OPERATION MANAGEMENT IN RETAIL SECTOR
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PROJECT
ON
OPERATION MANAGEMENT IN RETAIL SECTOR
PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS
FOR THE POST GRADUATE DIPLOMA IN MANAGEMENT
SUBMITTED TO SUBMITTED BY
Mrs. SHALINI SRIVASTAV AJAY KUMAR
FACULTY GUIDE PGDM/08-10/03
1 Reliance SuperACKNOWLEDGEMENT
I take this opportunity to express my deep sense of gratitude to all those who have contributed
significantly by sharing their knowledge and experience in the completion of this project work.
I am greatly obliged to my Parents for providing me the right kind of opportunity and facilities
to complete this venture.
My first word of gratitude is due to Mr. Akshay Gaur, Operation Manager, Relaince super,
Greater Noida, my corporate guide, for his kind help and support and for his valuable guidance
throughout the project. I am thankful to him for providing me with necessary insights and
helping me out at every single step.
My heartfelt thanks to my respected Faculty Guide namely Mrs. Shalini Srivastav, Without her
continuous help the project would not have been materialized in the present form. Her
valuable suggestions helped me at every step.
Finally, I would also like to thank all my dear friends for their kind cooperation, advice and
encouragement during the long and arduous task of preparing this report and carrying out the
project.
At last but not the least, who are always at the top of my heart, my dear family members whose
blessings, inspiration and encouragement have resulted in the successful completion of this
project.
Ajay Kumar
2 Reliance SuperDECLARATION
I hereby declare that the project report titled “OPERATION MANAGEMENT IN RETAIL SECTOR”
at RELIANCE SUPER, GREATER NOIDA (UP) is my own work and has been carried out under
the guidance of Mr. Akshay Gaur, Operation Manager, Reliance super, Greater Noida, and
Mrs. Shalini Srivastav, Faculty Guide, IILM-CMS, GREATER NOIDA. All care has been taken to
keep this report error free and I sincerely regret for any unintended discrepancies that might
have crept into this report. I shall be highly obliged if errors (if any) be brought to my attention.
Thank You.
AJAY KUMAR
3 Reliance SuperINDEX
Topic Page No.
Introduction 05
Types of retail sector 07
Retailing format in India 07
Retail sector growth in India 08
Contribution of Indian retain industry 10
FDI in Indian retail industry 13
Government intervention in retail 15
IT trends in retail sector in India 16
Opportunities of western retailers in India 18
E- Retailing in India 21
Top companies in retail 22
Retail: Worldwide scenario 29
Reliance Industries ltd. 31
Reliance super 32
SWOT analysis 33
Retail triangle 35
Learning from summer internship 38
SAP commands 41
Research work 43
Major findings 45
Conclusion 46
4 Reliance SuperINTRODUCTION
WHAT IS RETAIL?
The word retail is, in fact, derived from the French word retailer, which means “to cut off a
piece or to break bulk.”A retailer may be defined as a dealer or trader who repeatedly sells
goods in small quantities. The sale of goods or commodities in small quantities directly to
consumers of, or engaged in the sale of goods or commodities at retail. It also means to sell in
small quantities directly to consumers.
RETAIL -
• The sale of goods individually in small quantities to the public or to sell.
• Retailing consists of the sale of goods or merchandise from a fixed location, such as a
department store or kiosk, or by post, in small or individual lots for direct consumption by the
purchaser. Retailing may include subordinated services, such as delivery.
• The sale of goods directly to the consumer; to sell at retail, or in small quantities directly to
customers; to repeat or circulate (news or rumors) to others; Of, or relating to the sale of good
directly to the customer; In retail quantities, or at retail prices
• To sell directly to the consumer, usually in small quantities in comparison with the total level
of sale.
• Any product for sale in a store or directly to a consumer.
•Trade in which a client buys or sells an over-the-counter stock through a broker dealer.
• Merchants selling tangible goods in a face-to-face environment who normally use
conventional terminals and swipe transactions.
TYPES OF RETAIL SECTOR
Retailing is one of the pillars of the economy in India and accounts for 35% of GDP. The retail
industry is divided into organized and unorganized sectors. Over 12 million outlets operate in
the country and only 4% of them being larger than 500 sq ft (46 m2) in size.
• Organized Retail
• Unorganized Retail
5 Reliance SuperORGANIZED RETAIL
Organized retailing refers to trading activities undertaken by licensed retailers, that is, those
who are registered for sales tax, income tax, etc. These include the corporate backed
hypermarkets and retail chains, and also the privately owned large retail businesses.
Organized retail segment has been growing at a blistering pace, exceeding all previous
estimates. According to a study by Deloitte Haskins and Sells, organized retail has increased its
share from 5 per cent of total retail sales in 2006 to 8 per cent in 2007. The fastest growing
segments have been the wholesale cash and carry stores (150 per cent) followed by
supermarkets (100 per cent) and hypermarkets (75-80 per cent). Further, it estimates the
organized segment to account for 25 per cent of the total sales by 2011.
UNORGANIZED RETAIL
Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing,
for example, the local kirana shops, owner manned general stores, paan/beedi shops,
convenience stores, hand cart and pavement vendors, etc. Unorganized retailing” is defined as
an outlet run locally by the owner or caretaker of a shop that lacks technical and accounting
standardization. The supply chain and sourcing are also done locally to meet local needs. Its
organized counterpart may not obtain its supplies from local sources.
