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TABLE OF CONTENTS

1. Industry Overview 05

2. Organized Retail Sector 10

3. Origin of retail 13

4. Indian Retail Industry 18

5. Retailing Formats in India 23

6. Specialty stores 25

7. Major Industry Players 33

8. The growth Drivers 44

9. Swot of the Market 51

10. Challenges 55

11. Location Planning 58

12.

Competitor Analysis 6513. Future Outlook 68

14. Merger and Acquisition 70

15. Technology in retail 75

16. Government initiatives and regulation 79

17. Research methodology 83

18. Research analysis 86

19. Conclusion 89

20. Consumer survey questionnaire 90

21. References 94


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Industry analysis of the Indian retail sector:

Modern retailing has entered India in form of malls and huge complexes offering shopping

entertainment, leisure to the consumer as the retailers experiment with a variety of formats, from

discount stores to supermarkets to hypermarkets to specialty chains. However, kiranas stil

continue to score over modern formats mostly due to the convenience factor i.e. near to their

house.

This organized segment typically comprises of a large number of retailers, greater enforcement of

taxation mechanisms and better labour law monitoring system. It's no longer about just stocking

and selling but about efficient supply chain management, developing vendor relationship quality

customer service, efficient merchandising and even the labour class is also in the working process

timely promotional campaigns. The modern retail formats are encouraging development of well-

established and efficient supply chains in each segment ensuring efficient movement of goods

from farms to kitchens, which will result in huge savings for the farmers as well as for the nation

The government also stands to gain through more efficient collection of tax revenues. Network

marketing has been growing quite fast and has a few large players today. Gas stations are seeing

action in the form of convenience stores, ATMs, food courts and pharmacies appearing in many

outlets.

In the coming years it can be said that the hypermarket route will emerge as the most preferred

format for international retailers stepping into the country. Estimates indicate that this sector wil

have the potential to absorb many more hypermarkets in the next four to five years


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List of retailers that have come with new formats:

Retailer Current Format New Formats

Shoppers Stop Department Store Quasi-mall

Crossword Large Bookstore Corner shop

Piramyd Departmental Store Quasi-mall, Food retail

Pantaloon Own brand store Hypermarket

Subhiksha Supermarket considering moving to self service

Globus Department Store Small fashion stores

Traditionally, the kirana retailing has been one of the easiest ways to generate self-employment

as it required minimum investment in terms of land, labour and capital. These store are not

affected by the modern format of retailing. In order to keep pace with the modern formats, kiranas

have now started providing more value-added services like stocking ready to cook vegetables and

other fresh produce. They also provide services like credit, phone service, home delivery etc.

The organized retailing has helped in promoting several niche categories such as packaged frui

juices, hair creams, fabric bleaches, shower gels, depilatory products and convenience and health

foods, which are generally not found in the local kirana stores. Looking at the vast opportunity in

this sector, big players like Reliance has announced its plans to become the country's largest

modern retainers by establishing a chain of stores across all major cities.

Apart from metro cities, several small towns like Nagpur, Nasik, Ahmedabad, Aurangabad

Sholapur, Kolhapur and Amravati has seen the expansion of modern retails. Small towns in

Maharashtra are emerging as retail hubs for large chain stores like Pantaloon Retail because


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many small cities like Nagpur have a student population, lower real estate costs, fewer power cuts

and lower levels of attrition.

However, retailers need to adjust their product mix for smaller cities, as they tend to be more

conservative than the metros. In order for the market to grow in modern retail, it is necessary that

steps are taken for rewriting laws, restructuring the tax regime, accessing and developing new

skills and investing significantly in India.


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India is rated as the most attractive retail markets

2920575652Brazil

1st 7th1st 14th24thIndiasRank

2530853551Egypt

1840584970Malaysia

1271594164Thailand

965665651Turkey

4th

90534068China

2nd 92715852Russia

20%30%25%25%

RankTime

PressureMarket

SaturationMarket

AttractivenessCountry

Risk

Country

1st 80913462India


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Socio demographic factors will lead to faster growth of Organized

retail in India:

42% 39%

26% 27%

22% 23%

45%47%47%

24%24%25%

20%19%19%

12%11%10%9%9%

0%

20%

40%

60%

80%

100%

1991 1996 2001 2006 2010E

0-19 Yrs 20-34 Yrs 35-54 Yrs 55+ Yrs


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ORGANIZED RETAIL


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Emerging Retail Markets:

India, Russia, China and Vietnam top the list of the most attractive emerging markets for retailers

investment in 2010, While India and Russia have held the top two spots since 2007, China's

booming consumer spending, together with retailers moving into second-tier cities, helped it rise to

No. 3 from its No. 5 spot last year, according to the 2007 Global Retail Development Index from

management consultant firm A.T. Kearney.

The study based its results on four variables: 'country risk', measuring political risk, debt and credit

ratings; 'market attractiveness', encompassing retail sales per capita, population, infrastructure

and regulations; 'market saturation'; and 'time pressure'.

The higher the ranking, the more urgency for retailers to enter the market, according to the study,

which ranks the top 30 emerging countries for retail development and focuses on mass-merchant

and food retailers.

"If you want to be an international player in retail, these are the markets that demonstrate the

characteristics (where) you can be successful," said Laura Gurski, a co-author of the study and

partner in A.T. Kearney's consumer and retail practice.

India has already attracted the attention of global retailers like Wal-Mart Stores Inc., which is

working with India's Bharti Enterprises to set up a joint venture for a cash-and-carry business. In

India, foreign multiple-brand retailers, which sell diverse brands under one roof, are limited to

cash-and-carry and franchise or license operations.


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"India's window of opportunity continues to be wide for retail investment and development," the

report said. "Once India's window closes for grocery retailers, there will be little opportunity for

market domination in the main cities."

The country's growing population of young urban professionals with disposable incomes and the

nouveau riche has also made India attractive for luxury retailers. India has attracted "the low end

and the high end because of the breadth of the consumer segments that are available," said

Gurski.

When variables stay constant, Gurski said, do-it-yourself, apparel and electronics retailers usually

enter emerging markets some two years after international grocers establish themselves. Middle

Eastern countries are also represented on the list, with Saudi Arabia ranking No. 10

India has emerged as the world's most attractive destination for mass merchant and food retailing,

maintaining its 2005 position in an annual study of retail investment attractiveness among 30

emerging markets.

India was given the top ranking in management consulting company AT Kearney's 2006 Globa

Retail Development Index (GRDI). "The Indian retail market is gradually but surely opening up

while China's market becomes increasingly saturated," said Fadi Farra, a principal in AT

Kearney's Consumer Industries and Retail Practice and leader of the GRDI study. Much to the

surprise of market observers, China was ranked fifth in this year's tally, declining one more place

since 2005. While China remains very attractive, the market is becoming increasingly saturate as

and United Arab Emirates No. 18. Gap Inc announced last week it had struck a deal with two

franchisees to open Gap stores in Saudi Arabia starting at the end of this year. Dubai has


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capitalized on consumer desire for a more Western lifestyle and has established itself as a retai

mecca, Gurski said. Despite its focus on luxury, Dubai is "just beginning to be populated by the

bread-and-butter retailers of the United States and the Western world," she said. Retailers that

have already established a presence in major Chinese cities like Shanghai and Beijing, or those

that have been slow to gain a foothold there, are now looking at less developed markets in

second-tier cities, the study found. "If the markets are saturated, they're looking to make profits in

the second-tier cities," Gurski said.

But she cautioned that a separate strategy is needed for the smaller markets since consumer

tastes, ability to spend and willingness to embrace new formats may be different than in larger

urban areas.

International retailers rush to establish a presence and build market share, the study reveals.

