Introduction to retailing

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. Purchasers may be individuals or businesses. In commerce, a retailer buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells smaller quantities to the end-user. Retail establishments are often called shops or stores. Retailers are at the end of the supply chain. Manufacturing marketers see the process of retailing as a necessary part of their overall distribution strategy. It means all the activities involved in selling goods & services directly to final consumer for personal, non-business use.

Shops may be on residential streets, shopping streets with few or no houses, or in a shopping center or mall. Shopping streets may be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect customers from precipitation. Online retailing, also referred to as B2C type of ecommerce, and mail order are forms of nonshop retailing. Shopping generally refers to the act of buying products. Sometimes this is done to obtain necessities such as food and clothing; sometimes it is done as a recreational activity. Recreational shopping often involves window shopping (just looking, not buying) and browsing and does not always result in a purchase. Nature of Retailing Retailing includes all transactions in which the buyer intends to consume. A Retailer: Must derive more than 1/2 of their sales from the ultimate consumer of the product to be classified a retailer (less than 1/2, then they are a wholesaler).

Classification of Retail Stores According to 5 Criteria:

Form of Ownership Sole Proprietor (majority #s) Corporate Chains Contractual Chains Franchising

Types of Merchandise Offering Merchandise mix, breadth (variety); depth (selection in product)o

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Limited-line stores-----> Sporting Goods Stores etc. Single-line stores------> Specialty Retailers Foot Locker, Radio Shack...Category Killers...Borders Books, Toys R Us etc.

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General merchandise stores Department stores Macy's, Strawbridge & Clothier etc. Competition from discount stores and specialty have put pressure on department stores. Some department stores are cutting services, offering basement discounts (competing with discount stores), others are remodelling and opening designer departments and boutiques (competing with specialty stores). Others increased services, IE restaurants. Leased departments, leased to entrepreneurs. Supermarkets... Superfresh etc. Supermarkets are adding high turnover non-food items to offset low margins of food items. Added delis and hot pizza etc, in response to societal pressure (fast food). Also competition from convenience stores, 7-11 etc. Hypermarkets...success in europe, not in US 40% food, 60% general merchandise WalMart (222,000 Square

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feet, $2.5m per week) moving more toward supercenters. Supercenters...merchandise/groceries Wal Mart's projected high growth area of 1990s. Getting away from Hypermarkets. 80% of shoppers shop both sides of store. Use groceries to attract customers (traffice generaters), hoping they purchase high margin items. Discount Stores...Wal-Mart, KMart Developed in the 1950s when the post war supply for goods caught up with the demand for goods. Departmentalized, volume retailers. Off-price retailers... Buy manufacturers seconds, overruns, off seasons at a deep discount. TJ Maxx, Marshalls (317 stores, largest in the US). Discounted prices, fewer customer services. Inventory turned over 9- 12* per year (specialty retailer *3). Outlet malls-Reading VF outlet. Manufacturers that use Off-price retailing may alienate specialty retailers. Cannot advertise specific brands, but

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are advertising existence. Factory Outlets Dollar Discounts Offering more and more first run items, it is difficult for manufacturers to make enough "seconds" to fill these stores. Also starting to offer services, i.e. taking credit cards etc. It is not always the case anymore that you are guaranteed to get a better deal here than at a Department Store that has items on sale...especially if you consider the costs of accessing remote locations etc. Warehouse/Wholesale Club... Members only selling operations combine cash & carry wholesaling with discount retailing. Pioneered by Price Club, now bought out by Cost Co. Wholesale Club. Largest, WalMart's Sam's Club, $6.6 bn. KMart's PACE Variety Stores... Woolworths are transforming to specialty merchants, Champs Sporting Goods, Kids Mart, Lady Footlocker, Woolworth Express. Variety stores are becoming less popular.

Service Price Orientation (Level of Service) 1 Service oriented retailer strategy. 2 Slim Profit margins, discount retailers, offprice retailers, deep discounters.

Department Stores Specialty Stores

High

| Price | | | | |

Min -----------------------------------------------------------Max. Service | | | Superstores | Discount Stores | Factory Outlets | | Low |

Where retailing takes place In store vs. non store.

In Home Retailing, selling via personal contacts with customers in their own home. Avon, Electrolux, Amway, Encyclopedias. Either cold calling, or calling on a lead. Can demonstrate the product. Becoming less popular, moving more toward office party plan etc, since more dual earning families. Party plan-Tupperware Telemarketing, direct selling of goods and services by phone, generate sales leads, increase customer service, raise funds for non-profit organizations, gather marketing data. Long distance telephone companies.

Mail Order Retailing, sell by description. Compact discs. LL Bean. Eliminate personal selling and store operations. Appropriate for specialty products. Key is using customer databases to develop targeted catalogs that appeal to narrow target markets. Offers convenience (Place utility), no parking or long lines etc. Buy from anywhere, retailer has low rent, small sales staff and no shop lifting. Automated Vending, less than 2% of retail sales. Most impersonal way of retailing. Convenience Products. High repair costs, restocking cost. Pizza. ATMs, Purnell's basement, Restrooms, gas stations. Price higher than in stores, consumers pay for convenience. Personal products, no human contact. Television shopping, QVC and Home Shopping Network. Use has plateaued due to: o Limited Cable Channel capacity o Waiting for improvements in technology, i.e. interactivity.

