriented. The report

16
also examines the potential development areas in the retail market in India.

The process or entry options for FDI into Indian retail industry are examined in
comparison to the challenges faced by the entrants in the sector to drive investment
into the India market. The report presents some case studies on this crucial issue as
well as the further options which are available and the possible role that can be played
by private equity contributors. Further, the report draws a profile of the Global Retail
Industry and some of the major global players across the world. Indias position in the
global retail scenario is also explained in this report.
Retail not being limited to only consumer goods is further explored in this report in
the books music and gift retail industry which have picked up pace in transforming
from being isolated businesses to being integrated retail locations for all these
products which have received good consumer response as explained in this report by
way of analysis of the leading participants in this Industry. Food being a major driver
of retail consumption globally has also seen growth and entry of various global fast
food chains into India backed by slowly building weekend spending patterns in the
metros as well as acceptance of these food habits in the Indian palette. The major
industry contributors in this sector are analyzed by this report.

The Indian Retail IndustrySky is the limit

In terms of the retail development index India ranks fifth. In Asia it occupies the
second position , next to China. Among all the global markets, the Indian retail market
is the most expanding. This is owing to absence in restriction at the entry level. So the
large foreign companies can reap the benefits of economies scale by entering the
green retail fields of India. There are many reasons why the retail industry in India
can reach the zenith.
Firstly the organised retail sector in India has a very low contribution to the entire
retail sector in the country. Hence there is ample scope for the new players to achieve
success in the backdrop of soaring disposable income of the upcoming generation.
Secondly, not only have the incomes increased but there has been a sea change in the
preferences of the consumers . These factors have acted as a stimulus for the ushering
of foreign players retailing in apparels, accessories, electronic appliances etc. Large
shopping malls have already mushroomed in the metropolitan cities. There still lies
untapped potential in the Indian Retail Market.

17
1.1.8 Problems Faced by Organized Retail Industry in India
India has 12 million retail outlets. The retail sector is the second largest source of
employment and the job market is hugely receptive to retailing expertise as more and
more B-schools are now focusing on the sector and large retailers are setting up retail
academies. It is estimated to create 50,000 jobs a year in the next five years.

18
Market Size:
The retail market in India is estimated at Rs.5,88,000 crore. Of this the unorganized
market is worth Rs.5,83,000 crore and the organized market is Rs.5,000 crore.

Opportunity:
Over 8% of India's population is engaged in retailing. According to ASSOCHAM, the
total retail market is expected to grow by 20% annually and is one of the fastest
growing sectors in India.

Problems:
The organized retail industry in India is faced with stiff competition from the
unorganized sector.
There is a shortage of quality real estate and infrastructure requirements in our
country.
Opposition to Foreign Direct Investment from small traders affects retail industry.
Very high stamp duties on transfer of property affects the industry.
Shortage of retail space in central and downtown locations also hinders the growth
of retail industry.
Presence of strong Pro-tenancy laws makes it difficult to evict tenants and this is
posing problems.
Land-use conversion is time consuming and becoming complex.
For settling property disputes, it consumes lot of time.
Rigid building laws makes procurement of retail space difficult.
Non residents are not allowed to own property except they are of Indian origin.
Prohibition of Foreign investment in real estate business.
Customs duties are levied on import of goods in India.

1.1.9 Emerging Trends in Indian Organized Retail Sector

The emerging trends in the Indian organized retail sector would help the economic
growth in India. There is a fantastic rise in the Indian organized retail sector in a very
short period of time between 2001 and 2006. Eventually, out of the shadows of the

19
unorganized retail sector, India has a chance of tremendous economic growth, both in
India and abroad. The emerging trends in the Indian organized retail sector are also
adding up to the development of the Indian organized retail sector. The relaxation by
the government on regulatory controls on foreign direct investments has added to the
process of the growth of the Indian organized retail sector.
The infrastructure of the retail sector will evolve radically in the recent future. The
emergence of shopping malls are increasing at a steady pace in the metros and there
are further plans of expansion which would lead to 150 new ones coming up in India
by 2008. As the count of super markets is going up much faster than rate of growth in
retail sector, it is taking the lions share in food trade.
The growth of the Indian organized retail sector is anticipated to be heavier than the
growth of the gross domestic product. Alterations in people's lifestyle, growth in
income levels, and encouraging conventions of demography are proving favorable for
the new emerging trends in the Indian organized retail sector. The success of this retail
sector would also lie in the degree of penetration into the lower income strata to tap
the possible customers in the lowest levels of society. The demands of the buyers
would also be enhanced by more access to credit facilities. With the arrival of the
Transnational Companies (TNC), the Indian retail sector will undergo a
transformation. At present the Foreign Direct Investments(FDI) is not encouraged in
the Indian organized retail sector but once the TNC'S get in they inevitably try to oust
their Indian counterparts. This would be challenging to the retail sector in India.
The trends to follow in the future:
The Indian Organized retail sector will grow up to 10% of total retailing by
2010.
No one single format can be assumed as there is a huge difference in cultures
regionally.
The most encouraging format now would be the hypermarts.
The hypermart format would be further encouraged with the entry of the
TNCs.

FDI in Indian Retail Industry

The Government of India was initially very apprehensive of the introduction of the
Foreign Direct Investment in the Retail Sector in India. The unorganized retail sector