According to the study, Asia with a large 40 per cent of the top 20 markets has surpassed Eastern

Europe as the 'dominant region for global retail expansion.'

"The learning is that timing is the most important source of competitive advantage for global and

regional retailers in the globalization race. Knowing when to enter emerging retail markets is the

key to success," said Farra. Powering Asia's charge are Vietnam, which has risen five places to

third place, and countries like Thailand, South Korea and Malaysia, all of which are in the top 15

After topping the ranking for two consecutive years in 2008 and 2009, Russia slipped to second

place behind India last year and remained there in 2010 too.


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Origin of Retail Sector


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Early Trade:

When man started to cultivate and harvest the land, he would occasionally find himself with a

surplus of goods. Once the needs of his family and local community were met, he would attempt

to trade his goods for different goods produced elsewhere. Thus markets were formed. These

early efforts to swap goods developed into more formal gatherings. When a producer who had a

surplus could not find another producer with suitable products to swap, he may have allowed

others to owe him goods. Thus early credit terms would have been developed. This would have

led to symbolic representations of such debts in the form of valuable items (such as gemstones or

beads), and eventually money.

HOW RETAIL DEVELOPED:

Peddlers and Producers:

The Retail Trade is rooted in two groups, the peddlers and producers. Peddlers tended to be

opportunistic in their choice of stock and customer. They would purchase any goods that they

thought they could sell for a profit. Producers were interested in selling goods that they had

produced.

General Store:

This division continues to this day with some shops specializing in specific areas, reflecting thei

origins as outlets for producers (such as Pacific Concord of Hong Kong), and others providing a

broad mix, known as General Store (such as Casey's in the Midwest of the U.S.A.)

Although specialist shops are still with us, over time, the general store has increasingly taken on


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specialist products. Customers have found this to be more convenient than having to visit many

shops - thus the term "Convenience Store" has also been applied to these shops. As the

popularity of general stores has grown, so has their size. This combined with the advent of Self-

Service has lead to the Supermarket, or Superstore.

Early Markets:

Over time, producers would have seen value in deliberately over-producing in order to profit from

selling these goods. Merchants would also have begun to appear. They would travel from village

to village, purchasing these goods and selling them for a profit. Over time, both producers and

merchants would regularly take their goods to one selling place in the centre of the community.

Thus, regular markets appeared. The First Shop: Eventually, markets would become permanent

fixtures i.e. shops. These shops along with the logistics required to get the goods to them were,

the start of the Retail Trade.

The Birth of Distance Retailing:

Defined as sales of goods between two distant parties where the deliverer has no direct interest in

the transaction, the earliest instances of distance retailing probably coincided with the first regular

delivery or postal services. Such services would have started in earnest once man had learned

how to ride a camel, horse etc.

When individuals or groups left their community and settled elsewhere, some missed foodstuffs

and other goods that were only available in their birthplace. They arranged for some of these

goods to be sent to them. Others in their newly adopted community enjoyed these goods and

demand grew. Similarly, new settlers discovered goods in their new surroundings that they


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dispatched back to their birthplace, and once again, demand grew. This soon turned into a regular

trade. Although such trading routes expanded mainly through the growth of traveling salesmen

and then wholesalers, there were still instances where individuals purchased goods at long

distance for their own use. A second reason that distance selling increased was through war. As

armies marched through territories, they laid down communication lines stretching from their home

base to the front. As well as garnering goods from whichever locality they found themselves in,

they would have also taken advantage of the lines of communication to order goods from home.

Origins of Retail

It is likely that, as markets became more permanent fixtures they evolved into shops. Although

advantageous in many respects, this removed the mobility that a peddler or traveling merchant

may still have enjoyed. For some shopkeepers, it made sense to obtain extra stock and open up

another shop, most probably operated by another family member. This would recover business

from peddlers and create new business and the greater volume would allow the shopkeeper to

strike a better deal with suppliers. Thus the retail chain would have started. Its thought that this

process would have started in china over 2200 years ago with a chain of shops owned by a trader

called Lo Kass.

The First Self-Service Store:

This all changed in 1915 when Albert Gerrard opened the Groceteria in Los Angeles, the first

documented self-service store. This was soon followed a year later by the Piggly Wiggly self-

service store, founded by Clarence Saunders in Tennessee in the U.S.


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Growth:

This new type of shopping was more efficient and many customers preferred it. Although persona

service stores remain to this day, this new concept started a rapid growth of self-service stores in

the United States. Other countries were slow to take up the idea, but there has been a steady rise

in the global amount of self-service stores ever since .

Efficiency

These entrepreneurs noticed that their staff had to spend a great deal of time taking grocery

orders from customers. The groceries were stacked on shelves allowing customers to walk around

and browse, collecting their shopping in a basket that was supplied. The shopkeeper would only

need to tot up the final bill at the end of the process and transfer the goods from the basket to the

customer and receive payment.

From Family Business to Formal Structure:

Although retail chains would have been mostly run by families, as some chains grew, they would

have needed to employ people from outside of their family. This was a limiting factor as there

would have been a limit to the amount of trusted non family members available to help run the

chain. Another, even more definite limiting factor was the distance the furthest shop would have

been from the original shop. The greater the distance, the more time and effort would have been

needed to effectively manage outpost shops and to service them with goods. There was

therefore, a natural barrier to expansion. That was the case until transport and communications

became faster and more reliable. When this happened towards the end of the 19th century, chains


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became much bigger and more widespread. Many of these businesses became more structured

and formalized, leading to the retail chain that we see today.


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Indian Retail Industry


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UNORGANISED RETAIL SECTOR:

Today, retailing doesnt involve just dealing or marketing from shops, it includes analyzing the

market in an effort to provide reasonable prices together with an array of options and experience

to customers. The sole purpose of all this is retaining the brand loyalty of customers. Indian retai

is currently a US$ 245 billion market and is anticipated to extend to almost US$ 385 billion mark

by the next five years. The Indian retail sector is currently sporting a brand new look and together

with a 46.64 per cent three-year Compounded Annual Growth Rate (CAGR), Conventiona

marketplaces are paving way for new shopping malls, the likes of superstores, shopping plazas,

supermarkets and brand label stores. International style shopping centers have started dotting the

skyline of cities and smaller towns, acquainting the Indian customer to a unique shopping

experience. The retail industry in India is split up into the unorganized and organized retai

segments.

The unorganized retail sector includes the big, average and modest grocery stores and the

chemist shops. A changeover is taking place from the conventional retail sector to organized

retailing. But the unorganized segment still dominates and leads the industry. By 2010, the Indian

retailing sector is anticipated to become an Rs12.5 trillion market. The share of organized retailing

is supposed to jump to about 10 per cent from the existing three per cent. The anticipated

staggering growth in organized retailing provides an opportunity to expand the market for both

established and new players. According to the latest report India Retail Sector Analysis

(200607)I by RNCOS, the total retail market is primarily focused in rural regions, which makes up


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55 per cent or US$ 165 billion of the overall retail market as opposed to urban segment, which

represents 45 per cent or US$ 135 billion of the gross retail market. The rural market is spread

over 627,000 villages, even though its centre of attention is focused around a core group of

100,000 villages that makes up 50 per cent of the rural population.

India represents the most compelling international investment opportunity for mass merchant and

food retailers looking to expand overseas, according to management consulting firm AT Kearney's

2009 Global Retail Development Index (GRDI), an annual study of retail investment attractiveness

among 30 emerging markets. India is rated as the fifth largest emerging retail market and is seen

as a potential goldmine. Driving global brands into India is the greatly improved investment climate

due to the recent relaxation of direct ownership restrictions on foreign retailers. The country's retai

market totals $330 billion, is vastly underserved and has grown by 10 per cent on an average over

the past five years. The message for retailers on India is clear move now or forego prime

locations and market positions that will soon become saturated. Global retailers that missed

opportunities to capture first-mover advantage in China will make up for it in India.