Difference between organized and unorganized retailing
The major differences between organized and unorganized retailing lies in its number (chain) of
store operations. An unorganized outlet may be just stand alone or can have maximum of 2-3
outlets in a city, where as the organized outlets are "any retail chain (more than two
outlets)which is professionally managed (even if its family run), has a accounting transparency
(with proper usage of MIS and accounting standards) and organized SCM with centralized
quality control and sourcing (certain parts can be locally made) can be termed as an "organized
retailing" in India.
Retailing in India is predominantly unorganized. According to a survey by AT Kearney, an
overwhelming proportion of the Rs. 400,000 crore retail market is UNORGANISED. In fact, only
a Rs. 20,000 crore segment of the market is organized. We are known as a nation of
shopkeepers with over 12 million, the highest outlet density in the world in the world with an
estimated turnover of $ 200 billion. However a disturbing point here is that as much as 96 per
cent of them are smaller than 500 square feet in area. This means that India per capita retailing
space is about 2 square feet (compared to 16 square feet in the United States). India's per
capita retailing space is thus the lowest in the world. Another point to note is that only 8 % of
our population is engaged in Retail whereas the global average is around 10-12%.
6 Reliance SuperINSTORE RETAILERS
This type of retail format is also known as the brick and mortar format. These retail stores are in
the form of fixed point sale outlets. They are specially designed to lure the customers. There
are different types of stores through which the instore retailers operate.
Branded Stores appear in the form of exquisite showrooms. Here the total range of a particular
brand is available and the quality of the product is certified by the government. There are also
multi brand specialty stores that sell a series of brands so that the consumer can choose from
the wide array of brands. Department stores have a large number of brands and products
catering to all basic needs to luxurious items as well.
Supermarkets are basically self service retail stores. Discount Stores offer commodities at
reduced prices. In Hyper Marts customers have wide variety of products to choose from and
they are also available at discounted rates. Convenient stores are located in prominent places
within the reach of majority of the customers and do not operate in stringent work hours.
Shopping Malls are a storehouse of a large variety of retail shops situated close to each other.
RETAILING FORMATS IN INDIA
• MALLS: The largest form of organized retailing today. Located mainly in metro cities,in
proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sq ft and above. They lend an
ideal shopping experience with an amalgamation of product, service and entertainment; all
under a common roof. Examples include Shoppers Stop, Piramyd, and Pantaloon.
• SPECIALTY STORES: Chains such as the Bangalore based Kids Kemp, the Mumbai books
retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are
focusing on specific market segments and have established themselves strongly in their sector.
• DISCOUNT STORES: As the name suggests, discount stores or factory outlets, offer discounts
on the MRP through selling in bulk reaching economies of scale or excess stock left over at the
season. The product category can range from a variety of perishable/ non perishable goods.
• DEPARTMENT STORES: Large stores ranging from 20000-50000 sq. ft, catering to a variety of
consumer needs. Further it is classified into localized departments such as clothing, toys, home,
groceries, etc. Departmental Stores are expected to take over the apparel business from
exclusive brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop,
which started in Mumbai and now has more than seven large stores (over 30,000 sq. ft) across
India and even has its own in store brand for clothes called Stop.
• HYPER MARTS/SUPERMARKETS: Large self service outlets, catering to varied shopper needs
are termed as Supermarkets. These are located in or near residential high streets. These stores
7 Reliance Supertoday contribute to 30% of all food & grocery organized retail sales. Super Markets can further
be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets
ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal
sales.
• CONVENIENCE STORES: These are relatively small stores 400-2,000 sq. feet located near
residential areas. They stock a limited range of high-turnover convenience products and are
usually open for extended periods during the day, seven days a week. Prices are slightly higher
due to the convenience premium.
• MBO’s: Multi Brand outlets, also known as Category Killers, offer several brands across a
single product category. These usually do well in busy market places and Metros.
The Indian Retail Industry—Sky 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
organized 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.
Retail Sector Growth in India
In this section we may deal with the growth of the organized as well as the unorganized retail
sector of India. Due to the untapped potential that exists in the Indian retailing market, it is a
very fast growing sector. One reason that can be attributed to this rapid entry of the foreign
retail giants ,is that the Western Countries have reached a point of saturation in their retail
sector. Another reason as already mentioned earlier is the change in the tastes and preferences
or the psychographic of the consumers that is bent in their favour. The retail sector in India
contributes to about 10% in the GDP, it is the most underdeveloped sector in terms of
investments that are made in this sector. The unorganized retail sector has recorded a growth
of 5% per annum while the organized sector is growing at 25-30 % per annum. One should not
be impressed by the figures of the organized retail markets since developed market in US,
Taiwan, Malaysia is still a dream to the Indian retail market. They have registered a growth of
50% per annum. The retail stores have mushroomed in the Tier II and Tier III cities. The
8 Reliance Superparticipants in the retail market hold the presence of market in the cities as a signal to their
growth.
It has been seen that the retail companies have invested in the IT sector for their growth and
development. The IT sector has contributed greatly to the growth of the retail sector in India.