20
as has been mentioned earlier occupies 98% of the retail sector and the rest 2% is
contributed by the organised sector. Hence one reason why the government was
fearing the surge of the Foreign Direct Investments in India was the displacement of
labour.
The unorganized retail sector contributes about 14% to the GDP and absorbs about
7% of our labour force. Hence the issue of displacement of labour consequent to FDI
is of primal importance.
There are different viewpoints on the impact of FDI in the retail sector in India.
According to one viewpoint , the US evidence is empirical proof to the fact that FDI
in the retail sector does not lead to any collapse in the existing employment
opportunities. There are divergent views as well. According to the UK Competition
Commission, there was mass scale job loss with the entry of the hypermarkets brought
about by FDI in the UK retail market.
According to another school of thought, there is undoubtedly labour displacement
associated with FDI, but employment generation will occur in different dimensions.
Varied skills would be specialised. Taking into consideration the pros and cons of
introducing FDI in India, ICRIER has recommended 49% of FDI . The opening up of
FDI in India is also expected to be gradual so that the domestic industries can tailor
themselves according to the changes. At the formative stage , the idea was to start
with 26% of FDI in this sector. But soon the idea changed as China's FDI moved up
from 49% to 100% in the retail sector.
While the government is continuing its plans to liberalise FDI in the retail sector in
India, foreign companies like Wal-Mart are waiting on the threshold. They basically
wish to enter into partnership with various multinational chains. FDI would bring
about modern infrastructure that would help to boost the productivity of the organised
retail sector in India.
Malls have mushroomed in various locations. They are the centres of entertainment
for the new generation. FDI is not allowed in the retail sector and this is the reason
why many prominent global players like Dominos, Levis, Lee, Nike, Adidas, TGIF,
Benetton, Swarovski, Sony, Sharp, Kodak etc are entering the retail market via
licensee or franchisee. The opening up of the economy to FDI in the retail sector is
also expected to generate employment. FDI can be a blessing instead of curse only if
it produces backward linkages relating to production and manufacturing. It may also,
in the process help to push up domestic production as well as exports.

21
In the present scenario, 51% Foreign Direct Investment is permitted in India only
through single brand retailing. The international retailers are entering the matket
through licensees just as Wal-Mart has entered through the franchisee, Bharti
Enterprises.
Bottlenecks to FDI in Retail Industry
According to the Land and Property laws only the Indians have the right to land and
property in India and this law has in a a way inhibited the entry of the foreign players
in India. Again the labour laws are so designed that the store workers can be protected
, quite contrary to the requirements of the modern formats. The tax structure of India
is also unfavourable for the foreign players. The corporate tax rate for the domestic
companies is 36.59% whereas it is 41.82% for the foreign companies. The changing
sales tax as well as the Value Added Tax is also not favourable in the case of
international companies.

Government Intervention in Indian Retail

India's government seems to be on a gradual but definite path toward allowing
foreign retailers into the country.... suggests the A.T. Kearney's Retail Development
Index 2006. It is a common knowledge that the Union government has to face a
number of hurdles both from it's opponents as well as it's allies before it could
announce the final verdict. There have been demands from all corners regarding
framing of rules to safeguard interests of the so-called small traders. Simultaneously
economists have the consensus that industrialization is imperative for the growth of
the economy and foreign investment has to play an inevitable role in it. With Lok
Sabha elections to come in 2009, the Union government too seems a bit confused
regarding decision in who's favor can provide it a political edge. So in this study let us
compare the views for and against liberalization as is held by Indian Bureaucrats.

Entry of Large Players: Stiff Opposition from Left Parties

The recent outburst of fury among the Kerala's LDF(Left Democratic Front)
Government has been noticeable. They have exacted for a three-pronged approach to
prevent the retail giants from serving the Keralians. At the first stage, not only MNCs
but also the local retail giants like Reliance will be shown the red signal. In fact a
magnified CPI protest has compelled a Reliance Fresh outlet in Kochi to take police

22
protection. The draft of a bill has been finalized to amend the Kerala Essential
Commodities Act so that the state government can intervene in the retail market.
As a second step, local councils (70% of which is controlled by the Left) will deny
licenses, that are mandatory to start a retail chain in the state. Kochi and
Tiruvananthapuram corporations will be in fact commanded to reconsider the licenses
of outlets that are already operating in the regions. This strategy grants more power to
the state. However a ban on shopping in these outlets is still not clear. The third and
the most revolutionary judgment is actually an outcome of the whole game.
Government-controlled supermarkets and hypermarkets will be established in some of
the key cities in the state.
This rigid legal wall not only in Kerala but across the country has been born out of a
traditional mindset. Kerala claims to have a literacy rate of 90.92% and a sex ratio of
1058 females per 1000 males. The data speaks for the government's prudent
commitment in the case of Kerala. So it is high time that the government opens up
avenues for its people to let them grow and become self dependent.
But the government is still holding good, the conventional 'infant industry' outlook.
The main worry is the negative impact on the already gloomy condition of
employment. Let's make an attempt to understand the vicious circle of unorganized
retailing and present employment scenario. Unorganized retailing has a share of about
96% in the Indian retail sector. But why should people work in such miserable
situations if the manufacturing and services sector are booming is the overwhelming
question. There has been a trend to migrate to cities in search of alluring bright city
lights. But the consequences has been been even worse- earning lower than expected
wages(Harris Todaro model of migration). The illiterate and unskilled people
ultimately set up a grocery shop to earn a living. This gives birth to another
unorganized retail shop in India and thus enlarges its share. So the unorganized retail
market in India has born out of fate rather than selection.
The Actual Scene
Those opposing the expansion of organized retail in India must understand that the
share of primary sector shrinks and that of the secondary and then the tertiary sector
expands as an economy grows. This is the basic structural adjustment in case of any
transforming economy. India is at a take off stage. A retardation in the agricultural
sector is not permissible but inhibiting the growth of services on grounds of protection
to agriculture is more irrational. A proof of this has been seen in a small town of North

23
Bengal. The opening of a Big Bazaar (brand name for stores under Pantaloon)
departmental store has seen a human deluge of about 7,000 people in the 35,000 sqft
shopping mall by 3pm. This clearly indicates that people (even in remote places) have
become fed up of monotonous marketing practices and demand nowadays is purely
governed by choice.
Indian Retail Industry: Current Scenario
Indian retail industry is going through a transition phase. Most of the retailing in our
country is still in the unorganized sector. The spread out of the retails in US and India
shows a wide gap between the two countries. Though retailing in India is undergoing
an exponential growth, the road ahead is full of challenges.
Retailing
The word "Retail" originates from a French-Italian word. Retailer-someone who cuts
off or sheds a small piece from something. Retailing is the set of activities that
markets products or services to final consumers for their own personal or household
use. It does this by organizing their availability on a relatively large scale and
supplying them to customers on a relatively small scale. Retailer is a Person or Agent
or Agency or Company or Organization who is instrumental in reaching the Goods or
Merchandise or Services to the End User or Ultimate Consumer.
Retailing is the most active and attractive sector of last decade. While the retailing
industry itself has been present since ages in our country, it is only the recent past that
it has witnessed so much dynamism. The emergence of retailing in India has more to
do with the increased purchasing power of buyers, especially post-liberalization,
increase in product variety, and increase in economies of scale, with the aid of modern
supply and distributions solution.
Indian retailing today is at an interesting crossroads. The retail sales are at the highest
point in history and new technologies are improving retail productivity. though there
are many opportunities to start a new retail business, retailers are facing numerous
challenges.