Though India has more than five million retail outlets, they are greatly unorganized. There is no

supply chain management perspective. In fact, out of the entire retail sector in India, the organized

sector is only 25 per cent and the rest is unorganized. 96 per cent of the retail outlets are smaller

in area than the standard norms. The retail industry is divided into organized and unorganized

sectors. Organized retailing refers to trading activities undertaken by licensed retailers who are

registered for sales tax and income tax. These include corporate backed hypermarket and retail


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chains and so on. Unorganized retailing is the traditional low-cost shops, handcarts and

pavements and is by far the prevalent form of trade in India. The efficiency of organized sector in

retailing is manifested in some of the newer supermarkets in urban/metropolitan India the

produce is cleaner, fresher, well packed and often cheaper than the local shopkeeper. This is

possible because of the far more efficient distribution system, which organized retail chains are

employing, by cutting the layers of middlemen involved. There are other benefits too, of

transforming the unorganized retail sector into an organized sector. Firstly, a number of new jobs

will be created, far better paid than the underage labor working in the local shops. Secondly, the

benefits to the producer and consumer through better prices and lesser wastage; throwing up

exportable surpluses, which will also benefit the economy as a whole. Thus one can see that

allowing FDI in retailing is beneficial to all the stakeholders involved

The Big Bazaars and Spencers, the huge unorganized retail sector is finally beginning to see the

merit of logging on, even if at a model scale.

Taxation policies also push you to automate and the push is even harder for those looking to

expand beyond their single store existence.

Though its early days yet to measure it penetration in the unorganized retail industry, interest

levels are surely raising fast. Its good to at least answer their questions. Though the interest is

more with retailers who register good sales and volumes.

Software available to the retailers is ShawMans RetailMagiK, which takes care of the front-end

store needs, as well as the back-end warehouse requirements. It would surely help the

unorganized sector to get into technologies like bar-coding, which will make their operations more


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efficient. Some other features are a user-defined billing screen and discount with contro

mechanism from the head-office, delivery order management, batch control and quick information

search, among others. The product is a simple to use. The screen design and the functionality are

designed in such a way that the user need not press too many keys to get things done, says

Khushroo Bagwadia, business development manager, Shawman Software.

To begin with, most retailers look at decent entry-level solutions starting at Rs 25,000. However

there are cheaper quick-fix solutions available too. One can even deploy a computer and start with

financial accounting programmers like Microsoft Excel, FoxPro and Tally.

Small retailers seem next in line and vendors are also warming up to the opportunity. At the low-

end however, smart inexpensive solutions are the need of the hour. And solutions providers like

Microsoft, Polaris and Shawman are now working on developing smart tools for the retai

enthusiasts. For small players with just one store, the investment on retail solutions go really low,

anywhere between Rs 10,000 to Rs 25,000. Most of the time these solutions are developed by

local firms, who at times compete with the big names in the industry.

According to Oberoi of Polaris, generally the mom-and-pop stores like to go for technology, which

will get their work done at a reasonable cost. They avoid the high-end technology, and consider

these as frills. They are not even bothered about upgrading, so the cheap systems are more than

welcome. These solutions might not work for the mid-sized retailers with five stores, as then one

need to scale it up and take care of inventory and supply chain management, he says.


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Comparing the case with China, Vedamani suggests India is on the right track. In China, we find

the organized sector to be 20-23% of the total industry. Here, the technology has advanced in

phases, and so is the case in India.

Format Description The Value Proposition

Branded StoresExclusive showrooms either owned or

franchised out by a manufacturer.

Complete range available for a

given brand, certified product

quality

Specialty

Stores

Focus on a specific consumer need, carry

most of the brands available

Greater choice to the

consumer, comparison between

brands is possible

Department

Stores

Large stores having a wide variety of products,

organized into different departments such as

clothing, house wares, furniture, appliances,

toys, etc.

One stop shop catering to

varied/ consumer needs.

Supermarkets Extremely large self-service retail outletsOne stop shop catering to

varied consumer needs

Discount

Stores

Stores offering discounts on the retail price

through selling high volumes and reaping

economies of scale

Low Prices

Hyper- mart

Larger than a supermarket, sometimes with a

warehouse appearance, generally located in

quieter parts of the city

Low prices, vast choice

available including services

such as cafeterias.

Convenience

stores

Small self-service formats located in crowded

urban areas.

Convenient location and

extended operating hours.


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Shopping MallsEnclosure having different formats of in-store

retailers, all under one roof.

Variety of shops available to

each other.

Formats adopted by the Retail Players in INDIA.


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Retailer Original formats Later Formats

RPG Retail Supermarket (Foodworld) Hypermarket (Spencer's)Specialty Store (Health and

Piramal'sDepartment Store

(Piramyd Megastore)Discount Store (TruMart)

Pantaloon Retail

Small format outlets

(Shoppe)

Department Store

(Pantaloon)

Supermarket(FoodBAZAR)

Hypermarket (Big Bazaar) Mall (Central)

K Raheja Group

Department Store

(shopper's stop)

Specialty Store

(Crossword)

Supermarket

Hypermarket (TBA)

Tata/ TrentDepartment Store

(Westside)Hypermarket (Star India Bazaar)

Landmark GroupDepartment Store

(Lifestyle)Hypermarket (TBA)

OthersDiscount Store (Subhiksha, Margin Free, Apna Bazaar), Supermarket (N

Specialty Electronics


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Retailing formats in India

1. 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, Pyramid, Pantaloon.

2. Specialty Stores:


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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 sectors.

3. 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.

4. Department Stores:

Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer

needs. Further classified into localized departments such as clothing, toys, home, groceries

etc

5. Department Stores:

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!.

6. Hypermarts/Supermarkets:\


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Large self service outlets, catering to varied shopper needs are termed as

Supermarkets. These are located in or near residential high streets. These stores today 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.

7. 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.

8. MBOs :

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.


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SPECIALITY STORES

Food retail :

Food dominates the shopping basket in India. The US$ 6.1 billion Indian foods industry, which

forms 44 per cent of the entire FMCG sales, is growing at 9 per cent and has set the growth

agenda for modern trade formats. Since nearly 60 per cent of the average Indian grocery baske

comprises non-branded items, the branded food industry is homing in on converting Indian

consumers to branded food.


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The mobile revolution:

The retail market for mobile phones -- handset, airtime and accessories -- is already a US$ 16.7

billion business, growing at over 20 per cent per year. In comparison, the consumer electronics

and appliance market is worth US$ 5.6 billion, with a growth rate that is half of the mobile market.

Kidsretail:

When it comes to Indian children, retailers are busy bonding--and branding:

Monalisa, the Versace of kids is coming to India.

Global lifestyle brand Nautica is bringing Nautica Kids.

International brand Zapp tied up with Raymond to foray into kids' apparel.

Disney launched exclusive chains which stock character-based stationery.

Pantaloon's joint venture with Gini & Jony will set up a retail chain to market kids' apparel.

Swiss kidswear brand Milou is collaborating with Tirupur-based Sreeja Hosieries.

Turner International India Pvt Ltd. will launch Cartoon Network Townsville and Planet

POGO--two theme parks designed around its channels--in the National Capital Region.

Sahara One Television has also signed a Memorandum of Understanding to source

content from Spacetoon Media Group, Middle East's largest kids' entertainment brand for

animation and live action content.


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Leading the kids' retail revolution is the apparel business, which accounts for almost 80 per cent of

the revenue, with kids' clothing in India following international fashion trends. According to

research firm KSA Technopak, the branded segment comprises US$ 701.7 million of the total kids'

apparel market-size of over US$ 3 billion.