The retail firms have made lumpy investments in Enterprise Resource Planning System as a
strategy for their growth and development. SAP has also assumed a significant role in the
growth and development of the organized retail industry. The sudden growth of the organized
retail sector can be attributed to the ushering of the domestic retail giants like Reliance,
Pantaloons, ITC, RPG, Raheja’s and the Bharti Group. The foreign companies continue to wait in
the sidelines. These prominent retail chains have adversely affected the farmers in some states.
Another viewpoint is that the farmers have rather benefited since they were eager on the
market intervention of the buig retailers for the purpose of marketing and processing of their
output. Since the big retailers reap the benefits of buying directly from the farmers, the
consumers can purchase the products at minimal price rates. In places like Uttarakhand, the big
retail chains are welcomed for the same purpose by the farmers. They have helped in putting
finances in the right channels of processing and packaging.
Growth of the Retail Outlets In India
Outlets 1996 1997 1998 1999 2000 2001
Food Retailers 2769 2943.9 3123.4 3300.2 3480 3682.9
Non-Food 5773.6 6040 6332.2 6666.3 7055.5 7482.1
Retailers
Total Retailers 8542.6 8983.6 9455.6 9966.5 10534.4 11165
From the above table it is quite evident that there is a rising trend in the total retail outlets in
India. The non-food retail outlets contribute more to this rise.
The trend in the retail sector as compared to other sectors may be represented in the following
graph. We can see that as compared to the clothing and the food and beverages industry the
retail industry has witnessed a sharp rise especially from 2002.Before that it was following a
slow and steady pace. The growth of the different retail sectors can be discussed as under.
Growth of FMCG The report produced by HSBC shows that the FMCG retail sector is expected
to grow by 60 % by 2010. leaving aside the packaging sectors, the other sectors that have
registered rapid growth are hair care, household care, confectionery, chocolates etc.
Growth of Consumer Durables The consumer growth industry is estimated to grow by 40% in
the coming season. The television, refrigerator and washing machines sector has also witnessed
a rapid growth. The market for Indian colour television is expected to reach the value of 10.5
9 Reliance Supermillion units by the next fiscal year. The refrigerator market is estimated to reach 4.5 million.
Hence in a nut shell the retail industry in India has witnessed unprecedented growth in the past
years. The organised sector is expected to make Quantum jumps in the coming years in terms
of its contribution to GDP.
Contribution of Indian Retail Industry
Contribution of Retail: What, How and For Whom The presence of retail sector in India has
been in limelight for the last few years. Its significance has been undoubted. Policymakers are
quite optimistic that the evolution and steady maturation of organized retailing will take the
economy to new highs. Besides, it will also help strengthen the linkages between the different
sectors so as to break the vicious circle of poverty and ensure a bright future for the next
generation. The benefit of retailing to general public includes growing awareness and brand
consciousness.
Past – Retail Industry in India
Before the decade of eighties, India with hundreds of towns and cities was a nation striving for
development. The evolution was being witnessed at various levels and the people of the nation
were learning to play different roles as businessmen and consumers. The foundation for a
strong economy were being laid, youth were beckoning new awareness in all spheres. And this
brought in an opportunity for retail industry to flourish. First in the metros and major cities
later to impact sub urban and rural market as well.
Retailing in India at this stage was completely unorganized and it thrived as separate entities
operated by small and medium entrepreneurs in their own territories. There was lack of
international exposure and only a few Indian companies explored the retail platform on a larger
scale. From overseas only companies like Levi's, Pepe, Marks and Spencer etc. had entered
targeting upper middle and rich classes of Indians. However as more than 50 % population was
formed by lower and lower middle class people, the market was not completely captured. This
was later realized by brands like Big Bazaar and Pantaloons who made their products and
services accessible to all classes of people and today the success of these brands proves the
potential of Indian retail market.
A great shift that ushered in the Indian Retail Revolution was the eruption of Malls across all
regional markets. Now at its peak, the mall culture actually brought in the organized format for
Retailing in India which was absent earlier.To your surprise there was not a single mall in India a
decade before and just a few years ago only a handful of them were striving, today there are
more than 50 malls across different cities and 2 years from now around 500 malls are predicted
to come up.
10 Reliance SuperPresent – Retail Industry in India
At present the Retail industry in India is accelerating. Though India is still not at an equal pace
with other Asian counterparts, Indian is geared to become a major player in the Retail Market.
The fact that most of the developed nations are saturated and the developing ones still not
prepared, India secures a great position in the international market. Also with a highly diverse
demography, India provides immense scope for companies brining in different products
targeting different consumers.
According to the Global Retail Development Index, India is positioned as the foremost
destination for Retail investment and business development. The factor that is presently
playing a significant role here is the fact that a large section of Indian population is in the age
group of 20-34 with a considerably high purchasing power; this has caused the increase in the
demand in the urban market resulting in consistent growth in the Retail business. And though
the metros and other tier 1 cities continue to sustain Retail growth, the buzz has now shifted
from these great cities to lesser known ones. As the spending power is no longer limited to
metros, every tier 2 city in the country has good market for almost every product or service.
Due to this, tier 2 cities like Chandigarh, Coimbatore, Pune, Kolkatta, Ahmedabad, Baroda,
Hyderabad, Cochin, Nagpur, Indore, Trivandrum etc. provide a good platform for a brand to
enter Indian market.