Key Challenges:
1) Location:
"Right Place, Right choice"
Location is the most important ingredient for any business that relies on customers,
and is typically the prime consideration in a customers store choice. Locations

24
decisions are harder to change because retailers have to either make sustainable
investments to buy and develop real estate or commit to long term lease with
developers. When formulating decision about where to locate, the retailer must refer
to the strategic plan:
* Investigate alternative trading areas.
* Determine the type of desirable store location
* Evaluate alternative specific store sites
2) Merchandise:
The primary goal of the most retailers is to sell the right kind of merchandise and
nothing is more central to the strategic thrust of the retailing firm. Merchandising
consists of activities involved in acquiring particular goods and services and making
them available at a place, time and quantity that enable the retailer to reach its goals.
Merchandising is perhaps, the most important function for any retail organization, as
it decides what finally goes on shelf of the store.
3) Pricing:
Pricing is a crucial strategic variable due to its direct relationship with a firm's goal
and its interaction with other retailing elements. The importance of pricing decisions
is growing because today's customers are looking for good value when they buy
merchandise and services. Price is the easiest and quickest variable to change.
4) Target Audience:
"Consumer the prime mover"
"Consumer Pull", however, seems to be the most important driving factor behind the
sustenance of the industry. The purchasing power of the customers has increased to a
great extent, with the influencing the retail industry to a great extent, a variety of other
factors also seem to fuel the retailing boom.
5) Scale of Operations:
Scale of operations includes all the supply chain activities, which are carried out in
the business. It is one of the challenges that the Indian retailers are facing. The cost of
business operations is very high in India.

Present Indian Scenario

* Unorganized market: Rs. 583,000 crores
* Organized market: Rs.5, 000 crores
* 5X growth in organized retailing between 2000-2005

25
* Over 4,000 new modern Outlets in the last 3 years
* Over 5,000,000 sq. ft. of mall space under development
* The top 3 modern retailers control over 750,000 sq. ft. of retail space
* Over 400,000 shoppers walk through their doors every week
* Growth in organized retailing on par with expectations and projections of the last 5
Years: on course to touch Rs. 35,000 crores (US$ 7 Billion) or more by 2005-06

1.1.10 The Future of Organised Retailing in India

The word 'retail' is extracted from the French word 'retaillier' meaning 'to cut a piece
off' or 'to break bulk'. In simple terms it involves activities whereby products or
services are sold to final consumers in smaller quantities. Although retailing in its
various formats has been around in India for many years, it has been confined for a
long time to family owned corner shops or mom and pop shops popularly known as
kirana shop.
The Fact File
Retailing in more developed countries is big business and better organised than what
it is in India. Report published by McKinsey & Co. in partnership with Confederation
of Indian Industry (CII) states that the global retail business is worth a staggering US
$ 7 trillion. The ratio of organised retailing to unorganized in US is around 80 to 20,
in Europe it is 70 to 30, while in Asia it comes to around 20 to 80. Hence there lies a
great scope in India.
In India the scenario is quiet unique, organised retailing accounts for a mere 5% of the
total retail sector. Although there are around 5 million retail stores in India, 90% of
these have a floor space area of 500 sq.ft. or less. The emergence of organised
retailing in India is a recent phenomenon and is concentrated in the top 100 urban
towns and cities.
The Reason
This emergence of organised retailing has been due to the demographic and
psychographic changes taking place in the life of urban consumers. Growing number
of nuclear families, working women, greater work pressure, changing values and
Lifestyles, increased commuting time, influence of western way of life etc. have
meant that the needs and wants of consumers have shifted from just being Cost and
Relationship driven to Brand and Experience driven, while the Value element still
dominating the buying decisions.

26
Also, with the liberalization of Indian Economy in the early 1990's the employment
and income from the service sector has lead to the burgeoning of the so called 'Middle
Class Consumers'. The lifestyle and purchasing power of this segment has fueled the
growth of organised retailing.
The BIG Boys
The level of interest shown by major corporate sector has increased manifold over the
last few years. Large conglomerates like the TATA's, ITC, the RPG group, the
Piramals and the Rahejas have invested heavily into large format retail stores.
Organised retailing for some of these business groups is a logical extension of their
businesses. For example Real Estate Major Rahejas have successfully exploited their
expertise in selection and execution of retail establishment in prominent places around
metros in the country. While the ownership remains with them, the day-today running
is left to the hands of experts.
Also textile and garments companies like Raymond, Madura Garments and Arvind
Denims have successfully employed forward integration by opening up exclusive
outlets for their branded garments. This reduces their dependence on intermediaries,
increases the profit margin and allows them to remain close to their customers.
Apart from apparel brands, Consumer durables, FMCG products and Sports brands
have also spurred the growth of retails outlets. In fact, so much is the promise of this
sector that old Economy major like Reliance, BPCL and others want to join the band
wagon to cash in on their reach and retail space availability.
Organised retailing in India initially began in south The availability of land at prime
locations coupled with lower real estate prices enabled the construction of multi-
storeyed shopping complexes. The growth of retailing in an expensive real estate
places like Mumbai and Delhi was due to the recession in the real estate sector during
the mid-nineties. It was during these times that big business houses like Piramals and
Rahejas took notice of the potential in organised retailing.
The Design
Another interesting aspect of Indian Organised retailing market is the evolution of
various formats over a period of time. The traditional grocers by introducing self-
service formats and value added services like Home Delivery and Monthly Credit
have tried to differentiate them.
In the late nineties the departmental stores dominated the retail scene; today it's the
large formats of hyper markets and Mega Malls which have conquered the largest