Electronic Shopping Using computer online services Problems: Security of monetary transactions Who is the vendor? Prodigy Compuserve

Types of Retailers Specialty Store: Narrow Product line with a deep assortment, such as apparel stores, furniture stores, bookstores etc. Department Store: Several Product linestypical clothing, home furnishings and household goods Super market: Relatively large, low cost low margin, high volume, self service operation designed to serve total needs for food, laundry and household maintenance products Convenience Store: Relatively small store located near residential area, open long hours seven days a week and carrying a limited line of high turnover convenience products at slightly higher prices Discount store: Standard merchandise sold at lower prices with lower margins and higher volumes

Off-Price Retailer: Merchandise bought at less than regular wholesale price and sold at less than retail; often left over goods, overruns and irregulars obtained at lower prices. Retailers can position themselves as offering one of four levels of service: Self-service: It is corner stone of all discount operations. Self selection: Customers find their own goods, although they can ask for assistance Limited service: These retailers carry more shopping goods and customers need more information and assistance Full Service: Sales people are ready to assist in every phase of the locate compare-select process. Bloomingdales Wal-Mart Tiffany Kinney shoe Breadth of Product line 4. By combining these different service levels with different assortment breadths, we can distinguish the four broad positioning strategies available to retailers a. Bloomingdales: Stores that feature a broad product assortment and high value added Pay high attention to store design, product quality, service and image. Profit margin is high.

b. Tiffany: Narrow product assortment but high value added. Cultivate an exclusive image and tend to operate on high margin and low volume. c. Sun glass hut: narrow prod assortment and low value added, such stores keep their costs and prices low by designing similar stores and centralizing buying, merchandising and distribution d. Wall Mart: Broad product line but low value added. Focus on keeping prices low. High volume

5. Non store Retailing falls into 4 major categories: a. Direct selling b. Direct marketing c. Automatic vending d. Buying services is a store less retailer serving a specific clientele usually employees of large organizations, who are entitled to buy from a list of retailers who have agreed to give them discounts in return for memberships.

6. Major types of corporate retailing a. Corporate chain stores: Two or more outlets commonly owned and controlled, employing central buying and merchandising and selling similar lines of merchandise. b. Voluntary chains: A wholesaler sponsored group of independent retailers engaged in bulk buying and common merchandising c. Retailer cooperatives: Independent retailers who set up a central buying organization and conduct joint promotion effort d. Franchises

e. Merchandising conglomerates: A free form corporation that combines several diversified retailing lines and forms under central ownership along with some integration of distribution and management.

COMPANY PROFILE

RELIANCE RETAIL LIMITED Reliance Retail is the retail chain division of Reliance Industries of India which is headed by Mukesh Ambani. Reliance Industries Chairman Mukesh Ambani has unveiled a Rs. 25,000crore ($5.60 billion) retail plan for the company on June 26, 2006. Mukesh Ambani has called this

Starting of reliance retail as an idea which has the potential to revolutionize the Indian socioeconomic framework. He said "Conceptually, Reliance is creating a virtuous circle of prosperity by bringing farmers, small shopkeepers and consumers in a win- win partnership. "A new company, Reliance Retail Ltd. (RRL) will spearhead this revolution. Reliance Industries will have a 100 percent stake in RRL, save for employee stock options".

THE RELIANCE EMPIRE Reliance being the all encompassing company has entered into all the sectors, retail being their latest.

Reliance Industries Limited

Chairman and Managing Director Mukesh Ambani Market Capitalization INR 39,609,150,020 (Sept, 2006) Total Shares Outstanding 22,405,900 (Sept, 2006) Closely Held Shares 11,365,943 Sales INR 10,512,963,000

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According to the company website "1 out of every 4 investors in India is a Reliance shareholder. RIL is ranked at 342 in the 2006 Fortune Global 500 list among the worlds largest corporations.

The Reliance Industries

Product

End uses

Business Brand Petroleum Crude oil Refining,power,pet (Exploration and Natural rochemicals and gas other industries. & production) Refining LPG, Propylene, Gasoline, Jet/Aviation turbine fuel, High Speed Diesel, Superior kerosene oil Domestic and industrial fuel Feed stock for petrochemicals,Tra snsport fuel, Aviation fuel, Domestic Fuel, Transport Fuel, Feedstock for fertilizers, feed stock for power plants and cement plants

Polymers Repol Relene

Polypropyle ne High Density Polyethylen e Linear low density polyethylen e Poly Vinyl Chloride

Reclair Reon

Relpipe

Poly-Olefin pipes Linear Alkyl Benzene Detergents

Chemicals Relab

Acrylic Recrylon Recrylic

Wet spun Acrylic fibre Dry spun Acrylic fibre

Fibre Paraxylene Intermediat Mono es Ethylene

Texltiles Vimal

Suitings, shirtings, Dress material, Sarees

Fabrics

Harmony Furnishing Fabrics, Day curtains,

Furnishing, home textiles

Automotive RueRel upholstery Fabrics

V2

Suitings

Fabrics

Reance

Ready to stitch take away fabric

Suits, shirts and trousers.

Polyester Recron

Readymade garments

Staple fibre, filament yarn

Recron cotluk

Cotton luk,cotton feel yarn

Recron Dyefast

Recron superblack

Easy dyeable yarn

Recron superdye

Dope dyed staple fibre

Cationic Dyeable staple fibre

Reliance recorded a profit of 8.9% on assets first among the 38 chemical companies in Asia.

In terms of market cap, Reliance Industries ranks third among chemical companies in Asia, with a market cap of $6087.2 million as on October 19, 2001.

Reliance's total sales, at $6232 million, ranked eighth among the 38 Asian chemical

companies. Reliance's total sales have gone up substantially from 1996 when the company recorded $2485 million.