However there are a few precautions for every brand that explores Indian market. As Indian
consumers are very curious and have a broad perspective, they respond well to a new product
or concept and there are very fair chances of a brand surviving well, but every Indian consumer
be it an urbanite or a small town dweller needs a feeling of value for money. Although labeled
as tight fisted, Indian consumers are great spenders once they realize that they are getting
value for their money. Also new product /service concepts from the western world are better
adopted first by the urban Indians, the smaller markets respond well to the need based
retailing rather than luxury concepts.
As the Indian retailing is getting more and more organized various retail formats are emerging
to capture the potential of the market.
* Mega Malls
* Multiplexes
* Large and small supermarkets
* Hypermarkets
* Departmental stores
11 Reliance SuperAs the major cities have made the present retail scenario pleasant, the future of the Indian
Retailing industry lies in the rural regions. Catering to these consumers will bring tremendous
business to brands from every sector. However as the market expands companies entering
India will have to be more cautious with their strategic plans.
Indian Retail: Past Vs Present
It is widely accepted that the retail industry has undergone a drastic change in last five years
and there is yet more to come. Let us compare the image of Indian retailing in 2004-05 to that
of its status in 2007-08 in the following table:
Magnification of the Indian Retail Industry
Yardstick Situation in 04-05 Situation in 07-08
Value of retail sales Rs. 10,20,000 crore Rs 12,00,000 crore
Annual growth rate 5% 5.7%
Value of organized market Rs 35,000 crore Rs 55,000 crore
Share of organized market in the 3.4% 4.6%
sector
Forecasts (after 5 years) about size Over Rs. 1,00,000 crore Rs. 2,00,000 crore
of organized retail market
Forecasts about growth rate of Around 30% Around 40%
organized retail market
The above table clearly shows that the retail market as well as the mindset required for it has
experienced a thorough revisal in the last three years. This is just the beginning and Indians are
sanguine that the sector will see rosy days in the future. This confidence has helped India
acquire the No.1 position among 30 most attractive retailing destinations in the world
according to the Global Retail Development Index of 2005 (by AT Kearney, India). Among
emerging markets, India holds the second position after China in the list of most favored retail
destinations.
The retail industry employs a huge share of the total workforce in India. It is the second largest
employer after India. Presently 7 percent of the total labor force is employed in the retail
sector. According to available data it is also the largest employer in the services sector and
maximum growth in the non-agricultural sector has been witnessed by retail trade. According
to market analysts 300 new malls, 1,500 supermarkets and 325 departmental stores are going
to come up in India in the next few days. The shopping revolution that has led to this retail
boom is going to continue and this is a good news for the government as well as those who
wish to work in the organized sector.
12 Reliance SuperFuture – Retail Industry in India
According to a study the size of the Indian Retail market is currently estimated at Rs. 704 crores
which accounts for a meager 3 % of the total retail market. As the market becomes more and
more organized the Indian retail industry will gain greater worth. The Retail sector in the small
towns and cities will increase by 50 to 60 % pertaining to easy and inexpensive availability of
land and demand among consumers.
Growth in India Real estate sector is also complementing the Retail sector and thus it becomes
a strong feature for the future trend. Over a period of next 4 years there will be a retail space
demand of 40 million sq. ft. However with growing real estate sector space constraint will not
be there to meet this demand. The growth in the retail sector is also caused by the
development of retail specific properties like malls and multiplexes. According to a report, from
the year 2003 to 2008 the retail sales are growing at a rate of 8.3% per annum. With this the
organized retail which currently has only 3% of the total market share will acquire 15-20 % of
the market share by the year 2010. Factors that are playing a role in fuelling the bright future of
the Indian Retail are as follows:
The income of an average Indian is increasing and thus there is a proportional increase in the
purchasing power.
The infrastructure is improving greatly in all regions is benefiting the market.
Indian economy and its policies are also becoming more and more liberal making way for a
wide range of companies to enter Indian market.
Indian population has learnt to become a good consumer and all national and international
brands are benefiting with this new awareness.
Another great factor is the internet revolution, which is allowing foreign brands to understand
Indian consumers and influence them before entering the market. Due to the reach of media in
the remotest of the markets, consumers are now aware of the global products and it helps
brands to build themselves faster in a new region
However despite these factors contributing to the growth of Indian retail Industry, there are a
few challenges that the industry faces which need to be dealt with in order to realize the
complete scope of growth in Indian market. Foreign direct investment is not allowed in retail
sector, which can be a concern for many brands. But Franchise agreements circumvent this
problem. Along with this regulations and local laws and real estate purchase restrictions bring
up challenges. And with Good Planning, Timely Implementation and a media campaign that
touches Indian consumers any brand can go far ahead in the Indian Retail Revolution.
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 as has been
mentioned earlier occupies 98% of the retail sector and the rest 2% is contributed by the
13 Reliance Superorganized sector. Hence one reason why the government feared the surge of the Foreign Direct
Investments in India was the displacement of labor.
The unorganized retail sector contributes about 14% to the GDP and absorbs about 7% of our
labor force. Hence the issue of displacement of labor 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 labor displacement associated
with FDI, but employment generation will occur in different dimensions. Varied skills would be
specialized. 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 liberalize 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 organized retail sector in India. Malls have
mushroomed in various locations. They are the centre 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. 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
labor 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 unfavorable for the
14 Reliance Superforeign 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 favorable 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
its opponents as well as its 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 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
15 Reliance Superand 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 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.