27
retail space in the country. Although some formats have been successful and others
busted, still there is no consensus among experts as to what would work where. Each
formats has its won merits and demerits, and careful location and assortment
planning, accurate consumer insight with efficient supply chain management will
remain the corner stones of any format.
Building the Store Brand
The two major areas where the Retail Store managers face a marketing challenge is
one to create footfalls, and secondly to convert footfalls into sales.
Promotional efforts like Advertising and Sales promotions would help in creating
footfalls, but in the longer term it's the positioning and consumer proposition which
would build the stores brand. Once the brand is build, loyalty can be sustained
through Direct Marketing or CRM programs. The store brand would convey the value
proposition in terms of what it offers and what it stands for.
For example: Shopper's stop offers "All lifestyle products under one roof" and it
stands for "Feel the Experience While you shop" attribute.
Similarly Pantaloons Big Bazaar offers "All household products at one place" and it
stands for "The best bargain in town" attribute.
Also RPG's specialty store called Health & Glow offers "Health and Beauty treatment
products" and it stands for "Quality products with expert advice".
The Technology
Increased competition has lead to tighter margins and greater pressure on profits for
retail store owners. Operating expenses like rentals, salaries, maintenance, electricity
etc. have steadily risen as gross margins have declined. Because of the low-margin
nature of most retail businesses retailers will have to focus on operational efficiency
in order to create competitive differentiation.
"India is a big country where preferences change with every 25kms and customer
loyalty with every 5 rupees. Hence retails outfits needs technology and systems which
can manage and interpret these dynamics, and thereby help the management to take
real time decisions" said one of the pioneers of Organised Retailing in India, Mr.
Kishore Biyani of Pantaloons.
One of the major technological innovations in organised retailing have been the
introduction of Bar Codes, it provides real time information of products sold, which in
turn helps online inventory management and also allows the manufacturer to organise
production planning and distribution management. Organisations like A C Neilson

28
have come up with Decision Support Services Systems which help in sophisticated
multi-dimensional reporting, data navigation, analytical modeling, graphical
presentations and expert system tools. Also issues like shoplifting have been address
to with introduction of sensors and tags.
Human Resource
The HR function in all service sector organizations like Retailing is one of the pillars
of success. Proper Man power planning, Recruitment, Motivation and Retention
would be essential to maintain operational smoothness and consistent service to the
customers. Realizing the need gap existing in this area, major educational institutions
are today designing and offering specialized courses in retail management. Also a lot
of management Institutes have retailing as a full credit course.
The Macro Benefit
The contribution of a well developed retail industry, to its economy, could be
manifold; firstly it will help in releasing for productive usage large area of lands lying
ideal in prime location with governmental and non-governmental agencies. Secondly,
if we look at any major tourists' city in the world it has a well-developed shopping
environment; hence it is obvious that organised retailing would help significantly in
promoting our cities as tourist destinations.

29
30
 REVIEW OF LITERATURE

Numbers of studies had been presented about the shift of consumer loyalty from
unorganised retail sector to organised retail sector but due to paucity of time, a few
snapshots of literature are given here.

Mauri (2007) conducted that in the 1990's all the largest grocery retailers have
introduced loyalty cards with the specific goal of acquiring consumer knowledge. The
use of loyalty cards as a knowledge tool has become so critical that retailers offer
customers rewards in return for card subscription and continuous use, because
knowledge accumulates only if consumers keep on using the cards they have
subscribed. These cards have opened a rich debate in marketing literature, which is
still going on. All the analyses of card data have however assumed that consumers are
card loyal that is they use the card they have subscribed. Is card ownership and use
tangible evidence of consumer loyalty? The paper offers a framework for testing the
feasibility of this fundamental assumption.

Memon (2008) found that the Indian retail industry has now become very vibrant.
This is the age when many new players are set to get a good hold in the Indian
market. The national as well as international players are introducing new concepts and
cultures, thus making retailing - a magnum opus. This paper is focused on the buying
behavior of Indian shoppers in the organized market, leaving not even the kirana
stores against it. However, the days are not too far when the merchandised will have
to be considered, and value chain and value delivery be revised.

Dey (2010) found that the General Agreement on Trade on Services (GATS) has
opened up opportunities before the entrepreneurs of the developing countries to
participate in international trade as one of the many small suppliers to the global retail
chains. The paper has been divided into two parts. Part-I deals with the basic concepts
of GATS, the driving forces behind the retail boom and the theoretical construct of the
retail model. In Part II, we analyzed some of the concerns expressed world wide
against organized retailing and tried to identify the limitations of this business model.
As global consolidation is more pronounced in food business, we focused our

31
discussion mainly on food retailing sector though few examples from apparel sector
are also cited.

Agarwal (2010) found out (using Regression, Data Envelopment Analysis and
Sensitivity Analysis) how efficiently some of the top organized India retail companies
have been performing relative to each other over the years and thereby to identify
factors that help increase the efficiency of a retail company. The paper is deemed to be
helpful to enable Indian retail companies gain a competitive advantage in the face of
increased competition being faced in the emerging organized retail sector in India.
The findings brought forth Advertising and Marketing expenses as the significant
performance determining factors to be paid attention to.

Nikolaeva (2012) found that to investigate the determinants of e-commerce adoption

in the retail sector using duration analysis. The study proposes a conceptual model
based on technology adoption and population ecology models. It identifies specific
determinant factors organized under three areas: perceived benefits, organizational
readiness, and external influences. Organizational readiness and external influences
were the main driving factors of the adoption decision. It appears that many retailers
mimetically responded to the online entry of other retailers. Managers should be also
aware of the suitability of e-commerce adoption to their organization. The paper
investigates the e-commerce adoption decision among retailers using a unique
database collected from public sources, avoiding potential subjectivity bias. It traces
the timing of e-commerce adoption incorporating both fixed and time-varying
covariates.

