On

“a study on
Indian organized retail sector ”

MASTER OF Business Application (MBA)

IN RETAIL OPERATIONS

SESSION 2009-2011

SUBMITTED AT :

ASCENT INSTITUTE OF MANAGEMENT & IT.

NITIN GUPTA, ACSENT, MBA (2009-2011) 1

 SUBMITTED BY
NITIN GUPTA
Reg. No. 520932480

NITIN GUPTA, ACSENT, MBA (2009-2011) 2

 Introduction

A retail chain differs from other industries by nature of its number of locations. A
conventional manufacturing industry has a production at a limited number of locations
and sales being handled from a few more. However, a retail industry has sales from a
large number of locations. If it is in the food and beverage business, you could say that
its production is also being done at all locations. This means that material handling,
production, sales and distribution as well as finance transactions are being conducted at
all their stores. Each store requires an inventory control system, a Point of Sales system
and an accounting system (maybe also a production system).

Major Procurement is conducted at the HO, Material Receipt is done at the

Stores and Bill Passing and Bank Payments conducted at the HO. Some extent of local
procurement is also sometimes being done at the Stores. Sales is an activity which is
being done completely at the stores. Most of these activites are handled through a POS
system. However, while a POS system handles sales satisfactorily, it is generally not
geared up to manage inventory, consumption or requisitions for material.

Contrary to popular belief (even within the organisation), the problem for a Retail
organization is not the POS system. The problem is integration and accurate information
flow and the issue goes beyond just the Consolidation of Sales figures, A POS was
meant for entering sales tickets and printing them, which it does without too many
problems. It was then extended to contain some inventory information at each location.
It is not capable of becoming an inventory, sales and procurement management
solution.
Retail in India - A Challenge

The retail industry in India is growing at a significant pace. However, there are
several problems faced by the industry. The major challenges for the organized sector
include:

• Taxation laws that favor small retailers.

• Different structure of sales tax in different states.
• Multi-point octroi collection.
• Lack of trained workforce.
• Problems of supply chain and logistics.
• High cost of real estate.
• Limited land available at prime locations.

According to analysts, for this industry to thrive, Indian retailers need to emulate
worldwide retail practices such as accuracy in financial reporting, increased levels of
corporate governance and greater accountability among employees. Retailers need to
use the latest techniques to enhance the consumer's shopping experience...

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CHALLENGES FACING INDIAN RETAIL INDUSTRY

• The tax structure in India favors small retail business

• Lack of adequate infrastructure facilities
• High cost of real estate
• Dissimilarity in consumer groups
• Restrictions in Foreign Direct Investment
• Shortage of retail study options
• Shortage of trained manpower
• Low retail management skill

THE FUTURE
The retail industry in India is currently growing at a great pace and is expected to go up
to US$ 833 billion by the year 2013.It is further expected to reach US$ 1.3 trillion by the
year 2018 at a CAGR of 10%. As the country has got a high growth rates, the consumer
spending has also gone up and is also expected to go up further in the future. In the last
four year, the consumer spending in India climbed up to 75%. As a result, the India retail
industry is expected to grow further in the future days. By the year 2013, the organized
sector is also expected to grow at a CAGR of 40%.

OBJECTIVE

T he following survey was mainly done with an objective to know the state of mind
of an individual and their preference of organized retail. And their satisfaction
level towards these outlets.

And other reasons are:

1. To get an insight in to the retail industry

2. To understand the factors that influence shoppers to visit organized retail
Outlets
3. To understand consumer behavior about organized retail shop
4. To identify change in consumer behavior, i.e., preference of the small retail store
over the supermarket or vice versa.
5. Buying Experience of middle class people for daily need items with from

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 Organize retail shop & Kirana store.

The factors responsible for the development of the retail sector in India can be
broadly summarized as follows:

• Rising incomes and improvements in infrastructure are enlarging consumer markets

and accelerating the convergence of consumer tastes.
Looking at income classification, the National Council of Applied Economic Research
(NCAER) classified approximately 50% of the Indian population as low income in 1994-
95; this is expected to decline to 17.8% by 2006-07.

• Liberalization of the Indian economy which has led to the opening up of the market for
consumer goods has helped the MNC brands like Kellogg, Unilever, Nestle, etc. to
make significant inroads into the vast consumer market by offering a wide range of
choices to the Indian consumers.

• 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. About 47% of
India’s population is under the age of 20; and this will increase to 55% by 2015. This
young population, which is technology-savvy, watch more than 50 TV satellite channels,
and display the highest propensity to spend, will immensely contribute to the growth of
the retail sector in the country. As India continues to get strongly integrated with the
world economy riding the waves of globalization, the retail sector is bound to take big
leaps in the years to come.
• Retailers direct procure the products & services in bulk through manufacturers, so
they eliminate the middleman and save the cost. They offer the product & services on
the discount prices or on a wholesaler rate to the consumer.

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Fact and Figures:

• Even though India has well over 5 million retail outlets of all sizes and styles (or
non-styles), the country sorely lacks anything that can resemble a retailing industry in
the modern sense of the term. This presents international retailing specialists with a
great opportunity.

• It was only in the year 2000 that the global management consultancy put a
figure that: Rs. 400,000 crore (1 crore = 10 million) which will increase more than Rs.
800,000 crore by the year 2007 – an annual increase of 20 per cent. .

• As much as 96 per cent of the 5 million-plus outlets are smaller than 500 square
feet in area. This means that India per capita retailing space is about 2 square sfeet
(compared to 16 square feet in the United States). India's per capita retailing space is
thus the lowest in the world (source: KSA Technopak (I) Pvt Ltd, the India operation of
the US-based Kurt Salmon Associates).