The Ruling UPA government's outlook
The UPA government is rather clear in its aim of taking India to new highs. The commerce
minister has repeatedly asserted that FDI will kill two birds with the same stone. It will
generate substantial direct as well as indirect employment and at the same time will not
tamper with the present scope of the unorganized retail market. The indirect employment
includes jobs in transport, packaging and other logistic services. It will enhance competition in
the country thus giving a virtual chance to face global challenges while operating at home. Mr.
Nath is clearly focused on the utilization of FDI in acquiring benefits. It is true that such
investments will bring in huge imports but this may also help in the Indian products reaching
the foreign consumers. Foreign majors such as Wal-Mart, Tesco and Carrefour are ready to
enter India. The UPA government has already permitted 51 percent FDI in Single-brand
products without consulting its allies and it is expected that slowly but steadily the
government will achieve its goal.
IT Trends in the Retail Sector in India
The Indian retailing, which has topped the charts for being the most favored and attractive
destination is yet in its nascent stage. Neither the FMCG retailers are in a position to maintain
world class standard, nor one wishes to be an iconoclast. The digitization of the Indian retail
sector has captured the minds of retail magnets for quite some time now but has remained the
grey area of the Indian story of retail sector. The Indian IT sector is growing at a rate of 31
16 Reliance Superpercent and posted record revenue of $40 billion in 2006-07. This is indeed good news but the
staggering domestic segment demanded services worth only $8.2 billion. In this study we focus
on how e-retail can boost the plans of existing and forthcoming national retail players. We
further try to put forth the challenges in computerization of the organized retail and make an
attempt to suggest some prospective solutions.
Traditional retail sector:
The organized retail sector of India will form about 10 percent of the total retailing business in
India and is expected to worth US $70 billion by the end of 2010. in the mean time it will grow
at a CAGR of around 49.53 percent. But certain speed breakers associated with the primitive
form of retailing must be overcome to maintain its tempo.
1. Unorganized retailing in India is ubiquitous and so the communication between the
manufacturer and retailer is heavily dependent on the wholesalers, dealers and traders.
This is more so because the retailers can't afford costly investments. So they ultimately
have to suffer due to low participation market flow of commodities. Nowadays even the
organized business houses are facing the problems related to SCM (Supply Chain
Management). The SCM's huge emphasize on middlemen rather than on the retailers
has aggravated the problem. The introduction of EDI (Electronic Data Interface) can
deliver QR (Quick Response) and ECR (Efficient Consumer Response) systems to
ameliorate the partnership channel and thus shorten the time between the placement
of orders and delivery to occur. For e.g. the 17 outlets of Food World are linked online
with its central manufacturing house at Chennai.
2. The scale and process complexity are also of paramount importance as millions of
customers deal with thousands of retail outlets. At the end of the day the total number
of transactions is in the order of hundreds of millions. This makes keeping track of the
money movement an onerous job. The spread of the planning cycles and huge
geographical dispersion makes the task more arduous.
Retail operation
India has seen a retail boom in the last five years. This has helped the sector grow to a size of
Rs. 8, 10,000 crores. IT can and has to play a substantial role in this flourishing industry to keep
up the vigor as well as to make it globally competitive. It can happen in many ways:
1. retailing in a large country like India is basically a multi-plant and multi-market activity. It is
almost if not actually impossible to handle the diversified operations. Introduction of IT can
make things easier and the node can be immensely useful in managing the complexities.
17 Reliance Super2. Advanced planning and scheduling and inventory management are inevitable to any growing
retail sector. Besides, merchandising and seasonality management systems can drastically
change the fortune of retail sector in India.
To improve penetration and enhance quality of services, data mining and top-class
forecasting has no substitutes. Understanding consumer needs and collaborating with
suppliers are essential parts of merchandising activities. A logical interpretation of data is
fundamentally important to make decision, especially when one is looking forward to
establish a new retail chain. These help in modifying revenues and cutting down costs, the
two dimensions of an upward-moving profit curve. Data-cleansing and re-architecture also
help in making effective decisions. It is fully justified that all the retail institutions as well as
the manufacturer and all distribution centers be linked Online to ensure EDI of the server
installed in the market with the EPOS (Electronic Point Of Sale). However the retailers should
carefully choose the IT service provider as global researches have shown that global IT
expenditure in the retail sector is growing at 13 percent whereas the revenues has grown at a
mere rate of 2 percent. The maintenance costs are also quite high owing to the different
technology platforms for fragmented point solutions.
Opportunities of the Western Retailers in India
The retail industry in the western countries has reached a point of saturation and there is no
way of expanding. In this backdrop the retail giants are trying to make their mark in the retail
market of countries that still have untapped potential of expansion. India happens to be one of
them. AT Kearney has constructed the Global Retail Development Index which has helped the
western retailers to identify the countries in which investments could be made.
Opportunities in India have attracted the western retailers like Wal-Mart, Euro set, Supervalu
who have plans to enter as single branded retailers. In gauging whether to enter, the
companies keep into account the timing factor that is whether the consumers are ready to
accept the products that are offered by them. It is highly possible that there are potentials in
the market but the consumer preferences are skewed against the products that are offered.
Certain parameters have been included in the construction of the Global Retail Development
Index and given weightage which have been shown in the following figure.