Nisa (2013) found that India is one of the largest emerging markets, with a population
of over one billion. India is one of the largest economies in the world in terms of
purchasing power and has a strong middle class base of 300 million. Around 70 per
cent of the total households in India (188 million) reside in the rural areas, where
mostly traditional retail outlets, commonly called kirana stores exist. However,
recently organized retailing has become more popular in big cities in India and most
of the metropolitan cities and other big cities are flooded by modern organized retail
stores. Many semi-urban areas also witnesses entry of such organized retail outlets.
Till now, entry of foreign retailers was restricted in Indian retail market because of the

32
ban on Foreign Direct Investment in Indian Retail Sector. But recently, as government
has changed its policy and the cabinet has allowed 51 per cent FDI in single-brand
retail, the prospects of foreign players entering India became high.

Chavadi and Kokatnur (2014) found that with retailing picking up and consumers
becoming choosy, it becomes vital for the retailers to look out for new avenues and
opportunities to make their customers happy. Intense competition in the market has
forced retailers to rethink on their strategies. Popular brands having national presence
are able to create entry barriers through their strong distribution channel and heavy
promotion. The objective of developing and delivering private label is to close the
value gaps not delivered by so called national brands. This paper makes an attempt to
identify the factors driving customers to the stores, examines the relationship of
various variables with store loyalty explores the possible growth rate in categories
such as apparels, consumer durables, life style products and food products and
estimates overall percentage contribution of private labels in total sales of the stores.

Sahu (2015) studied that the retail business, in India, is estimated to grow at 13 per
cent per annum from US$ 322 billion in 2006-07 to US$ 590 billion in 2011-12. The
unorganized retail sector is expected to grow at about 10 per cent per annum from
US$ 309 billion 2006-07 to US$ 496 billion in 2011-12. Organized retail which now
constitutes a small four per cent of retail sector in 2006-07 is likely to grow at 45-50
per cent per annum and quadruple its share of total retail trade to 16 per cent by 2011-
12. The study has indicated how consumers and farmers benefit from organized
retailers. The study has also examined the impact on intermediaries and
manufacturers. The results are indicative of the mega-and-mini-metro cities around a
limited number of organized retail outlets.

Dash and Chandy (2016) studied that Indian retailing is hailed as a huge sector in
India; in reality it is not so rosy when compared to the retail scenario in developed and
other developing countries. This study revolves around the opportunities and
challenges faced by organized retail players in Bangalore. It was also found that
organized retailers see Bangalores growing middle class as their greatest opportunity
followed by large number of earning youth customers. Thus, the study found that the
major challenges as well as opportunities of organized and unorganized retail are

33
almost the same. This means that mitigating the challenges and leveraging on the
opportunities could benefit both sectors.

The perusal of review of literature revealed that focus was on the buying behavior of
Indian shoppers in the organized market, leaving not even the kirana stores against it.
The use of loyalty cards as a knowledge tool has become so critical that retailers offer
customers rewards in return for card subscription and continuous use, because
knowledge accumulates only if consumers keep on using the cards they have
subscribed. Indian retail companies gain a competitive advantage in the face of
increased competition being faced in the emerging organized retail sector in India. It
was found that the major challenges as well as opportunities of organized and
unorganized retail are almost the same. This means that mitigating the challenges and
leveraging on the opportunities could benefit both sectors.

34
35
3.1 NEED OF THE STUDY
The need of the study was to know the reasons of shift of consumer loyalty from
Unorganised Retail Sector to Organised Retail Sector and also to analyze the reasons
of growing popularity of Organised Retail Sector and also to examine the expected
future growth in Indian Retail Sector. The main focus of previous studies has been
mainly on the buying behaviour of Indian shoppers in the organized market, leaving
not even the kirana stores against it. It also revealed that a number of specific policy
recommendations for regulating the interaction of large retailers with small suppliers
and for strengthening the competitive response of the unorganized retailers. This
research enables to cover the gap identified from review of literature. That is why
need was felt to conduct a fresh research in this area.

3.2 SCOPE OF THE STUDY

The scope of the study was limited to the geographical areas of Jalandhar city only.
The research had very wide scope as today different customers had different
preferences while purchasing. Due to resource and time constraint study had to be
limited to two hundred respondents only.

3.3 OBJECTIVES OF THE STUDY

The current study under taken to achieve the following objective:
To study the preference of people towards unorganized and organized retails
stores.
To study the factors of organized retail outlet with regard to satisfaction level.
To study the benedits from traditional stores.
To study the product related factor with regard to organized retail outlet to
satisfaction level.

36
37
 RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problem. The

Research Methodology includes the various methods and techniques for conducting a
Research. Marketing Research is the systematic design, collection, analysis and
reporting of data and finding relevant solution to a specific marketing situation or
problem. D.Slesinger and M.Stephenson in the encyclopedia of Social Sciences
define Research as the manipulation of things, concepts or symbols for the purpose
of generalizing to extend, correct or verify knowledge, whether that knowledge aids in
construction of theory or in the practice of an art.
Research is, thus, an original contribution to the existing stock of knowledge making
for its advancement. The purpose of Research is to discover answers to the Questions
through the application of scientific procedures. Our project has a specified
framework for collecting data in an effective manner. Such framework is called
Research Design. The research process followed by us consists of following steps:

4.1 RESEARCH DESIGN

A research design was the arrangement of conditions for collection & analysis of data
in a manner that aims to combine relevance to the purpose with economy in
procedure. Research design was needed because it facilitates the smooth sailing of
various research operations, thereby making research as efficient as possible yielding
maximal information with minimal expenditure of effort, time and money. The
present study had used descriptive research design. It involves collecting data through
self reports collected or through observation. Research described the variables already
exists and were not much under control.

4.1.1 Descriptive Research: A type of conclusive research, which has as its major
objective the description of something-usually market characteristics or functions. In
other words descriptive research is a research where in researcher has no control over
variable. It just presents the picture, which has already studied.
4.1.2 Conclusion Oriented Research: Research designed to assist the decision maker
in the situation. In other words it was a research when given our own views about the
research.