Industry experts say kids' retailing will touch annual growth of 30-35 per cent. Toys, stationary,

sportswear, outerwear, tailored clothing, eyewear, watches, fragrance, footwear, theme parks, TV

channels the segment is growing rapidly at 10 per cent per annum. Margins are in the range of

20-25 per cent (for dealers and distributors), while companies enjoy an average gross margin of

about 10 per cent.

Agricultural retail:

Agriculture across India is heralding the country's second Green Revolution. 14 states, including

Maharashtra, Punjab, Andhra Pradesh and Rajasthan amended the Agricultural Produce

Marketing Committee (APMC) act this year, along the lines of the Model APMC Act, '02, which

allows farmers to sell their produce directly to buyers offering them the best price.

Agricultural sectors such as horticulture, floriculture, development of seeds, animal husbandry

pisciculture, aqua culture, cultivation of vegetables, mushroom under cultivated conditions and

services related to agro and allied sectors are open to 100 per cent FDI through the automatic

route.


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For its e-Choupal scheme, ITC built internet kiosks in rural villages so farmers can access latest

information on weather, current market prices, foods-in-demand, etc.

With a US$ 5.6 billion, multi-year investment in agriculture and retail, Reliance Retail will establish

links with farms on several thousand acres in Punjab, West Bengal and Maharashtra. FieldFresh,

planning to become India's first large-scale exporter of produce, will annually pay farmers over

US$ 30,000 to lease land for vegetables, to hire tractors and to pay their workers.

Besides a five-year program with the Punjab government to provide several hundred farmers with

four million sweet-orange trees for its Tropicana juices by 2008, PepsiCo--with agriculture exports

worth US$ 40 million--also introduced farmers to high-yielding basmati rice, mangoes, potatoes

chilies, peanuts, and barley for its Frito-Lay snacks.

Export potential and a rapidly growing domestic demand for reliable produce from new

supermarket chains is driving change. With 77 per cent of India's population relying on agriculture

for a living, improved efficiency and new markets can benefit a large number of people.

International retailers :

The Australian government's National Food Industry Strategy and Austrade initiated a test

marketing food retail in India wherein 12 major Australian food producers have tied up with India-

based distributor AB Mauri to sell their products directly at retail outlets.

The largest-ever 150-member British business delegation in India committed investments in the

areas of food processing, agri retail and manufacturing. It is also likely to press for the

liberalisation of sectors like financial & legal services and retail.


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US-based home delivery and logistics company, Specialised Transportation Inc, will enter the

Indian market through a strategic alliance with Patel Retail, a subsidiary of Patel Integrated

Logistics.

Among other big international players, Wal-Mart has announced its plans for India in partnership

with Bharti, Tesco is sure to try again, and Carrefour too might finally find the right partner.

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 today 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.


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Supermarkets are relatively new entrants in the market. They are so called pioneers in organized

food retailing and go by the western model in look and feel and format. This is what everybody

means when they say organized food retailing.

Franchise outlets:

Like Tommy Hilfiger and Wal Mart, other US retailers are firming up their India entry strategies

and if they are already in, they are undergoing rapid expansion. Fashion brands DKNY is also a

set to foray into the Indian fashion Industry through a franchisee agreement with Indian company

S. Kumar Starbucks recently expressed their interest in entering Indian company

Like Tommy Hilfiger and Wal-Mart, other US retailers are firming up their India entry strategies

and if they are already in, they are undergoing rapid expansion. Fashion brand DKNY is also all

set to foray into the Indian fashion Industry through a franchisee agreement with Indian company,

S Kumars.Starbucks recently expressed their interest in entering India through the franchise

route, like their AmericanF&B counterparts Pizza Hut, Subway, and the very successful

McDonalds. McDonalds has major expansion plans lined up; in the next 3 years, it plans to open

another 100 outlets

in cities across India.

Hypermarket:


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A very large commercial establishment that is a combination of departmental store and a

supermarket.

The specific features of a hypermarket are the wide range of goods offered, quality service, quality

display of goods on the shelves and complex systems providing for customers loyalty.

Hypermarket is known for a wide range of goods offered. It consist of dozens of thousands of

items, while similar goods can be offered in several forms. In order to work with such an

assortment it is necessary to group it into categories and sub categories that would unite goods

according to this or that criteria.

Shopping Malls:

The new shopping malls that have been expanding their footprint across Indian cities are well

designed, built on international formats of retailing and integrated with entertainment and

restaurants to provide a complete family experience. Over 300 malls are expected to be

built over the next two years and most Indian cities with over a million populations will be

exposed to this modern method of retailing.

Shopping malls have existed in India since several decades but were designed and built to house

several shops in a single facility. These malls also known as Shopping Arcades offered only rows

of shops, most of which were small stores that promised bargains for their various wares. These

Shopping Arcades tried to maximize on their store space and did not offer any areas for recreation

and entertainment.


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Organized Retail Sector

Product Segments:

The organized retail business in India is very small. This is despite the fact that India is one of the

biggest markets. Retail business contributes around 10-11 per cent of GDP. India also has the

largest number of retailers, about 12 million, though they are mostly small. Most of the organized

retailing in the country has just started recently, and has been concentrated mainly in the metro

cities. Organized retailing in India has a huge scope because of the vast market and the growing

consciousness of the consumer about product quality and services. Organized retail only accounts


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for 3% of the total retail industry as yet and is estimated to grow to $64 billion by the year 2015. As

a result, the retailing space in the country will also rise by 15-20% by 2010. 50 million sq ft of

quality space under development 7 major cities to account for 41 million sq ft development 300

malls, shopping centre and multiplexes under construction To open 35 hypermarkets, 325 large

department stores, 1500 supermarkets and over 10,000 new outlets To add US $ 10 billion of

business to organized retail. ASSOCHAM president, Anil K Agarwal says: The organized secto

retailing is all set to grow at much faster speed than unorganized sector and the higher growth

speed will alone be responsible for its higher market share which has been projected for $17

billion by 2010-11. Cities and metropolis in which retailing will show booming prospects include

Mumbai, Delhi, Chennai, Kolkata, Bangalore and Kanpur, said Agarwal adding that the popular

mode adopted for building shopping malls in these cities will be based on build, operate, lease

and sell basis".

The 4 major organized retail sectors are Food & Grocery, Clothing, Consumer Durables

and Books & Music. In 2003-04, private consumption expenditure in India amounted to Rs

1,690,000 crores (USD 375 billion) of which, retail sales constitute about 61% (USD 230 billion).In

terms of penetration by the organized retail sector, footwear is the highest category, followed by

clothing. Footwear is driven by the dominance of home grown players like Liberty as well as the

15% market share that MNC retailer Bata Commands. Foreign Presence, especially through the

franchisee route, e.g. Adidas, Reebok, Nike etc. adds to this slice of the pie. Franchisee activity in

this category, especially in Tier II Cities, is pegged to rise.


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Estimated Growth inOrganized Retail

2004 2009 CAGR

(%)LargeSegments

1,924 5,024 21%

OtherSegments

1,315 2,645 15%

Non-storeRetailing

239 422 12%

TotalOrganizedretail

3,478 8,091 18%

The Four Large Segments:

Food-ChainStores

-SingleLarge Stores

39132665

1,6241,462162

33%35%20%

Clothing-Manufacturer retailers-Chainstores-SingleLarge Stores

1,075293315467

2,266590852824

16%15%22%12%

Consumer

durables-Manufacturer retailers-Chainstores-SingleLarge Stores

359

14198120

822

284298240

18%

15%25%15%

Book andMusic-ChainStores-SingleLarge Stores

975443

310202108

26%30%20%


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Retail is amongst the fastest growing sectors in the country. Indiaranks First, ahead of Russia, in terms oemerging markets potential in retail and is deemed a Priority market for International retail.