Company with the highest refining capacity in India-60mpta Reliance SEZ At Jhajjar, Haryana (Area covered 25, 000 acres) (Nature of SEZ-Multi product) Reliance SEZ in Raigad (Area covered- 10,000 hectares)

Reliance Fresh is the convenience store format which forms part of the retail business of of Reliance Industries of India which is headed by Mukesh Ambani. Reliance plans to invest in excess of Rs 25000 crores in the next 4 years in their retail division. The company already has in excess of 560 reliance fresh outlets across the country. These stores sell

fresh fruits and vegetables, staples, groceries, fresh juice bars and dairy products. A typical Reliance Fresh store is approximately 3000-4000 square. feet and caters to a catchment area of 1-2 km. History Post launch, in a dramatic shift in its positioning and mainly due to the circumstances prevaling in UP, West Bengal and Orissa, it was mentioned recently in news Dailies that, Reliance Retail is moving out of stocking fruits and vegetables. Reliance Retail has decided to minimise its exposure in the fruit and vegetable business and position Reliance Fresh as a pure play super market focusing on categories like food, FMCG, home, consumer durables, IT and wellness , with food accounting for the bulk of the business. The company may not stock fruit and vegetables in some states, Orissa being one of them. Though Reliance Fresh is not exiting the fruit and vegetable business altogether, it has decided not to compete with local vendors partly due to political reasons, and partly due to its inability to create a robust

supply chain. This is quite different from what the firm had originally planned. When the first Reliance Fresh store opened in Hyderabad last October, not only did the company said the stores main focus would be fresh produce like fruits and vegetables at a much lower price, but also spoke at length about its farm-to-fork theory. The idea the company spoke about was to source from farmers and sell directly to the consumer removing middlemen out of the way. Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz, Reliance Footprint, Reliance Wellness, Reliance Jewels, Reliance Timeout and Reliance Super are various formats that Reliance has rolled out. In addition, Reliance Retail has entered into an alliance with Apple for setting up a chain of Apple Specialty Stores branded as iStore, starting with Bangalore.

BACKGROUND

We can see many examples of businesses where ,first we grow and then think of expanding but Reliance is quite different. Reliance has developed such huge amount of resources and capital over the years that whenever it steps into any segment it is not required to wait for growing signal, thats why it always thinks of expanding without any bounderies. Reliance retail is next Step by RIL which will be a pan India project. Reliance Fresh is the retail chain division of Reliance Industries of India which is headed by 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 crores 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 RILs 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 nonvegetarian 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. The company is planning on opening new stores with store-size varying from 1,500 sq ft to 3,000 sq ft, which will stock fresh fruits and vegetables, staples, FMCG products and dairy products. Each store is said to be within a radius of 1-2 km of each other, in relation to the concept of a neighbour store. However, this is only the entry roll-out that the company

has planned. Bangalore is said to have 40 stores in all by the end of the year. In a dramatic change due circumstances prevaling in UP, West Bengal and Orissa, It was mentioned recently in News Dailies that, Reliance Retail is moving out stocking. Reliance Retail has decided to minimise its exposure in the fruit and vegetable business and position Reliance Fresh as a pure play super market focusing on categories like food, FMCG, home, consumer durables, IT, wellness and auto accessories, with food accounting for the bulk of the business.

The company may not stock fruit and vegetables in some states, Orissa being one of them. Though Reliance Fresh is not exiting the fruit and vegetable business altogether, it has decided not to compete with local vendors partly due to political reasons, and partly due to its inability to create a robust supply chain. This is quite different from what the firm had originally planned. When the first

Reliance Fresh store opened in Hyderabad last October, not only did the company said the stores main focus would be fresh produce like fruits and vegetables at a much lower price, but also spoke at length about its farm-tofork theory. The idea the company spoke about was to source from farmers and sell directly to the consumer removing middlemen out of the way. Reliance may exit some businesses if the business does not increases by March 2008.

A GLANCE AT EXISTING RELIANCE

FACILITIES :

MORE THAN 200 STORES IN 12 CITIES.

PROCESSING CENTERS IN PUNJAB, DELHI, RAJASTHAN, M.P, GUJARAT, JHARKHAND, ORISSA, KERALA, TAMILNADU, BENGAL, ANDHRA PRADESH, KARNATAKA.

INVENTORY : FRESH FRUITS AND VEGETABLES, STAPLES, GROCERIES, FMCGs, MILK ETC.

TRANSPORTATION : RELOGISTICS , 2000 CRORE RELIANCE COMPANY.. . COLD TRUCKS. TATA 407, TATA 409, TATA 909 AND USE THIRD PARTY LOGISTICS ALSO

INFORMATION SOFTWARES.

:

ADVANCED STORES WITH UPGRADED

SOURCING MENTIONED

:

NEARBY VILLAGES OF ABOVE

PROCESSING CENTERS + FEW INHOUSE LABELS + KNOWN SUPPLIERS.

PRICING GIVEN

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PROCUREMENT FROM FARMERS HAS

RELIANCE COMPETITIVE EDGE OVER THE OTHER RETAILERS.