38
4.2 SAMPLING DESIGN
Sampling can be defined as the section of some part of an aggregate or totality on the
basis of which judgement or an inference about aggregate or totality is made. The
sampling design helps in decision making in the following areas: -
4.2.1 Universe of the study: The universe comprised of two parts as theoretical
universe and accessible universe.
Theoretical Universe: It includes retail customers all over world.
Accessible Universe: It includes retail customers in India.
4.2.2 Sample Size: Sample size refers to the total number of items about which the
information is desired. The sample size of the study was 200.
4.2.3 Sampling Unit: Who was to be surveyed?
The target population must be defined that has to be sampled. Sampling unit was
individual retail customers residing in Jalandhar city.
4.2.4 Sampling Technique: The sampling techniques used was non- probability.

4.3 DATA COLLECTION AND ANALYSIS

Information has been collected from primary and secondary data.
(a) Secondary Data
These types of data were known as published data. Data which were not originally
collected was called secondary data. The first step in any research was the collection
of secondary data. In this project, data was collected from internet and journals.
(b) Primary Data
Primary Data was the one which is of employee`s importance and backbone of any
study. It was obtained from respondents with the help of widely used and well known
method of survey. In this study primary data is collected through questionnaire. In this
structured questionnaire was used. Questionnaire was a list of questions given to
number of persons for them to answer. It secures standardized results that can be
tabulated and treated statistically. Structured questionnaire were those questionnaire in
which there are definite, concrete and predetermined questions. In this questions were
presented with exactly the same wordings and the same form to all the respondents.

39
4.3.1 Data Analysis
Tools of Presentation: In the current study, data has been presented through
figures and tables.
Tools of Analysis: After collecting the data has been analysed through pie
charts, summated score and percentage to analyze the collected data. The data
should necessarily be condensed into few manageable groups and tables for
further analysis. Thus it helps to classify the raw data into some purposeful and
useable categories.

4.4 LIMITATIONS OF THE STUDY

The following were the limitations of the study
Analysis was only a mean and end in itself. The analyst had to make
interpretations and draw its own conclusions. Different people may interpret the
same thing in different ways. Thus there was chance of personal biasness in
interpretations.
Due to shortage of time available at disposal, much information needed for the
study cannot be collected.
As there was always a cost factor involved in every research, so it was not
possible to include larger part of the universe.
The sample may not be a true representative, as due to location factor, the
respondents may not be representative of the whole universe.

40
41
 DATA ANALYSIS AND INTERPRETATION

The data has been processed and analyzed by tabulation interpretation so that findings
can be communicated and can be easily understood. The findings are presented in the
best possible way. Tables and graphs had been used for illustration of principle
findings of the research.

5.a Demographic Profile of Respondents.

Table 5.a: Demographic Profile of Respondents
Demographics No. of respondents %age of respondents
Gender
Male 107 53.5
Female 93 46.5
Total 200 100
Occupation
Businessman 46 23
Service 12 6
Housewife 28 10
Student 94 47
Self Employed 20 14
Total 200 100

Analysis and Interpretation: It was found that the majority sample of respondents
that is 53.5% was male and 46.5% was female. And majority of respondents that is
47% was student, 23% was businessman and 14% was Self Employed.
So it can be interpreted that majority of the respondents was male and was student.

42
Statement 1: Customer Regularity Towards Organized Outlets

Table 5.1: Customer Regularity Towards Organized Outlets

Opinion No. of respondents %age of respondents
Yes 190 95
No 10 5
Total 200 100

Figure 5.1: Customer Regularity Towards Organized Outlets

Analysis and Interpretation: It was found out that in majority of the sample that is
95% cases respondents were regular customers of retail outlets whereas 5% was not.
So it can be concluded that the majority of respondents were regular customers of
retail outlets.

43
44
Statement 2: Respondents Preference for Shopping.

Table 5.2: Respondents Preference for Shopping

Place for Shopping No. of respondents %age of respondents
Retail Outlet 152 76
Traditional Stores 28 14
Both 20 10
Total 200 100

Figure 5.2: Respondents Preference for Shopping

Analysis and Interpretation: It was found out that in majority of the sample that is
in 76% cases respondents usually go to retail outlets for shopping, 14% cases
traditional stores and 10% cases both.
So it has been concluded that majority of respondents usually go to retail outlets for
shopping.

45
46
Statement 3: Number of Times Respondents Visit Organized Retail Outlets in a
Month.

Table 5.3: Number of Times Respondents Visit Organized Retail Outlets in a

Month.
Number of Visits No. of respondents %age of respondents
1-5 Times 66 33
5-10 Times 96 48

More than 10 Times 38 19

Total 200 100

Figure 5.3: Number of Times Respondents Visit Organized Retail Outlets in a

Month.

Analysis and Interpretation: It was found out that in majority of the sample that is
in 48% cases respondents visit organized retail outlets 5-10 times in a month, 33%
cases 1-5 times and 19% cases more than 10 times.
So it has been concluded that majority of respondents visit organized retail outlets 5-
10 times in a month.

Statement 4: Opinion Regarding Convenience of Shopping in Organized Retail

Store

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 Table 5.4: Opinion Regarding Convenience of Shopping in Organized Retail
Store
Opinion No. of respondents %age of respondents
Yes 186 93
No 14 7
Total 200 100

Figure 5.4: Opinion Regarding Convenience of Shopping in Organized Retail

Store

Analysis and Interpretation: It was found out that in majority of the sample that is
93% cases respondents agree that shopping in organized retail store is more
convenient than unorganized retail store whereas 7% was not.
So it can be concluded that the majority of respondents agree that shopping in
organized retail store is more convenient than unorganized retail store.

Statement 5: Benefits Respondents Get from the Traditional Stores.

Table 5.5: Benefits Respondents Get from the Traditional Stores

48
 Benefits No. of respondents %age of respondents
Credit 88 44
Friendly Relations 58 29
Free Home Delivery 40 20

Any Other 14 7
Total 200 100

Figure 5.5: Benefits Respondents Get from the Traditional Stores

Analysis and Interpretation: It was found out that in majority of the sample that is
in 44% cases credit was the benefit got by respondent from the traditional stores, 29%
cases friendly relations, 20% cases free home delivery and 7% cases any other.
So it has been concluded that majority got credit as the benefit from the traditional
stores.