• Just over 8 per cent of India's population is engaged in retailing (compared to

20 per cent in the United States). There is no data on this sector's contribution to the
GDP.

• From a size of only Rs.20, 000 crore, the organized retail industry will grow
more than Rs. 160,000 crore by 2007. The TOTAL retail market, however, as indicated
above will grow 20 per cent annually from Rs. 400,000 crore in 2000 to Rs. 800,000
crore by 2005.

• Given the size, and the geographical, cultural and socio-economic diversity of
India, there is no role model for Indian suppliers and retailers to adapt or expand in the
Indian context.

• The first challenge facing the organized retail industry in India is: competition
from the unorganized sector. Traditional retailing has established in India for some
centuries. It is a low cost structure, mostly owner-operated, has negligible real estate

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and labor costs and little or no taxes to pay. Consumer familiarity that runs from
generation to generation is one big advantage for the traditional retailing sector.

• In contrast, players in the organized sector have big expenses to meet, and yet
have to keep prices low enough to be able to compete with the traditional sector. High
costs for the organized sector arises from: higher labor costs, social security to
employees, high quality real estate, much bigger premises, comfort facilities such as
air-conditioning, back-up power supply, taxes etc. Organized retailing also has to cope
with the middle class psychology that the bigger and brighter sales outlet is, the more
expensive it will be.

• The above should not be seen as a gloomy foreboding from global retail
operators. International retail majors such as Benetton, Dairy Farm and Levis have
already entered the market. Lifestyles in India are changing and the concept of "value
for money" is picking up.

• India's first true shopping mall – complete with food courts, recreation facilities
and large car parking space – was inaugurated as early as in 1999 in Mumbai. (This
mall is called "Crossroads").

• Local companies and local-foreign joint ventures are expected to more

advantageously position than the purely foreign ones in the fledgling organized India's
retailing industry. The foreign Retail players has knowledge & experience about
Retail ,at the same, local players has knowledge about Indian culture &society setup.

• These drawbacks present opportunity to international and/or professionally

managed Indian corporations to pioneer a modern retailing industry in India and
benefit from it.

• The prospects are very encouraging. The first steps towards sophisticated
retailing are being taken, and "Crossroads" is the best example of this awakening.
More such malls have been planned in the according to that retail industry is one of
other big cities of India.

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• An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make an impact
circa 2003.

•Indian organized retail is new and in the experimental stage so the

players should be deeper pocket to absorb the sock of loss in retail

Limitations

• The time factor was a great limitation while the time of 2 month research project.
• Due to less knowledge of site of NCR, I visited few areas of NCR so research is
based on according to the customer of that area.
• Sample size of 100 is not sufficient to finish this project in moredescriptive
manner.
• During our meeting part with customer we consider only our potential customer
who was middle class people.

conclusion

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For a start, these retailers need to invest much more in capturing more specific market.
Intelligence as well as almost real-time customer purchase behavior information. The
retailers also need to make substantial investment in understanding/acquiring some
advanced expertise in developing more accurate and scientific demand forecasting
models. Re-engineering of product sourcing philosophies-aligned more towards
collaborative planning and replenishment should then be next on their agenda. The
message, therefore for the existing small and medium independent retailers is to closely
examine what changes are taking place in their immediate vicinity, and analyze Whether
their current market offers a potential redevelopment of the area into a more modern
multi-option destination. If it does, and most commercial areas in India do have this
potential, it would be very useful to form a consortium of other such small retailers in
that vicinity and take a pro-active approach to pool in resources and improve the overall
infrastructure. The next effort should be to encourage retailers to make some
investments in improving the interiors of their respective establishments to make
shopping an enjoyable experience for the customer.

As the retail marketplace changes shape and competition increases, the potential for
improving retail productivity and cutting costs is likely to decrease. Therefore, it will
become important for retailers to secure a distinctive position in the marketplace based
on value, relationships or experience.

R ~ Rain check
E ~ Establishment
T ~ Trade
A ~ Affiliated Chains
I ~ Investment Oppt
L ~ Low Price Guaranty

Bibliography

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Books

Retail Marketing by J.A. Lamba

Statistic Methods by S.P. Gupta
Research Methodology by C. R. Kothari

Web sites

http://en.wikipedia.org/wiki/Retail

http://www.indiaonestop.com/retailing.htm

http://www.ibef.org/artdisplay.aspx?cat_id=375&art_id=13997

http://www.ibef.org/artdisplay.aspx?cat_id=375&art_id=3974

http://www.reportbuyer.com/consumer_goods_retail/country_overview_consumer_good
s_retail_/indian_organized_retail_industry_2005_2007_.html#top.

http://populationcommission.nic.in/facts1.htm

http://www.indiatogether.org/2005/jul/eco-palaces.htm

Magazines & News papers

Sudhir Vinita (Apral31, 2006)”In The Growth Trajectory”, Pitch pp 26-29

Guest Column (November15, 2006)” The Changing Marketplaces”, Pitch pp 100-110

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Sridharan R. and Gopalan Krishna (December31, 2006),”Retail’s Coming Face-Off”,
Business Today pp82-94

‘The Behemoth from Bentonville’ The Times Of India (Times Ascent), New Delhi,
27December2006, pp 10.

“Retail Revolution” (29November2006) The Economic Times, New Delhi, pp 20.

Barbaro Michael & Greenhouse Steven (August19, 2006),”Wal-Mart image-maker

quits”, Times Business

Kaushik, Neha (21December2006), “Youth and beyond” Business Line (Brand Line), pp
01.

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 SUBMITTED BY
NITIN GUPTA
REG. NO. 520932480

NITIN GUPTA, ACSENT, MBA (2009-2011) 12