Reliance plans to invest in excess of Rs 25000 crores in the next 4 years in their retail

division. The company already has in excess of 560 reliance fresh outlets across the country. These stores sell fresh fruits and vegetables, staples, groceries, fresh juice bars and dairy products. A typical Reliance Fresh store is approximately 3000-4000 square. feet and caters to a catchment area of 1-2 km. Post launch, in a dramatic shift in its positioning and mainly due to the circumstances prevaling in UP, West Bengal and Orissa, it was mentioned recently in news Dailies that, Reliance Retail is moving out of stocking fruits and vegetables. Reliance Retail has decided to minimise its exposure in the fruit and vegetable business and position Reliance Fresh as a pure play super market focusing on categories like food, FMCG, home, consumer durables, IT and wellness , with food accounting for the bulk of the business. The company may not stock fruit and vegetables in some states, Orissa being one of them. Though Reliance Fresh is not exiting the fruit and vegetable business altogether, it has decided not to compete with local vendors partly due to political reasons, and

partly due to its inability to create a robust supply chain. This is quite different from what the firm had originally planned. When the first Reliance Fresh store opened in Hyderabad last October, not only did the company said the stores main focus would be fresh produce like fruits and vegetables at a much lower price, but also spoke at length about its farm-to-fork theory. The idea the company spoke about was to source from farmers and sell directly to the consumer removing middlemen out of the way. Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz, Reliance Footprint, Reliance Wellness, Reliance Jewels, Reliance Timeout and Reliance Super are various formats that Reliance has rolled out. In addition, Reliance Retail has entered into an alliance with Apple for setting up a chain of Apple Specialty Stores branded as iStore, starting with Bangalore. Indian Retail Industry Introduction Indias GDP growth of 9.4 per cent in 2006-07 is the highest posted for over 18 years, reflecting the booming economy of the country. Growing in tandem with the economy

is the Indian retail sector. The sector is on a high growth trajectory and is expected to grow by more than 27 per cent over the next 5 to 6 years. Retail is one of Indias largest industries, contributing to about 10 per cent of the GDP and providing employment to 8 per cent of the nations workforce. Indian retail business promises to be one of the core sectors of the Indian economy, with organized retail sector estimated to grow by 400 per cent of its current size by 2007-08. The growth and potential of the sector is being widely acknowledged both in the domestic as well as international forums. India topped AT Kearneys Global Retail Development Index 2007 for the third consecutive year, retaining its position in the global market as the most preferred retail destination amongst emerging markets. For the fifth time, India also topped the Global Consumer Confidence Index June 2007 conducted twice a year by The Nielsen Company. Indians were judged the worlds most optimistic consumers, with large sections of the population considering now a good time to

spend. Indian consumers were also found to be bullish about their personal finances over the next 12 months. The economics of Indian consumerism is buoyant, with India ranking as the fourth largest economy in terms of Purchasing Power Parity (PPP), next only to United States, Japan and China. India is expected to outpace Japan by the year 2010 to become worlds third largest economy. With 54 per cent of the Indians aged below 25, the young Indian consumer is buying big to look good and feel good. The India Retail Industry is the largest among all the industries, accounting for over 10 per cent of the countrys GDP and around 8 per cent of the employment. The Retail Industry in India has come forth as one of the most dynamic and fast paced industries with several players entering the market. But all of them have not yet tasted success because of the heavy initial investments that are required to break even with other companies and compete with them. The India Retail Industry is gradually inching its way towards becoming the next boom industry.

The total concept and idea of shopping has undergone an attention drawing change in terms of format and consumer buying behaviour, ushering in a revolution in shopping in India. Modern retailing has entered into the Retail market in India as is observed in the form of bustling shopping centres, multi-storied malls and the huge complexes that offer shopping, entertainment and food all under one roof. A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing workingwomen population and emerging opportunities in the services sector are going to be the key factors in the growth of the organized Retail sector in India. The growth pattern in organized retailing and in the consumption made by the Indian population will follow a rising graph helping the newer businessmen to enter the India Retail Industry. In India the vast middle class and its almost untapped retail industry are the key attractive forces for global retail giants wanting to enter into newer markets, which in turn will help the

India Retail Industry to grow faster. Indian retail is expected to grow 25 per cent annually. Modern retail in India could be worth US$ 175-200 billion by 2016. The Food Retail Industry in India dominates the shopping basket. The Mobile phone Retail Industry in India is already a US$ 16.7 billion business, growing at over 20 per cent per year. The future of the India Retail Industry looks promising with the growing of the market, with the government policies becoming more favourable and the emerging technologies facilitating operations. Indian Retail Scene India is the country having the most unorganized retail market. Traditionally it is a familys livelihood, with their shop in the front and house at the back, while they run the retail business. More than 99% retailers function in less than 500 square feet of shopping space. Global retail consultants KSA Technopak have estimated that organized retailing in India is expected to touch Rs 35,000 crore in the year 2005-06. The Indian retail sector is estimated at around Rs 900,000 crore, of which the organized sector accounts for a mere 2 per cent indicating a

huge potential market opportunity that is lying in the waiting for the consumer-savvy organized retailer. Purchasing power of Indian urban consumer is growing and branded merchandise in categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and even Jewellery, are slowly becoming lifestyle products that are widely accepted by the urban Indian consumer. Indian retailers need to advantage of this growth and aiming to grow, diversify and introduce new formats have to pay more attention to the brand building process. The emphasis here is on retail as a brand rather than retailers selling brands. The focus should be on branding the retail business itself. In their preparation to face fierce competitive pressure, Indian retailers must come to recognize the value of building their own stores as brands to reinforce their marketing positioning, to communicate quality as well as value for money. Sustainable competitive advantage will be dependent on translating core values combining products, image and reputation into a coherent retail brand strategy.