49
Statement 6: Opinion Regarding Factors of Organized Retail Outlet
Raters Agreement.
(1 = Strongly Agree, 2 = Agree, 3 = Neutral, 4 = Disagree, 5 = Strongly Disagree)

Table 5.6: Raters Agreement Statements

Statements Strong Agree Neut Disagree Summate
ly ral Strongly d Score
Agree Disagree
1) Parking Facilities 34*1 3*2 38*3 51*4 74*5 728

2) Visual 38*1 80*2 18*3 38*4 26*5 534

Merchandise,
Display etc.
3) Centrally Air 40*1 32*2 34*3 42*4 52*5 634
Conditioned

4) Well Equipped 74*1 56*2 48*3 18*4 4*5 422

Lifts & Elevators

5) Cleanliness 48*1 72*2 54*3 16*4 10*5 468

6) Enjoy shopping 94*1 64*2 22*3 18*4 2*5 370

while eating
7) Ease of payment 56*1 88*2 32*3 18*4 6*5 430
through credit and
debit cards

Maximum score: 200 x 1= 200

Neutral score : 200 x 3= 600
Minimum score : 200 x 5= 1000

Analysis and Interpretation: On the basis of these summated scores the above
statements has been interpreted as follows:
5.6.1 The summated score of this statement is 728. It lies between Neutral and
Minimum score. It shows that the respondents were strongly disagreed to it.

50
5.6.2 The summated score of this statement is 534. It lies between Maximum and
Neutral score. So the score depicted that respondents were strongly agreed.
5.6.3 The summated score of this statement is 634. It lies between Neutral and
Minimum score. It shows that the respondents were strongly disagreed to it.
5.6.4 The summated score of this statement is 422. It lies between Maximum and
Neutral score. So the score depicted that respondents were strongly agreed.
5.6.5 The summated score of this statement is 468. It lies between Maximum and
Neutral score. So the score depicted that respondents were strongly agreed.
5.6.6 The summated score of this statement is 370. It lies between Maximum and
Neutral score. So the score depicted that respondents were strongly agreed.
5.6.7 The summated score of this statement is 430. It lies between Maximum and
Neutral score. So the score depicted that respondents were strongly agreed.

51
Statement 7: Ranking of the Reasons for Declining Popularity of Unorganized
Retail Sector in India.

Table 5.7: Ranking of the Reasons for Declining Popularity of Unorganized

Retail Sector in India
Reasons Summated Scores Total Rank
Globalization 2*1+13*2+32*3+50*4+103*5 839 4

Young Population 70*1+63*2+22*3+10*4+35*5 477 1

Role of Media 45*1+39*2+68*3+38*4+103*5 994 5

High Income 52*1+69*2+36*3+29*4+14*5 484 2

Change of role of women 31*1+16*2+52*3+73*4+28*5 651 3

in the society
(1 is most important and 5 is least important)

Analysis and Interpretation: For the listed five reasons for declining popularity of
unorganized retail sector in India, the first rank being the most important i.e. young
population and the last rank that is 5 which was role of media.

52
Statement 8: Opinion Regarding the Product Related Factors of Organized
Retail Outlet
Raters Agreement.
(1 = Strongly Agree, 2 = Agree, 3 = Neutral, 4 = Disagree, 5 = Strongly Disagree)
Table 5.8: Raters Agreement Statements
Statements Strong Agree Neutr Disagre Strongly Summat
ly al e Disagree ed Score
Agree
1) Competitive 56*1 62*2 38*3 22*4 21*5 487
Prices

2) Latest Branded 8*1 34*2 39*3 60*4 59*5 728

Varieties
3) Better Selling 60*1 45*2 22*3 33*4 40*5 548
Service

4) Promotional Gifts 46*1 61*2 39*3 20*4 24*5 495

5) Price Discounts 52*1 43*2 57*3 25*4 23*5 524

Maximum score: 200 x 1= 200

Neutral score : 200 x 3= 600
Minimum score : 200 x 5= 1000

Analysis and Interpretation: On the basis of these summated scores the above
statements has been interpreted as follows:
5.8.1 The summated score of this statement is 487. It lies between Maximum and
Neutral score. It shows that the respondents were strongly agreed to it.
5.8.2 The summated score of this statement is 728. It lies between Neutral and
Minimum score. So the score depicted that respondents were strongly
disagreed.
5.8.3 The summated score of this statement is 548. It lies between Maximum and
Neutral score. It shows that the respondents were strongly agreed to it.
5.8.4 The summated score of this statement is 495. It lies between Maximum and
Neutral

53
 score. So the score depicted that respondents were strongly agreed.
5.8.5 The summated score of this statement is 524. It lies between Maximum and
Neutral
score. So the score depicted that respondents were strongly agreed.

54
Statement 9: Opinion Regarding Future of Traditional Stores.

Table 5.9: Opinion Regarding Future of Traditional Stores.

Opinion No. of respondents %age of respondents
Yes 114 57
No 52 26
Can`t Say 34 17
Total 200 100

Figure 5.9: Opinion Regarding Future of Traditional Stores.

Analysis and Interpretation: It was found out that in majority of the sample that is
in 57% cases respondents stay in the market for another 10 years, 26% cases not and
17% cases can`t say.
So it has been concluded that in the majority of cases, respondents stay in the market
for another 10 years.

55
56
Statement 10: Opinion Regarding Boom in the Retail Industry
(Will they stay in the market for another 10 years or not)

Table 5.10: Opinion Regarding Boom in the Retail Industry

Opinion No. of respondents %age of respondents
Yes 104 52
No 78 39
Can`t Say 18 9
Total 200 100

Table 5.10: Opinion Regarding Boom in the Retail Industry

Analysis and Interpretation: It was found out that in majority of the sample that is
in 52% cases respondents was of view that boom in the retail industry reach to rural
market, 39% cases concentrated to urban area only.
So it has been concluded that majority of respondents was of view that boom in the
retail industry reach to rural market.

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58
 FINDINGS OF THE STUDY

After conducting whole of the research and collecting data from respondents, the
following findings had emerged:-

Majority of respondents were regular customers of retail outlets.