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Major Industry Players

Nanz in North India, Nilgiris in the South, Pantaloon in the East and Crossroad in the West were

the pioneers of the retail revolution in India. Nanz faced several obstacles in their business and

had to finally down their shutters. Nilgiris, due to some strange reason, did not see any logic to

expand beyond the southern frontiers. Pantaloon went to scale up and become bigger and bigger

to form the Future Group, that is now omnipresent in almost all formats right from small groceries

to e-tailing. Crossroads in Mumbai imparted some valuable lessons to their parent, the Piramyd


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Group, who has since then gone on an expansion drive with other formats of retailing in different

cities.

The big players in Indian retail landscape now are the Future Group, Shoppers Stop, Westside,

Subiksha and RPG Spencer. The newcomers who are knocking at the gates are Reliance Retail

Bharti Walmart and Aditya Birla Trinethra. Here, we intend to do a brief profiling of the major

players in order to understand the retail business in a better manner.

1

The V++ Group

The V++ Group, which was earlier known as PRIL (Pantaloon Retail India Limited) began as a

trouser manufacturer in the mid 1980s. The V++ Group is divided into six verticals V++ Retail,

V++ Capital, V++ Brands, V++ Space, V++ Media and V++ Logistics. The V++ Group started

operations in the mid 1987s by incorporating the company as Manz Wear Private Limited. The

company went on to manufacture ready made trousers under the Pantaloons brand name. It

came out with a public issue in 1991 and later changed their name to Pantaloon Fashions (India)

Limited (PFIL).

The first exclusive mens store called Pantaloon Shoppe was inaugurated in 1992. Pantaloons

went for a franchisee route to expand the number of retail outlets and by 1995, it had reached to a

crucial number of 70. The first departmental store called Pantaloons was opened in Kolkata in

1997 with an investment of Rs 0.7 million. The store was a success and recorded revenues of Rs


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100 million within the first year of operations. In 1999, the companys name was changed to

Pantaloon Retail (India) Limited (PRIL).

The success of Pantaloons departmental stores encouraged PRIL to come up with other retailing

formats such as Big Bazaar to retail low cost general merchandising, and Food Bazaar to retail

food products. As of 2005, the V++ Group has 3.5 million sq ft of retail space and over 100 stores

across 25 cities in India. It employs more than 12,000 people and has a customer base of more

than 120 million.

Kishore Biyani, the promoter of the group who likes to address himself as Chief Knowledge

Officer has plans to launch 18 formats and over 3,340 stores, thereby turning the V++ Group into

a US$7 billion company with over US$1 billion in profits by the year 2010.

6. RPG Spencer

RPGs Spencer presently has 125 stores across 25 cities covering a retail trading area of half a

million square feet and with a clientele of 3 million customers a month. Spencer's has a national

footprint with seven hypermarkets, three supermarkets and 70 daily use outlets, called Dailies.


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All the newly opened Spencer's stores stock every conceivable product that is required by a

household on a daily basis. At Spencer's Daily shoppers can get fresh fruits, vegetables, fast-

moving consumer goods, household items, groceries, with regular offers and discounts.

Spencer's outlets are divided in to three retail formats. These are, Spencer's Hyper, the over

25,000-sq ft hypermarkets stocking over 25,000 items. The 8,000sq ft to 15,000-sq ft mini hyper

stores, branded as Spencer's Super and the daily purchase 4,000-sq ft to 7,000-sq ft Spencer's

Daily for groceries, fresh food, chilled and frozen products, bakery and weekly top up shopping.

8. Bharti Wal-Mart


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Bharti Retail (Pvt.) Ltd. unveiled the roadmap for its retail

venture on 19th February, 2007 envisaging an investment of $2.5 billion with expectation of

revenue of $4.5 billion (about Rs. 20,000 crore) from this business by 2015. The first retail outlet is

expected to open somewhere in the month of August .

Bhartis plan is to invest $2.5 billion by 2015 and open stores across all major cities. This

investment would be only for setting up front-end stores. The modalities for its back-end linkage

including its joint venture with the world's largest retailer Wal-Mart, are in the process of being

worked out.

A high-level team from Wal-Mart was visited India in the later part of February to work out the

details of the back-end chain. While Bharti would manage front-end of the retail venture, Wal-Mart

would be involved in the back-end, including logistics, supply chain and cash-and-carry, he added.


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The JV was presently scouting for 10 million sq. ft. of retail space, which would include

hypermarkets, supermarkets and convenience stores and would provide employment to about

60,000 people. The company would open multi-format retail outlets in all cities with a population

of about one million. Bharti is now conducting a massive consumer survey to take a final decision

on branding and promotional campaign.

However, Bharti and Wal-Mart have been facing stiff opposition from the left parties and other

political outfits who fear that the entry of the Bentonville giant will make life difficult for the small

grocers and create massive unemployment. They also expect Wal-Mart to take a tough stance on

lowering prices and force farmers to sell their produce at lower rates. A lurking fear of monopolistic

regime in the retail sector is also enhancing their fears. Both Bharti and Walmart are presently

having a tough time in convincing the ministers, politicians, agriculturists, the NGOs and other

pressure groups that their business model would serve to work in the best interests of all the

stakeholders.

9. VISHAL RETAIL :


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Vishal is one of fastest growing retailing groups in India. Its outlets cater to almost all price

ranges. The showrooms have over 70,00 products range which fulfills all your household needs

and can be catered to under one roof. It is covering about 1282000 sq. ft. in 18 state across India.

Each store gives you international quality goods and prices hard to match. The cost benefits that

is derived from the large central purchase of goods and services is passed on to the consumer

What started as a humble one store enterprise in 1986 in Kolkata(erstwhile, Calcutta) is today a

conglomerate encompassing 51 showrooms in 39 cities. Indias first hyper-market has also been

opened for the Indian consumer by Vishal. Situated in the national capital Delhi this store boasts

of the singe largest collection of goods and commodities sold under one roof in India. The groups

prime focus is on retailing.

The Vishal stores offer affordable family fashion at prices to suit every pocket. The groups

philosophy is integration and towards this end has initiated backward integration in the field of high

fashion by setting up a state of the art manufacturing facility to support its retail endeavors

Company has already tied up for 5-lakh sq ft space and is looking for more. Company will come


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up with 32 new stores this year. Company is doing research on more formats. Company is

looking for opportunities of expansion in the South. Contribution of apparels business at 53% may

slightly come down to 50%. India is a big country and there is huge space for four-five big retai

players. Vishal can always sustain growth in this big market. Company can sustain margins as it is

going for backward integration. Currently manufacturing contributes 10% of the business, which in

the next two to three years, will go up to 25%. Company is increasing its focus on the non-appare

and FMCG segment. The current share of FMCG at 15% could go up to 20-25%. Apparel sales

currently at 63% in the next 2-3 years should come down to 50% as the company is now also

focusing on different segments. With growth in volumes, the cost of sourcing will come down in

the near future. Company will venture wherever it gets real estate space. Currently, it has very

little space in the south India. Eventually, it will have a pan-India set up.


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THE GROWTH DRIVERS

Drivers of Retail Industry

The Demography Dynamics: Approximately 60 per cent of Indian population below 30

years of age.


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Double Incomes: Increasing instances of Double Incomes in most families coupled with the

rise in spending power.

Plastic Revolution: Increasing use of credit cards for categories relating to Apparel

Consumer Durable Goods, Food and Grocery etc.