Table1: Parameters in the Construction of GRDI
Parameters Weightage
Country Risk 25%
Market Attractiveness 25%
Market Saturation 30%
Time Pressure 20%
18 Reliance SuperCountry Risk:
Country risk arises from political risk, poor debt management, low credit ratings and access to
bank finance. Country risk also has their origin from business risk arising from terrorism,
corruption and violence.
Attractiveness of Market
This is measured by retail sales per capita. If the score is zero in this parameter, then it clearly
hints to a highly underdeveloped retail sector. On the other hand a cent percent score would
indicate that the retail sector has reached the point of saturation. Weightage is also given to
population, urban population and business efficiency. The more the population and urban
population more will be the prospect for growth. By business efficiency we mean the quality of
infrastructure. Higher the quality of infrastructure, higher will be the ease of business
operations.
Market Saturation
To understand the market saturation level, importance is to be given to the share of modern
retailing, number of international retailers, the sale of retail per urban inhabitant and the
market share of the top retailers.
Time Factor
The time factor as measured by CAGR has a weightage of 20% in the construction of GRDI.
Major Challenges
1. Amalgamation or Confusion- According to Tata Strategic Management Group, India has a
high density retail structure of 1 retail outlet per 90 people and is the 9th largest retail market
in the world. But the structure of the retail industry in India is in utter jumble. The parallel
operation of convenience stores, supermarkets, hypermarkets and specialty stores in the
economy is bewildering. According to the 'Wheel of Retailing Theory', certain loopholes in one
of the forms of marketing can get communicated to other forms also.
2. What to sell- Another bemusement is the category of items to be offered. According to
researches, 41 percent of total consumption expenditure goes to the segment of food and
groceries and it accounts for 77 percent of total retail sales. So it is obvious that this is the most
preferred section of retailers. But unfortunately the foible taste bias for 'wet market' (i.e. fresh
food available through hawkers) has marred this prospect also. Therefore supply chain
19 Reliance Supermanagement, storage of fresh perishable foods and persuading the customers that the food is
inexpensive despite being fresh are genuine challenges to the newcomers. Diversifying the
product base to consumer products such as readymade garments, furniture, mobiles and
computers can mitigate the losses, if any from food marketing and also broaden the reach to
consumers.
3. Nostalgia- Indian shopping habits are no different. People tend to attach qualities like
honesty, fair price, good behavior etc. to shopkeepers with whom they have been dealing right
from childhood. They find no reason to go to a distant megastore without any genuine reason.
This problem is difficult to deal with as it demands a change in long-formed mindset. Organized
retail outlets can overcome this problem by employing eligible local peoples who can interact in
vernacular language and win the confidence of people.
4. Information Technology- This is a major problem and India must act fast if it wishes to create
a smooth field for organized retailing. Digitization of services will make transfer of goods easy
and an improvement in supply chain management will definitely play a significant role in
attracting more consumers and less consumer grievances. Besides, it will generate easier
payments option for customer and easier money movement for the CEOs of these highly
diversified malls.
Minor Challenges
1. Human resource crunch- the concern for insufficient manpower in the industry has been in
news for the last few months. This fear is somehow unfounded. The retail industry according to
recent reports is growing at a rate of 100 percent. Kishore Biyani's Future Group i.e. the Big
Bazaar chain of retail outlet alone provides employment to more than 18,000 people and is
planning to expand its employment base to 34,000 by June 2008. If we add to this the foray by
mega players like Reliance and Bharti-Walmart then the fear can surely turn into a
misperception. Retailing mainly deals with hard-selling of space, trade of stocks and building of
relationships. Since most of the openings are for front line shop people, a graduation will
suffice. Nowadays many institutes also provide post-HSC and post-graduate retail-specific
courses.
2. Hindrances from government- Some political parties want the government to amend laws
and improve curbs so that the mega players can't openly decimate the unorganized retail
sector. This is a conclusion based on a myopic outlook and must be amended for a long term
strategy. The fear is baseless because of the reasons mentioned above. The megastores will no
doubt provide employment to the less educated masses. Also taking business away especially
from small food vendors is more easily said than done. Instead the limiting move will send
wrong signals to the investors and will ward off investments when the states need it most.
Allowing 51 percent retail FDI in single brand retailing is a welcome move in this direction. It is
expected that the government will create further opportunities for the organized retail to come
20 Reliance Superup as home grown investment is always sweeter than foreign investment.
The advent of organized retailing in an economy where spending power is growing fast and Tier
II as well as Tier III town dwellers are becoming brand conscious is sure to bring a revolution in
the retail sector.
E-Retailing in India
E-retailing, most commonly known as e-tailing is nothing but shopping through the Internet
and other media forms. There are many things that are common between direct retail stores
and online retail stores. Both have the process of billing of the customers and have to maintain
a relationship with the suppliers.
Bottlenecks Faced By E-Retailing in India
Problems with the Payment System-People in India are not used to the online shopping system
and moreover the online payment system through the credit card is also totally alien to them.
Most of them do not avail of the transaction facilities offered by the credit cards. They are also
dubious regarding the online payment system through the credit cards. Hence different
payment options should be made available to them like the credit card, cash on delivery and
net banking to give them further assurance.
Problems with Shipping The customers using the online shopping channel should be assured
that the products that they have ordered would reach them in due time. For this the retail
companies have resorted to private guaranteed courier services as compared to postal services.