There is no doubt that the Indian retail scene is booming. A number of large corporate houses Tatas, Rahejas, Piramals, Goenkas have already made their foray into this arena, with beauty and health stores, supermarkets, self-service music stores, newage book stores, every-day-low-price stores, computers and peripherals stores, office equipment stores and home/building construction stores. Today the organized players have attacked every retail category. The Indian retail scene has witnessed too many players in too short a time, crowding several categories without looking at their core competencies, or having a well thought out branding strategy. STRATEGIES, TRENDS AND OPPORTUNITIES Retailing in India is gradually inching its way toward becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behaviour, ushering in a revolution in shopping in India. Modern retail has entered India as seen in sprawling shopping centres, multi-storied malls and huge complexes offer shopping, entertainment and food all under

one roof. The Indian retailing sector is at an inflexion point where the growth of organized retailing and growth in the consumption by the Indian population is going to take a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing workingwomen population and emerging opportunities in the services sector are going to be the key growth drivers of the organized retail sector in India. GROWTH OF RETAIL SECTOR IN INDIA Retail and real estate are the two booming sectors of India in the present times. And if industry experts are to be believed, the prospects of both the sectors are mutually dependent on each other. Retail, one of Indias largest industries, has presently emerged as one of the most dynamic and fast paced industries of our times with several players entering the market. Accounting for over 10 per cent of the countrys GDP and around eight per cent of the employment

retailing in India is gradually inching its way toward becoming the next boom industry. As the contemporary retail sector in India is reflected in sprawling shopping centers, multiplex- malls and huge complexes offer shopping, entertainment and food all under one roof, the concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. This has also contributed to largescale investments in the real estate sector with major national and global players investing in developing the infrastructure and construction of the retailing business. The trends that are driving the growth of the retail sector in India are Low share of organized retailing Falling real estate prices Increase in disposable income and customer aspiration Increase in expenditure for luxury items (CHART)

Another credible factor in the prospects of the retail sector in India is the increase in the young working population. In India, hefty pay packets, nuclear families in urban areas, along with increasing working-women population and emerging opportunities in the services sector. These key factors have been the growth drivers of the organized retail sector in India which now boast of retailing almost all the preferences of life - Apparel & Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home & Office Products, Travel and Leisure and many more. With this the retail sector in India is witnessing rejuvenation as traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. The retailing configuration in India is fast developing as shopping malls are increasingly becoming familiar in large cities. When it comes to development of retail space specially the malls, the Tier II cities are no longer behind in the race. If development plans till 2007 is studied it shows the projection of 220 shopping malls, with 139

malls in metros and the remaining 81 in the Tier II cities. The government of states like Delhi and National Capital Region (NCR) are very upbeat about permitting the use of land for commercial development thus increasing the availability of land for retail space; thus making NCR render to 50% of the malls in India.

India is being seen as a potential goldmine for retail investors from over the world and latest research has rated India as the top destination for retailers for an attractive emerging retail market. Indias vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets. Even though India has well over 5 million retail outlets, the country sorely lacks anything that can resemble a retailing industry in the modern sense of the term. This presents international retailing specialists with a great opportunity. The organized retail sector is expected to

grow stronger than GDP growth in the next five years driven by changing lifestyles, burgeoning income and favourable demographic outline. INDUSTRY EVOLUTION Traditionally retailing in India can be traced to the emergence of the neighborhood Kirana stores catering to the convenience of the consumers Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission 1980s experienced slow change as India began to open up economy. Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw the emergence of retail chains Later Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers. For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music; Crossword and Fountainhead in books.

Post 1995 onwards saw an emergence of shopping centers Mainly in urban areas, with facilities like car parking Targeted to provide a complete destination experience for all segments of society Emergence of hyper and super markets trying to provide customer with 3 Vs - Value, Variety and Volume Expanding target consumer segment: The Sachet revolution - example of reaching to the bottom of the pyramid. At year end of 2000 the size of the Indian organized retail industry is estimated at Rs. 13,000 crore RETAILING FORMAT IN INDIA Malls: The largest form of organized retailing today. Located mainly in metro cities, in proximity to urban outskirts, they range 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, 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 sectors. 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 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 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. 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 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. INDIAS NUMBER OF DOMESTIC GROCERY CHAINS AND EARLY FOREIGN ENTRANTS

Retailing in India is evolving rapidly, with consumer spending growing by

unprecedented rates and with increasing number of global players investing in this sector. Organised retail in India is undergoing a metamorphosis and is expected to scale up to meet global standards over the next five years. Indias retail market has experienced enormous growth over the past decade, more than doubling in size to US$ 311.7 billion in 2005-06. The market was estimated at US$ 1.1 trillion (in PPP terms) in 2005-06. The most significant period of growth for the sector was between years 2000 and 2006, when the sector revenues increased by about 93.5 per cent translating to an average annual growth of 13.3 per cent. The sectors growth was partly a reflection of the impressive Indian economic growth and overall rise in income levels of consumers. Even the introduction of Value Added Tax (VAT) in April 2005 has not severely impacted consumer demand for retail goods. Greater exposure to western products and lifestyles has helped drive consumerism. The sector also benefited considerably by the rising popularity of satellite television since the early 1990s, which provided a highly

effective mass marketing route, reaching out to the large Indian consumer base. Traditional and modern Retailing Traditional retailing continues to be the backbone of the Indian retail industry, with traditional/unorganized retailing contributing to over 95 per cent of total retail revenues. The quintessential mom-and-pop retailing outlets or the cornerstore formats constitute a major part of Indian retail store formats. Over 12 million small and medium retail outlets exist in India, the highest in any country. More than 80 per cent of these are run as small family businesses. Prevalence of traditional retailing is highly pronounced in small towns and cities with primary presence of neighborhood kirana stores, push-cart vendors, melas and mandis. Organized formats are only in the initial stages of adoption in these regions. Leading retail players in the industry are beginning to explore these markets and the rural consumers are slowly beginning to embrace the newer organized retail formats. Modern/Organized retailing is growing at an aggressive pace in urban India, fuelled by