Urbanization: increased urbanization has led to higher customer density areas thus

enabling retailers to use lesser number of stores to target the same number of customers

Aggregation of demand that occurs due to urbanization helps a retailer in reaping the

economies of scale.

Covering distances has become easier: with increased automobile penetration and an

overall improvement in the transportation infrastructure, covering distances has become

easier than before. Now a customer can travel miles to reach a particular shop, if he or she

sees value in shopping from a particular location.

DRIVERS FOR GROWTH:


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Indian consumers are rapidly evolving and accepting modern formats overwhelmingly. Retai

Space is no more a constraint for growth. India is on the radar of Global Retailers and suppliers /

brands world-wide are willing to partner with retailers here. Further, large Indian corporate groups

like Tata, Reliance, Raheja, ITC, Bombay Dyeing, Murugappa & Piramal Groups etc and also

foreign investors and private equity players are firming up plans to identify investmen

opportunities in the Indian retail sector. The quantum of investments is likely to sky-rocket as the

inherent attractiveness of the segment lures more and more investors to earn large profits

Investments into the sector are estimated at INR 20 25 billion in the next 2-3 years, and over

INR 200 billion by end of 2010.

Stocks in the retail sector are also becoming increasingly attractive from an investor's point of

view. Successful development of value based concepts as well as development of retail space in

smaller cities and towns shall drive the organized retail into the next levels of cities. Retailers have

responded to this phenomenon by introducing contemporary retail formats such as hypermarkets

and supermarkets in the new pockets of growth. Prominent tier-II' cities and towns which are

witnessing a pick-up in activity include Surat, Gorakhpur, Dehra Dun, Vijaywada, Bhopal, Indore

Vadodara, Coimbatore, Nasik, Bhubaneswar, Varanasi and Ludhiana among others.

With consumption in metros already being exploited, manufacturers and retailers of products such

as personal computers, mobile phones, automobiles, consumer durables, financial services etc

are increasingly targeting consumers in tier II cities and towns. In addition, petro-retailing efforts of

petroleum giants scattered through out the country's landscape have also ensured that smaller

towns are also exposed to modern retailing formats.


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On the supply side, mall development activity in the small towns is also picking up at a rapid pace,

thereby, creating quality space for retailers to fulfill their aggressive expansion plans. Thus, the

retail boom', 85% of which has so far been concentrated in the metros is beginning to percolate

down to smaller cities and towns. The contribution of these tier-II cities to total organized retailing

sales is expected to grow to 20-25%.

GROWING CONSUMER CLASS:

Favorable demographic and psychographic changes relating to India's consumer class

international exposure, availability of increasing quality retail space, wider availability of products

and brand communication are some of the factors that are driving the retail in India. Over the las

few years, many international retailers have entered the Indian market on the strength of rising

affluence levels of the young Indian population along with the heightened awareness of global

brands and international shopping experiences and the increased availability of retail real estate

pace.

Development of India as a sourcing hub shall further make India as an attractive retail opportunity

for the global retailers. Retailers like Wal-Mart, GAP, Tesco, JC Penney, H&M, Karstadt-Quelle

etc stepping up their sourcing requirements from India and moving from third-party buying offices

to establishing their own wholly owned / wholly managed sourcing & buying offices shall further

make India as an attractive retail opportunity for the global players.


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Manufacturers in industries such as FMCG, consumer durables, paints etc are waking up to the

growing clout of the retailers as a shift in bargaining power from the former to the latter becomes

more discernible. Already, a number of manufacturers in India, in line with trends in developed

markets, have set up dedicated units to service the retail channel. Also, instead of viewing

retailers with suspicion, or as a necessary evil' as was the case earlier, manufacturers are

beginning to acknowledge them as channel members to be partnered with for providing solutions

to the end-consumer more effectively.

In India they do not have to face this dilemma largely because rapid urbanization, increase in

demand, presence of large number of young population, any number of opportunities are available

. The bottom line is that Indian market is changing rapidly and is showing unprecedented

consumer business opportunity.

Indian consumer class can be classified according to the following criteria:

1. Income

2. Socio-Economic status

3. Age demographics

4. Geographical dispersion
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SWOT OF THE MARKET

STRENGTH

1) Organized retailing at US$ 3.31 billion, growing at 8%.


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2) 2nd largest contributor to GDP after agriculture at 20%.

3) Pattern of consumption changing along with shopping trends.

4) A Growing population will translate to move consumers.

5) Consumer spending increasing at 11% annually.

6) Almost 25 million sq. ft. retail space available.

7) Paradigm shift in shopping experience for consumers pulling in more people.

8) Most of the entrants to organized retail come from 3 main categories, and have ventured into

retail as their business extension.

Real Estate Developers

Corporate Houses

Manufacturers/Exporters

WEAKNESSES

1) Shortage of quality retail spaces at affordable rates.

2) Government regulations on development of real estate(Urban Land Ceiling Act)

3) Need to provide Value for Money-squeezing margins

4) Lack of industry status.


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5) Retail revolution restricted to 250 million people due to monolithic urban-rural divide.

6) Footfalls not a clear indicator of sales as actual consumers lower in number.

7) Lack of huge investments for expansion

OPPORTUNITIES:

1) Increasing urban population-more participants in retail revolution.

2) Increase in consuming middle class population.

3) Social factors like dual household income have enhanced spending power.

4) Spends moving towards lifestyle products and esteem enhancing products.

5) Availability of old industrial lands-prime real estate locked in sick industrial units.

6) Average grocery spends at 42% of monthly spends-presents a huge opportunity.

7) Increase in use of credit cards

THREATS:

1) Rising lease/rental costs affecting project viability.

2) FDI restrictions in the retail sector.

3) Poor monsoons and low GDP Growth could affect consumer spending drastically.

4) Archaic labor laws are a hindrance to providing 24/7 shopping experience.


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5) Personalized service offered by Mom-&-Pop stores.

6) Unavailability of qualified personnel to support exponential growth in retail.

7) Differentiate taxation laws hindering expansion.

CHALLENGES

Retailing in its traditional form has been existing in India for decades. But retail management in

the true sense (as retailing is known in the west) is a relatively new discipline in India. It is unlike

other forms of marketing and the traditional marketing rules do not apply. In retailing, as in service,


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there is a fifth P added to the existing 4 of marketing, the People. Therefore the contact person

(whom the

Consumers interact with) becomes a doubly important entity. The most important difference is that

where marketing has the classic 4 Ps (Product, Promotion, Price and place), in retailing a fifth P

people is added which is critical. They are critical to a service business like retailing both as

employees who execute the business and the customers with whom retailers must interact.

The following are the key challenges of retailing:

Large transactions: Retailers need to handle smaller transactions in large numbers and still be

able to make money.

Low price strategy: The Indian consumer being value-conscious, a key to success for many

retailers is the ability to attract customers by offering low price guarantee.

Aggressive sales, discount and collection schemes (say, credit facilities.) and thus keep the

enthusiasm going.

Indian consumer behaviors - Retailers need to conduct MRs and behavioral studies into the

Indian psyche simply because he is so different from those in the west and in fact, different from

other Indian consumers. His shopping patterns need to be analyzed in detail.


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Location: A prime location in the city/town so a big plus. Things such as waiting and parking

areas need to be taken care of.

Use of information technology (IT) in developing a supply chain and integrating all the retailing

processes from procurement to after sales.

As somebody rightly pointed out, India remains one of the last frontiers of modern retailing.