Offline presence The customers should be assured that the online retailers are not only
available online but offline as well. This gives them the psychological comfort that these
companies can be relied upon.
Products offered at discounted rates The online retailers save on the cost of building and
employee salaries. Some part of this benefit should also be enjoyed by the online customers by
a reduction in the price of the product. The customers should be conveyed this message that
they are getting the products at a discounted price.
Language Problem Most internet retail shops use English as their mode of communication.
English may not be comprehensible to the majority of the Indian population. To increase the
customer base, content in the online retail shops should be provided in local language.
Another reason why the concept of e- retailing or online retailing has not gained prominence
in India is that the Indians prefer to touch the products physically before buying them. This
facility is provided through the multi-brand outlets, not available online. Studies have revealed
21 Reliance Superthe preferences of the customers towards the traditional shopping methods. Hence the
retailer online should first make it a point to spot the potential customers and accordingly plan
out the product. If the customers are more open to online shopping, then nothing can be more
beneficial. They save the time and effort to visit, departmental stores, shopping malls, etc.
products can be delivered by a click of the mouse.
Another problem is that the retail industry is standing on its point of inflexion and considering
its infant stage, it would take time for the new concept of e-retailing to take off.
Some online retailing sites in India
E Bay is heading the race of online retailers. In this race it has become very difficult to
determine the online retail store that makes the products available at convenient and cheap
rates. From this very difficulty has cropped up comparison sites. Comparison is done on the
basis of an index which is constructed from the data available from different shopping sites. The
bechna.com and the ultop.com are such sites though many more sites are entering this zone.
The comparison sites not only help to choose the online sites that would be providing the best
deal but also offline as well. Sites like Rediff.com and India.com have constructed the data that
is taken from the conventional local retailers. These sites help the customer in finding out the
local retail store that will best suit his purpose
Future of E-retailing in India
There are divergent views on the future of e-retailing in India. Some experts are of the opinion
that the giant, big brand retailers would dominate the small ones due to their wider investment
capacities. It would be next to impossible for the small retailers and the kiraynas to prove their
existence in the battlefield of online retailing. Another viewpoint is that there would be an
exponential growth in the online retailing business in India.
Top Companies: An analysis
Big Bazaar is a chain of department stores in India,
currently with 75 outlets. It is owned by the Pantaloon
Retail India Ltd, Future Group. It works on the same
economy model as Wal-Mart and has considerable
success in many Indian cities and small towns. The idea was pioneered by entrepreneur Kishore
Biyani, the CEO of Future Group. Currently Big Bazaar stores are located only in India. It is the
biggest and the fastest growing chain of department store and aims at being 350 stores by the
end of year 2010.
It offers all types of household items such as home furnishing, utensils, fashion products etc. It
has a grocery department and vegetable section known as the Food Bazaar and its online
22 Reliance Supershopping site is known as FutureBazaar.com. The real estate fund management company
promoted by the Future Group expects to develop more than 50 projects across India covering
a combined area of more than 16 million sq. ft. On April 1 2007, Big Bazaar had to shut its
outlets in Mumbai as the 120 retrenched employees called a strike with the support of Bhatia
Kamgar Sena (the trade Union wing of Shiv Sena). Later the management agreed to reinstate
the sacked workers
Pantaloon Retail India Ltd, is India’s leading retail company with
presence across food, fashion, home solutions and consumer
electronics, books and music, health, wellness and beauty, general
merchandise, communication products, E-tailing and leisure and
entertainment.
Headquartered in Mumbai (Bombay), has over 450 stores across 30 cities in India and employs
over 18,000 people. Pantaloon founded by Mr. Kishore Biyani. The company owns and
manages multiple retail formats catering to a wide cross-section of the Indian society and its
width and depth of merchandise helps it capture almost the entire consumption basket of the
Indian consumer.
Founded in 1987, as a garment manufacturing company, Pantaloon Retail forayed into modern
retail in 1997 with the opening up of a chain of department stores, Pantaloons. In 2001, it
launched Big Bazaar, a hypermarket chain, followed by Food Bazaar, a supermarket chain. It
went on to launch Central, a first of its kind, seamless mall located in the heart of major Indian
cities. Some of its other formats include, Collection I (home improvement products), E-Zone
(consumer electronics), Depot (books, music, gifts and stationeries), all (fashion apparel for
plus-size individuals), Shoe Factory (footwear) and Blue Sky (fashion accessories). It has recently
launched its retailing venture, futurebazaar.com.
In India's chaotic markets, Kishore Biyani is the unchallenged king of retail. He has the knack of
catching rivals off-guard and striking where it hurts most. And now that he's set himself the task
of retaining control of the largest retail space in the country, he won't let anyone - suppliers or
international promoters included - catch him slacking. The latest to face the wrath of the 43-
year-old is South African hypermarket Shop rite, which opened shop in Mumbai last month
through a franchise agreement with local company Normal Lifestyle.
The hypermarket began retailing products from big boys Nestle, Unilever and Procter & Gamble
at consumer discounts of 20-30 per cent, lower than even Biyani's purchase prices in his Big
Bazaar and Food Bazaar stores.