bourgeoning economic activity. Organized retail revenues are expected to increase from an estimated US$ 12.9 billion per annum in 2005-06 to more than US$ 43 billion by 200910. The sector is predicted to grow by 400 per cent, in value terms, by 2007-08. A large number of domestic and international players are setting up base and expanding their business with newer organized retail formats and intense competition driving innovation in formats. Growth across segments Retail sector in India is primarily categorized by the type of products retailed, as opposed to the different retail formats in operation. The Food and Beverages vertical accounts for the largest share of revenues at 74 per cent of the total retail market. This category has the highest consumer demand across all income levels and various retail formats. The Indian consumer behavior of preferring proximity to retail formats is highly pronounced in this sector, with food, grocery and allied products largely sourced from the local stores or push-cart vendors.

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

Organized retail in India Organized retail clocked revenues of US$ 12,927 million, compared to total retail sales estimated at US$ 311,731 million in 2005-06. The apparel industry contributed to the largest share of the organized retail pie, with revenues of US$ 4,756 million, owing to the rapidly rising number of malls and

introduction of several domestic and international apparel brands in the country. The Food and Beverages segment recorded the highest growth over 2004-05, with the proliferation of Organized retail clocked revenues of US$ 12,927 million, compared to total retail sales estimated at US$ 311,731 million in 2005-06. The apparel industry contributed to the largest share of the organized retail pie, with revenues of US$ 4,756 million, owing to the rapidly rising number of malls and introduction of several domestic and international apparel brands in the country. The Food and Beverages segment recorded the highest growth over 2004-05, with the proliferation of supermarkets, hypermarkets and the entry of major players like Reliance Fresh (promoted by Reliance Retail Ltd). This segment is poised to gain traction, with several new players planning their entry and the existing players expanding their business in this segment at a rapid pace. The Home Dcor segment followed suit growing at 18 per cent, with a boom in the real estate and housing sector. Penetration of organized retail was at 4.15 per cent in 200506, an increase from the 3 per cent estimated

for 2004-05, and is projected to increase to 9.52 per cent in 2009-10, with revenues from organized retail expected to touch US$ 43,829 million in 200910. Footwear segment recorded the highest penetration of 32.84 per cent, primarily due to the presence of well established players like Bata, Liberty and Paragon. These players have been in the market for over three decades, have good brand recall and a well established distribution network penetrating both rural and urban areas. Consumer durables segment and the books and music segment also witnessed continued growth. Entry of players like Crossword and Music world has given the segment strong impetus. Apparel is one of the fastest growing verticals, with the highest number of domestic and foreign brands mushrooming in the market, and increasing consumer willingness to pay for brand and quality of products. RECENT TRENDS

Retailing in India is witnessing a huge revamping exercise as can be seen in the graph India is rated the fifth most attractive emerging retail market: a potential goldmine. Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3 percent or US$ 6.4 billion As per a report by KPMG the annual growth of department stores is estimated at 24% Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney. Multiple drivers leading to a consumption boom: Favorable demographics Growth in income Increasing population of women Raising aspirations: Value added goods sales Food and apparel retailing key drivers of growth Organized retailing in India has been largely an urban Phenomenon with affluent classes and growing number of double-income households.

More successful in cities in the south and west of India. Reasons range from differences in consumer buying behavior to cost of real estate and taxation laws. Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market across most categories of consumption ITC is experimenting with retailing through its e-Choupal and Choupal Sagar rural hypermarkets. HLL is using its Project Shakti initiative leveraging women self-help groups to explore the rural market. Mahamaza is leveraging technology and network marketing concepts to act as an aggregator and serve the rural markets. IT is a tool that has been used by retailers ranging from Amazon.com to eBay to radically change buying behavior across the globe. E-tailing slowly making its presence felt.

Retail sales India CHALLENGES & OPPORTUNITIES Retailing has seen such a transformation over the past decade that its very definition has undergone a sea change. No longer can a manufacturer rely on sales to take place by ensuring mere availability of his product. Today, retailing is about so much more than mere merchandising. Its about casting customers in a story, reflecting their desires and aspirations, and forging long-lasting relationships. As the Indian consumer evolves they expect more and more at each and every time when they steps into a store. Retail today has changed from selling a product or a service to selling a hope, an aspiration and

above all an experience that a consumer would like to repeat. For manufacturers and service providers the emerging opportunities in urban markets seem to lie in capturing and delivering better value to the customers through retail. For instance, in Chennai CavinKares LimeLite, Maricos Kaya Skin Clinic and Apollo Hospitals Apollo Pharmacies are examples, to name a few, where manufacturers/service providers combine their own manufactured products and services with those of others to generate value hitherto unknown. The last mile connect seems to be increasingly lively and experiential. Also, manufacturers and service providers face an exploding rural market yet only marginally tapped due to difficulties in rural retailing. Only innovative concepts and models may survive the test of time and investments. However, manufacturers and service providers will also increasingly face a host of specialist retailers, who are characterized by use of modern management techniques, backed with seemingly unlimited financial resources. Organized retail appears inevitable.