Conquering the retailing in India will be a major challenge, given the complications that the

unorganized sector poses those of the supply chain and consumer behavior as well as the glaring

complexities of such a vast a market with all kinds of consumer segments thrown in. A wise

retailing hawk would set up special cells; committees to track retailing industry throughout the

country. Benchmarking the best in the country and seeing oneself as to where exactly he wants to

be in the complicated perceptual map would be a fine starter. Any retail chain needs to experiment

and re-orient to cater to the local needs and preferences. Given that these chains come with huge

asset bases and financing from their international operations, this is not a difficult task. While

Indian markets still beckon a large retail chain, the success of anyone foraying into the land of

snake-charmers and maharajas ultimately depends on how well and in-depth understanding they

have of the conditions, the people, the supply Retailing in India chain dynamics, the poorer (but

strong) unorganized cousins and of course, the local Gods!

Fraud in retail is expensive

We feel that fraud in going to be one of the retail sectors primary challenges in the future.


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Fraud and theft, including employee pilferage, shoplifting, vendor frauds and inaccuracy in

supervision and administration costs the Indian retail industry about Rs 550-600 crores every

year. This is despite the fact that most large modern format retailers use standard security

features such as CCTVs, POS systems and anti shoplifting systems for greater control over fraud

and theft. In financial terms, cost of this fraud constitutes about 2% of the organized retail sectors

revenues.

We believe that the implications and size of this loss will be more significant as retailers continue

to scale up and increase product lines.

Improvement in infrastructure and logistics needed

India is a large and highly fragmented country, with 29 states and 18 officials languages. A bulk of

its population, 66.1%, lives in rural retail potential We feel that private logistics companies offering

specialized services, refrigerated transport and ware house facilities across the country, along

with timely distribution of supplies to retail outlets will.


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LOCATION PLANNING

TYPES OF LOCATIONS

A) High Street Location:

a. Very busy with high customer traffic.


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b. Has an array of retail stores in small sizes. areas. The lack of adequate infrastructure makes it

virtually impossible to reach this virtually untapped market. Distribution, or lack of it, is a major

hindrance for retailers in India. The lack of quality infrastructure across the country and a non-

existent distribution sector results in inefficient logistics systems. Infrastructure is the weakest link

in Indias path to progress and there is urgent need to address issues plaguing this area

Urbanization is driving an increasing need to upgrade or create infrastructure facilities. An

indicator of the urgent need for highway development, for instance, is the fact that average daily

traffic volume on highways of 39,000 Passenger car units (PCUs) far exceeds the highway

capacity of 15,000 PCUs. Transport is a major concern, with a deteriorating railway system and a

limited highway network .In contrast to the global standards, the average load carried by trucks in

India around 7 tons_ is very low. However, the Indian Government is presently investing heavily in

the state highway system. This will help in an overall decline in logistics a cost which is currently

10-12% of total GDP. 10,000 MW of power needs to be added every year for next decade. Growth

in air passenger traffic, estimated at 20% p.a. for next two years, necessitates quadrupling of

airport capacities. Ports will witness 38% increase in tonnage in next -3 years and hence, port

infrastructure cannot be ignored.

c. Has stores that are generally found in clusters based on product categories.

d. High real-estate rentals.

Eg: Linking road in Bandra, Brigade Road in Bangalore


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In assessing the desirability of various available locations, note the positive and negative aspects

of each. Once again, analysis of trends is important. No location is static; it is either improving or

declining in such things as traffic flow and potential market area.

Store design and layout of the store's interior and exterior help determine the store's image

and character. In planning a new store or remodeling of an old one, there is plenty of room for

creativity. This part of the plan takes a lot of thought and consideration. Some bad decisions made

in the planning stage can be corrected, but mistakes made in the area of store design and layouts

are usually quite costly to correct.

Retailers can get specialized assistance from merchandise suppliers, local architects, and

store planning consultants. Display windows, fixtures, lighting, and storage are examples of areas

covered in this part of the retail business plan. Store layout involves such considerations as

allocation of space, customer traffic flow throughout the store, and maximizing profit per square

foot.

Planning a retail business has several advantages. A well thought out plan not only makes

the best of the present, but also anticipates future contingencies

Retailing is a challenging and dynamic field. The retailer draws on knowledge from such areas as

marketing, psychology, finance, accounting and management. From the field of management, we

learn that planning is one of the most important functions of the retailer. It is a function often

neglected under the pressure of day-to-day business activity, but it is so important that the

successful retailer must give it top priority.


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Retailers must decide how to make the best use of limited resources, such as people, funds, and

inventories. In order to use these resources in the most productive way, the retailer plans for the

future.

The most important planning occurs before a retail store even opens for business. Carefu

planning at this time can greatly enhance a store's chances of success. By gathering and

synthesizing the relevant information into a retail business plan, the retailer can make better

decisions. A workable retail business plan should be detailed, specific, and in writing. Indeed, a

major advantage of planning is that it forces the retailer to put ideas in writing.

Without planning, there is no predetermined course of action, and with out some predetermined

course of action, retailers do not know what to do, where to do, or why it should be done. They

waste their own energies and the resources of the store. Planning involves selecting objectives

and developing specific programs, policies, and procedures for achieving them.

Steps in formulating the retail business plan:

Setting objectives-

Planning begins with objectives. Stores can have many different objectives: survival, growth,

market share increase, high return on investment, and development of a good store image. Some


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objectives are more important than others. Profit, of course, is a primary objective for any retai

organization. Social concerns, however, must often be given consideration, too, if the store is to

be a "good citizen" of its business community

Objectives are difficult to apply to real situations and decisions if they are stated in vague

terms. An objective should establish a measurable goal - a yardstick to compare results with

efforts. Goals or objectives such as "to increase sales by 18 per cent this year" or "to break even

in the first year of operation" are examples of clearly defined and measurable objectives. They

must be supported with concrete plans that are specific for reaching these goals.

In forming the retail business plan, be as specific as possible. Remember to be customer-

oriented while setting objectives; it is one of the keys to successful retailing. Do not lose sight of

these objectives once they are formulated. Schedule quarterly, or if appropriate, monthly reviews

of progress. Revise and update your objectives periodically as well.

Financial planning:

Financial planning is an important part of the retail business plan. In fact, inadequate financial

planning is a frequent cause of store failure.Financial statistics on the type of business under

consideration is often available from trade associations. This information can be invaluable to the

manager in the initial planning stages. The retailer must make a sales forecast, calculate a break-


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even point, and estimate the capital requirements of the business. Asset planning, anothe

essential part of financial planning, involves inventory, accounts receivable, equipment and

fixtures, and cash. Often, these assets must be financed in part with funds obtained from outside

sources - banks, relatives, and so on.

Assessing available resources:

What are the strengths and weakness of the business? By assessing these factors, a retailer can

maximize the use of all available assets and can limit or eliminate the handicaps imposed by the

inherent weakness of these resources. Experienced, creative management is a strong resource

Sufficient working capital to meet the costs of doing business the first year is another.

At least as important as knowing the strengths of the business is analyzing its weaknesses.

Awareness of weak areas is the first step in overcoming them. Some weaknesses can be

overcome by hiring an outside expert in areas in which the retailer's knowledge and experience

are limited. Additional training and outside reading are other answers to many weak areas.

A retailer with general retailing experience but little knowledge of, say, the shoe business

could benefit greatly by hiring experienced shoe salespeople if she is planning to open a shoe

store. A retailer who is weak in the areas of financial planning and control needs to work closely

with a good accountant. Even during the planning stage, an accountant can be helpful in setting

up an appropriate bookkeeping system.


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Assessing market potential

What type of customer, or what segment of the market, does the store cater to? Is there enough

demand for the products to provide sufficient sales volume? These are some of the main

questions the retailer tries to answer by assessing market potential.

The key factors in market assessment are: first, the number of people living in the trade

area, and second, the buying power of these people. An extreme example of poor market

assessment would be trying to sell expensive fur coats in a poor mining town. Even the age

distribution of the population can affect a store's market potential.