It has been found that majority of respondents usually go to retail outlets for
shopping.
It has been found that majority of respondents visit organized retail outlets 5-10
times in a month.
It has been found that majority of respondents agree that shopping in organized
retail store is more convenient than unorganized retail store.
It has been found that respondents agreed that they got credit as the benefit from
the traditional stores.
It has been found that majority of respondents say that traditional stores will stay
in the market for another 10 years.
Majority of respondents was of view that boom in the retail industry reach to rural
market.

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60
7.1 CONCLUSION OF THE STUDY
Retailing involves all activities incidental to selling to ultimate consumer for their
personnel family and household use. It does this by organizing their availability on a
relatively large scale and supplying them to a customers on are latterly small scale. In
India, the most of the retail sector is unorganized. In India, the retail business
contributes around 11 percent of GDP. Of this, the organized retail sector accounts
only for about 3 percent share, and the remaining share is contributed by the
unorganized sector. The main challenge facing the organized sector is the competition
from unorganized sector.
The recent studies revealed that focus was on the buying behavior of Indian shoppers
in the organized market, leaving not even the kirana stores against it. Indian retail
companies gain a competitive advantage in the face of increased competition being
faced in the emerging organized retail sector in India. However, recently organized
retailing has become more popular in big cities in India and most of the metropolitan
cities and other big cities are flooded by modern organized retail stores. It was found
that the major challenges as well as opportunities of organized and unorganized retail
are almost the same. This means that mitigating the challenges and leveraging on the
opportunities could benefit both sectors.
The objectives of the study were to study the Indian Organized Retail Sector as well
as Unorganized Retail Sector and to know the major reasons of shift of consumer
loyalty from Unorganized Retail Sector to Organized Retail Sector. Also to know the
reasons for growing popularity of Organized Retail Sector and to know the reasons
for declining popularity of Unorganized Retail Sector.
The findings of the study was that majority of respondents were regular customers of
retail outlets and visited organized retail outlets 5-10 times in a month. Majority of
respondents agree that shopping in organized retail store is more convenient than
unorganized retail store but got credit as the benefit from the traditional stores. Most
of respondents was of view that boom in the retail industry reach to rural market.

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7.2 RECOMMENDATIONS OF THE STUDY
After conducting the entire research on shift of consumer loyality from unorganised
retail sector to organised retail sector, we recommend the customers following facts:

The traditional store owners can provide the customers with different and latest
brand varieties.
Organised Retail Outlets should focus on building good relations with their
customers.
Better visual merchandise can help both traditional and retail stores to attract more
and more consumers.
More emphasis should also be provided on:
o Better payment facilities through credit and debit cards.
o Better after sale services.
Organised Retail Outlets should also provide with the benefits of credit purchase.

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63
 REFERENCES

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2009, from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1070149
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2009, from at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1310544
Chavadi and Kokatnur et al. (2014). Do private brands result in store loyalty? An
empirical study in Bangalore. Retrieved November 25, 2009, from
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1079663
Dash M. and Chandy P. (2016). A study on the challenges and opportunities faced
by organized retail players in Bangalore. Retrieved November 26, 2009, from
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1363999
Dey et al. (2010). GATS and transnational retailing: Few concerns and challenges.
Retrieved November 25, 2009, from http://papers. ssrn.com/sol3 /papers.cfm?
abstract_id=630061
Mauri P. (2007). Card loyalty. A new emerging issue in grocery retailing.
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abstract_id=287997
Memon J. (2008). Changing face of Indian retail industry and its implications on
consumer behavior: an in-depth study. Retrieved November 25, 2009, from
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=548052
Nikolaeva et al. (2012). E-commerce adoption in the retail sector: Empirical
insights. Retrieved November 25, 2009, from http://papers.ssrn.com
/sol3/papers.cfm? abstract_id=1080514
Nisa J. (2013). FDI in Indian retail industry. Retrieved November 25, 2009, from
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abstract_id=1123411

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65
 QUESTIONNAIRE

I am a student of Apeejay Institute of Management Technical Campus is

conducted a research on Study on Shift of Consumer Loyality from Unorganised
to Organised Retail Sector as a part of curriculum. I need you to fill this
questionnaire, it will take only 3-5 minutes of yours. I promise information will be
kept confidential and thank you for your cooperation.

Demographics
Name:
Gender: Male / Female
Occupation:
Businessman Service
Housewife Student
Self employed

1. Are you a regular costumer of organized outlets like Reliance fresh, More,
Easy Day etc?
a) Yes b) No

2. Where you usually go for shopping?

a) Retail outlets b) Traditional outlets
c) Both

3. How often you visit to organized retail outlets in a month?

a) 1-5 times b) 5-10 times c) More than 10
times

4. Do you agree that shopping in organized retail store is more convenient than
shopping in an unorganized retail store?
a) Yes b) No

66
5. What benefits you get from the traditional stores?
a) Credits
b) Friendly relations
c) Free home delivery
d) Any other

6. Check these factors of organized retail outlet with regard to satisfaction level?
Statements Strongly Agree Neutral Disagree Strongly
Agree Disagree
1) Parking Facilities

2) Visual
Merchandise,
Display etc.
3) Centrally Air
Conditioned

4) Well Equipped
Lifts & Elevators

5) Cleanliness

6) Enjoy shopping
while eating
7) Ease of payment
through credit and
debit cards

7. What do you think are the reasons for declining popularity of unorganized
retail sector in India; please rank the factors on the scale of 1 to 5 (1 being most
important and 5 being least important)
a) Globalization b) Young Population
c) Role of media d) High Income
e) Change of role of
women in the society

67
8. Check the product related factor with regard to organized retail outlet to
satisfaction level?
Statements Strongly Agree Neutral Disagree Strongly
Agree Disagree
1) Competitive
Prices

2) Latest Branded
Varieties
3) Better Selling
Service

4) Promotional
Gifts

5) Price Discounts

9. According to you what would be the future of traditional stores?

Will they stay in the market for another 10 years or not?
a) Yes b) No c) Cant say

10. According to you the boom in the retail industry will reach to the rural area
or will it only concentrated to the urban area?
a) Yes b) No c) Cant say

Thanks for cooperation

68