Retailing in India is currently estimated to be a US$ 200 billion industry, of which organized retailing makes up a paltry 3 percent or US$ 6.4 billion. By 2010, organized retail is projected to reach US$ 23 billion. For retail industry in India, things have never looked better and brighter. Challenges to the manufacturers and service providers would abound when market power shifts to organized retail. The retail sector has played a phenomenal role throughout the world in increasing productivity of consumer goods and services. It is also the second largest industry in US in terms of numbers of employees and establishments. There is no denying the fact that most of the developed economies are very much relying on their retail sector as a locomotive of growth. The India Retail Industry is the largest among all the industries, accounting for over 10 per cent of the countrys GDP and around 8 per cent of the employment. The Retail Industry in India has come forth as one of the most dynamic and fast paced industries with several players

entering the market. But all of them have not yet tasted success because of the heavy initial investments that are required to break even with other companies and compete with them. The India Retail Industry is gradually inching its way towards becoming the next boom industry. Key Players in the Indian Retail Sector: The untapped scope of retailing has attracted superstores like Wal-Mart into India, leaving behind the kiranas that served us for years. Such companies are basically IT based. The other important participants in the Indian Retail sector are Bata, Big Bazaar, Pantaloons, Archies, Cafe Coffee Day, landmark, Khadims, Crossword, to name a few. Retailing in India: a forecast: Future of organized retail in India looks bright. According to recent researches it is projected to grow at a rate of about 37% in 2007 and at a rate of 42% in 2008. It will capture a share of 10% of the total retailing by the end of 2010. According to the Union Minister of Commerce

& Industry, Shri Kamal Nath, the organized retail sector is expected to grow to a value of Rs. 2,00,000 crore (US$45 billion) and may generate 10 to15 million jobs in next 5 years. This can happen in two forms- 2.5 million of these people may be associated directly with retailing and the rest 10 million people may be gainfully employed in related sectors that will be pulled up through the strong forward and backward linkage effects. However to compete in this sector one needs to have up-to-date market information for planning and decision making. The second most important requirement is to manage costs widely in order to earn at least normal profits in face of stiff competition. Policy and regulatory environment The Government is progressively undertaking reforms and liberalising the retail sector; thereby attracting significant foreign investments. The regulatory and supervisory policies are being reshaped and reoriented to meet the new challenges and opportunities in this sector. To facilitate easier flow of Foreign Direct Investments (FDI) inflow, instead of having

to seek Foreign Investment Promotion Board (FIPB) approval, FDI up to 100 per cent is allowed under the automatic route for cash and carry wholesale trading and export trading. FDI up to 51 per cent is allowed, with prior Government approval for retail trade in Single Brand products with the objective of attracting investment, technology and global best practices and catering to the demand for such branded goods in India. This implies that foreign companies can now sell goods sold globally under a single brand, such as in the case of Reebok, Nokia and Adidas. However, retailing of multiple brands, even if the goods are produced by the same manufacturer, is presently not allowed. Relaxation of FDI restrictions are being vigorously pursued by the business and trade coalitions and are expected to fall in place over the next 3-5 years. The most common channels for entry of foreign retailers are the strategic licence agreements, franchising, distribution, manufacturing, joint ventures and cash and carry wholesale trading. Strategic licence agreements

This route involves the foreign company entering into a licensing agreement with a domestic retailer or partnering with Indian promoter owned companies in the Middle East (UAE) or South East Asian countries (Singapore, Malaysia, Thailand, Indonesia). Franchising This is a widely taken entry route, with many international brands setting up shop via this provision. The franchising routes operable in India are: Unit franchisee: Franchisee is granted rights to operate a single business unit Multiple franchisee: Individual unit franchises are given to multiple outlets, a route primarily used by domestic brands Master franchisee: Rights are granted for an entire territory to the master franchisee and the master franchisee can in turn grant unit and multiple franchisees in that territory Regional franchisee: This route is similar to that of the master franchisee, but applicable on a larger scale The master and regional franchisee routes are the most preferred and

the oft-adopted routes of entry into India by the international retailers. Cash-and-carry wholesale trading 100 per cent FDI is allowed in wholesale trading which involves building a large distribution infrastructure to assist local retailers and manufacturers. Joint ventures International firms can enter into agreements with domestic players, and set up base in India. The share of the multinational is restricted to 49 per cent in this route. Manufacturing International retailers can set-up manufacturing units for their products in India. Entry through this route entails the company the rights to retail the products in India through individual retailing outlets. Distribution An international company can set up distribution offices in India and supply products to the local retailers. Franchisee outlets can also be set up in this route. The labour laws in India are under the scanner for higher liberalisation, with the Government permitting flexibilities in the rules in emerging

retail hubs like Bangalore and Hyderabad. Instituted laws like restriction on working hours, mandatory closure of the store once a week are being modified to suit the modern retailing demands and necessities, without adversely impacting the labour benefits. Efforts are also being undertaken by the Government to remove impediments being posed by licensing and clearance mechanisms in India; with the aim of introducing a singlewindow clearance mechanism. This would reduce the entry and establishment timelines for new players in the market and facilitate easy procedures in issuance of necessary approvals. The Government is expected to take a calibrated approach in land and rent reforms to improve the real estate regulatory environment and facilitate easy access to retail space for international investors. The Government is releasing large tracts of unused land for retail development in the Mumbai and NCR regions. This is soon to be followed by other state governments, with the Governments benefiting from the access to impressive revenues from land.