Reliance Fresh is the retail chain division of Reliance Industries of
23 Reliance SuperIndia which is headed by Mr.Mukesh Ambani. Reliance has entered into this segment by
opening new retail stores into almost every metropolitan and regional area of India. Reliance
plans to invest Rs 25000 cores in the next 4 years in their retail division and plans to begin retail
stores in 784 cities across the country. The Reliance Fresh supermarket chain is RIL’s Rs 25,000
crore venture and it plans to add more stores across different g, and eventually have a pan-
India footprint by year 2011. The super marts will sell fresh fruits and vegetables, staples,
groceries, fresh juice bars and dairy products and also will sport a separate enclosure and
supply-chain for non-vegetarian products. Besides, the stores would provide direct employment
to 5 lakh young Indians and indirect job opportunities to a million people, according to the
company. The company also has plans to train students and housewives in customer care and
quality services for part-time jobs.
Reliance Fresh recently (24th Jan, 2007) opened several "Fresh"
outlets in Chennai, New Delhi, Hyderabad, Jaipur, Mumbai,
Chandigarh, Ludhiana increasing its total store count to 40.
Reliance is still testing its retail concepts by controlled entry
beginning in the southern state.
DLF Retail Developers Ltd. is one of the troikas of the DLF Group.
Besides being India's largest real estate developer, DLF is also of
the leaders in innovating shopping malls in India. It caught public
eye when it launched the 2, 50,000 sq ft. shopping mall in Gurgaon. It has brought a dramatic
change in the lifestyles and entertainment with its City Centers and DT Cinemas. DLF has plans
to invest Rs. 2000-3000 crore in all the emerging areas from metros to class cities in the next
two years. Till last year the company was involved in building 18 malls out of which 10 were in
the NCR region. Future plans of DLF involve opening up of 100 malls (specialty malls, big box
retailing and integrated malls) across 60 cities in next 8-10 years. They are slowly transforming
into 'lease' and 'revenue share' models. Local players like ITC, the A.V. Birla Group and Tatas
have given the hints to enter organized retail. France’s Carrefour SA and Britain’s Tesco too
were recently in news for their future plans to explore the Indian retail market
Bharti Retail, a wholly owned subsidiary of Bharti Enterprises. Has
announced two joint ventures (JV)with the international retailing
behemoth, Wal-Mart. The first JV ensures cash and carry business, in
which 100 percent FDI is permitted and it can sell only to retailers and distributors. The second
JV concerns the franchise arrangement. Sunil Mittal, Chairman of the Bharti Group assured that
the ventures will use “low prices every day” and “best practices for the satisfaction of the
customer”. Processed foods and vegetables will be delivered by Bharti Field Fresh, Bharti's JV
24 Reliance Superwith Rothschild. Bharti Retail aims to foray every city with a population exceeding 1 million. It
has plans to come up with an investment of more than $2 billion in convenience stores,
supermarkets and hypermarkets spread over an aggregate 10 million sq. ft. The expansion drive
looks ambitious but analysts are worried that Bharti may face stiff competition from Pantaloon
and Reliance as they too have sanguine plans to flood the markets with thousands of retail
outlets in the coming five years. Bharti Telecom also has plans to offer all its fixed and mobile
telecom products and services from a single window to the SMB (Small and Medium Business)
enterprises under the Bharti Infotel division.
Lifestyle is part of the Landmark Group, a Dubai-based retail
chain. With over 30 years’ experience in retailing, the Group has
become the foremost retailer in the Gulf. Positioned as a trendy,
youthful and vibrant brand that offers customers a wide variety of
merchandise at exceptional value for money, Lifestyle began operations in 1998 with its first
store in Chennai in 1999 and now has 13 Lifestyle stores, 5 Home Centers and 1 Baby shop
store across Chennai, Hyderabad, Bangalore, Gurgaon, Delhi, Mumbai and Ahmedabad.
Business World-IMRB Most Respected Company Awards Survey has rated Lifestyle as the Most
Respected Company in the Retail Sector in 2003 and 2004. Lifestyle has also been awarded the
ICICI-KSA Technopak Award for Retail Excellence in 2005, the Reid & Taylor Retailer of the Year
Award for 2006 and more recently, the Lycra Images Fashion Award for the Most Admired
Large Format Retailer of the Year in 2006
The foundation of Shopper's Stop was laid on October 27, 1991 by
the K. Raheja Corp. group of companies Shoppers’ Stop aims to
position itself as a global retailer. The company intends to bring
the world’s best retail technology, retail practices and sales to
India. Currently, they are adding 4 to 5 new stores every year with
an immense amount of expertise and credibility, Shopper's Stop has become the highest
benchmark for the Indian retail industry Shopper's Stop in the only retailer from India to
become a member of the prestigious Intercontinental Group of Departmental Stores (IGDS).
With its wide range of merchandise, exclusive shop-in-shop counters of international brands
and world-class customer service, Shoppers’ Stop brought international standards of shopping
to the Indian consumer providing them with a world class shopping experience. The stores offer
a complete range of apparel and lifestyle accessories for the entire family. From apparel brands
like Provogue, Color Plus, Arrow, Levi’s, Scullers, Zodiac to cosmetic brands like Lakme,
Chambor, Le Teint Ricci etc., Shoppers’ Stop caters to every lifestyle need. Shoppers' Stop
retails its own line of clothing namely Stop, Life, Kashish, Vettorio Fratini and DIY. The
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