Assessing the competitive situation

Competition is a good thing. It leads to better products and services at lower prices. It can inspire

a retailer to do a better job. However, numerous and / or aggressive competitors are costly to the

retailer in many ways. Price wars eat away profits. Too many similar stores serving too few

consumers cause the sales volume of each store to suffer.

For some types of stores, however, the best strategy can be to locate as close as possible to the

competition. Competing stores located in the same area may increase customer traffic. Some

cities, for example, have an area with many antique shops. Customers are drawn to the area

because of this convenience, and each store's traffic helps the other stores. Retailers should not


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be afraid of competition, but they should try to find a market where there is an unfilled demand for

the type of store they are planning.

Other assessments:

Local laws, tax rates, and the labour force are other areas that can affect the retail store. The

planner should investigate these uncontrollable environmental factors.

In this preliminary work, be aware of trends as well. For example, demand for the products

may look very promising in a certain area, but the population of this area might be declining. On

the other hand, an area with slightly lower market potential at present could be growing very fas

and provide a better long-run market for a particular store. These assessments are often difficul

to make, but the effort put into planning at this stage will pay off handsomely when store

operations get under way.

Location, store design and layout:

Once a geographical market has been chosen, the next step in formulating the retail business

plan is to select a site for the store. The importance of this decision is summarized by a favorite


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saying of retailers: "There are three vitally important things in retailing - location, location, and

location."

In assessing the desirability of various available locations, note the positive and negative

aspects of each. Once again, analysis of trends is important. No location is static; it is either

improving or declining in such things as traffic flow and potential market area.

Store design and layout of the store's interior and exterior help determine the store's image

and character. In planning a new store or remodeling of an old one, there is plenty of room for

creativity. This part of the plan takes a lot of thought and consideration. Some bad decisions made

in the planning stage can be corrected, but mistakes made in the area of store design and layou

are usually quite costly to correct.

Retailers can get specialized assistance from merchandise suppliers, local architects, and

store planning consultants. Display windows, fixtures, lighting, and storage are examples of areas

covered in this part of the retail business plan. Store layout involves such considerations as

allocation of space, customer traffic flow throughout the store, and maximizing profit per square

foot.

Organization and supervision


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Planning is an example of a management function. Other management functions performed by

the retailer are organizing, staffing, leading, and controlling.

By organizing, the retailer establishes relationships among people, materials, and other

resources to get a job done. Labour is organized and divided, and responsibility is delegated.

Staffing entails the recruitment and selection of employees. It is a vitally important function

because the employees of a store represent that store to the public. People can really be the

most important asset of a retail firm.

Every retailer is in a leadership position. Leadership means motivating employees to

achieve their maximum potential, while at the same time accomplishing the goals of the

organization. Because leadership means understanding people, it is one of the most creative and

challenging aspects of a retailer's job. The retailer's professionalism and attitudes set the tone fo

employees' attitudes and performance.

Controlling is the follow-up function of retail management. Actual performance is compared with

planned performance to spot and evaluate deviations.

Knowledge on buying


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For established retail operations, past sales data are very helpful in knowing how much to buy.

For a new retail business, these past data are not available. However, if a sales forecast and

desired inventory turnover rate have been determined, the beginning inventory figure can be

calculated. A balance between meeting customers' needs and high inventory carrying costs must

be found.

Knowing how much to buy goes hand in hand with knowing what to buy. Successful retailing

involves having the right merchandise in the right place, at the right time, and at the right price for

the customer.

Information from store records is a valuable aid in knowing what to buy. In the absence o

this information, an understanding of the target customer's shopping habits and motivations is

helpful. Information from suppliers can provide valuable input for the store buyer. Once the

inventory has been obtained, a unit control system must be set up to keep track of the stock.

Pricing

The goals of retail pricing are fourfold. First, the goods must sell at a satisfactory rate. Second

inventory costs and expenses must be covered. Third, a desired profit must be made, and fourth

prices should be fair to customers.

There are different pricing strategies for different types of stores, from the discount store to the

exclusive shop with quality merchandise and expanded customer services. Pricing in retailing is

both a science and an art.


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Retailers have special terms to describe various pricing operations, such as markup

markdown, and psychological pricing. Pricing is, naturally, closely related to financial planning.

Advertising and promotion

A store's location, layout, design, and product lines affect its overall image. Advertising is anothe

key element of the store's image in the minds of customers. Advertising can be thought of as

communicating with customers. The objective of an advertisement is to stimulate the customer to

want what the retailer has to offer, and to persuade the customer to take action to satisfy the

stimulated want or need.

Besides advertising, retailers send messages to customers through personal selling, sales

promotion, and packaging. Information channels beyond the direct control of the retailer are

publicity and word-of-mouth communication.

By giving careful consideration to defining who the advertisement is directed at (the "target

customer"), retailers can get more mileage out of advertising spend. The content of an

advertisement should focus on benefits desired by the target customers.

Sales promotion and display techniques are a major promotional tool. Sales promotions

can have various objectives, such as generation of immediate sales, attracting customers to the

store, and building goodwill.


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Window displays can serve to attract customers, to show customers the kind of

merchandise the store carries, and to project the image of the store. Because window displays

are so visible, they should be given the attention, care, and creative input they deserve. Interio

displays can be informative, can stimulate impulse buying, or can suggest uses of a product. In

addition, they can enhance the store's image. Other sales promotion strategies include specia

events, sales, coupons, and trading stamps.

Employee selection and training

The salesperson is a communicator: This person translates product features into benefits and

satisfactions for the customer. But most important, the salesperson is the representative of the

store to its customers.

The unique quality that distinguishes personal selling from other promotion activities is the

opportunity for feedback between customer and salesperson. Good advertising and promotion

can get people into a store. Good salespeople and good value keep them coming back.

The importance of employee selection and training cannot be overstated. Many retailers

are surprised to learn that monetary compensation, although important to employees, is usually

not their most important concern. Fairness, security, honesty, and opportunity are often more

important than pay.

Services


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An enlightened retailer realizes that the customer is the pivot around which all retailing activities

revolve. This attitude is expressed to the customer through shopping conveniences, services

employee attitudes, and fair values. As part of the retail business plan, decisions must be made

about the types of services to be offered. Services, and handling of credit policies and custome

complaints, deserve the ongoing attention of the manager.

Accounting and financial management

Information and control play an important role in the internal operation of a retail business. Good

records are the basis for guiding and controlling a retail business. They are the tools a manage

uses to control inventory, expenses, and ultimately, profits.

Financial statements, such as balance sheets and income statements, are summaries of

the financial strength and profitability of the retail business. They tell how well a business is doing

and give evidence about the quality of management decisions. Financial planning in the form of

budgets helps retailers to spot problems before they occur.

Information

One information tool in particular has been a real boon to retailers, and that is the computer. More

and better information is available to the retailer now than ever before, because of computers

This means that better and faster decisions can be made. Computers offer speed and accuracy of

information processing that is especially helpful in inventory management.


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Information is important for intelligent decision-making. Much of this information evolves

from basic store records or is provided by a computer system. Another source of information for

the retailer is marketing research, such as the market assessment. Most of the research involved

in formulating the retail business plan is in fact, marketing research. Research can also help

answer questions in such areas as pricing, promotion and distribution.


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Technology in Retail


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Over the years as the consumer demand increased and the retailers geared up to meet this

increase, technology evolved rapidly to support this growth. The hardware and software tools that

have now become almost essential for retailing can be into 3 broad categories.

Customer Interfacing Systems

Bar Coding and Scanners

Point of sale systems use scanners and bar coding to identify an item, use pre-stored data

to calculate the cost and generate the total bi

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