Key Trends and drivers Maturing Metros National Capital Region (NCR) NCR comprises of National Capital Territory (NCT), Faridabad and Gurgaon of Haryana and Noida and Ghaziabad of Uttar Pradesh. NCR contributed to US$ 16,342 million of retail revenues in 2005-06, and is projected to open doors to markets worth US$ 19,522 million by 2010-11. Delhi, the fashion capital of India and home to the highest number of rich and super-rich households, contributes US$ 12,683 million to the retail revenues. The total number of households in Delhi stood at 2.8 million in 2005-06, with more than 7,000 households belonging to the rich and superrich category, with incomes higher than US$ 243,902 per annum. This is the highest for any city across the country. Mumbai A potpourri of consumers, this city contributes to US$ 10,195 million of total retail revenue. The hub of Indian cinema and home to diverse income categories; the middle class and the

rich account for 47 per cent and 30 per cent of retail revenues of the city. Each category of population has a significant share in the retail pie, with the city offering opportunities for a spectrum of retail formats, from value segment to the lifestyle segment. Mumbai is home to a large percentage of the rich and super-rich households, with businessmen, politicians and bollywood personalities, having their base in the city. This city is projected to offer a retail potential of US$ 14,927 million by 2010-11. The regions of NCR and Mumbai dominate the organised retail scenario in India. The combined contribution of these metros is estimated to reach 40 per cent by 2007-08. These cities which are also referred to as the Maturing Metros, have been projected to achieve worlds 2nd and 3rd largest city status by 2015 and have the highest number of malls and modern retail format stores in operation and many more in the pipeline. Most pan-India retailers have multiple retail outlets present in these cities. These cities also act as launch pads for the new entrants. Lastly, these maturing metros are the hub of the luxury-retailing in India.

Metros on the Growth Path Metros of Bangalore, Hyderabad, Chennai and Kolkatta are growing at an exceptional rate, with the retail buzz in these cities becoming more pronounced by the day. These cities contributed to US$ 15,511 million worth retail revenues in 2005-06, projected to touch US$ 25,610 million by 2010-11. With the growth in the IT/ITeS sector and other sunrise sectors like biotechnology, hospitality etc. concentrated in these cities, the metros have experienced exponential growth over the past few years, and are expected to demonstrate robust economic performance in the coming years. Bangalore and Hyderabad have low penetration of underprivileged households, with the consuming middle class forming the largest share of population. Luxury retailing has found entry and tremendous response in these markets, with increasing number of rich and super rich households in these cities. The middle class households contribute to almost half the retail activity in these metros, with lifestyle formats beginning to mushroom. These cities are expected to witness a radical

transition in the migration of households belonging to the lower income strata to the higher income category, owing to the success of the technology sector and other sunrise sectors such as biotechnology and hospitality industries. These cities have considerable latent demand for branded products and offer suitable opportunities for a variety of retail offerings. Most of the retail sector giants have a footprint in these cities, with aggressive future plans for expansion. Metros-in-the-making The emerging cities of Ahmedabad, Pune, Kanpur, Nagpur, Surat, Ludhiana, Coimbatore, Chandigarh, Lucknow, Kochi, Jaipur, Vadodara, Vizag, Indore, Vijayawada, Trivandrum, Bhopal, Nashik and Madurai contribute to US$ 15,619 million worth total retail activity. Organised retail penetration is lower than in any of the metros, with traditional retail ruling the market across these geographies. These cities are less saturated than the metros, but have greater spending power. Middle class and lower middle class form majority of the households, with more than

half the population falling in this category. The combined retail potential of these cities is expected to increase to US$ 23,563 million. Underprivileged population is expected to decrease by more than 30 per cent in cities of Pune and Ahmedabad by 2010-11, with the other smaller cities also following a similar trend. Pune and Ahmedabad are the fastest growing cities with thriving industry activity. Investors from the IT/ITeS sector and the other emerging sectors are eyeing these cities for expansion. These two cities contributed to US$ 3,854 million worth retail revenues in 2005-06, projected to increase to US$ 5,976 million by 2010-11. Pune has witnessed an explosive increase in the mall space availability in the recent years, with the organised retail penetration substantially increasing. The cities, along with the other potential cities as listed below, are set to take centre stage as the future retailing hotspots, with significant improvement in their infrastructure and purchasing power. The mall phenomenon

From the setting up of Indias first mall in 1999, there has been a steady proliferation of malls, a trend specially pronounced in the urban cities. Total number of malls was estimated at 200 for 2005-06, projected to increase to 600 by 2010-11. With increasing number of malls, there is increasing retailing space availability for players, with malls further providing incentives like lower rentals for anchor tenants and greater consumer exposure. The activity in the retail sector is further being supported by the allowance of FDI in real estate by the Government. With impressive ratio of transactions to customer footfalls ratio (conversion ratio) across malls, the market trend promises a positive outlook for the future. Mall development activity is being pursued aggressively across all the metros and the high-growth cities, with significant investments in the pipeline. The evolving cosmopolitan population with rising aspirations and growing incomes across the country is the driving force increasing domestic and international investments. Changing face of Indian consumerism

Favourable demographics, combined with increasing disposable incomes, are progressively changing the face of Indian consumerism. With the economy opening new vistas of employment and with employers offering attractive compensation packages and perks, the pool of Indian skilled professionals are boasting of higher disposable incomes. From frugal spending to frenzied shopping, Indias swelling middle class is redefining lifestyle patterns with adoption of western values and growing brand consciousness. The average household disposable income has doubled since 1985, with analysts predicting a similar trend for the next two decades. The thriving services sector growth has handed young India a bulging wallet and a penchant for luxury products. The new found freedom to shop at plush malls and stores for expensive gadgets like mobile phones and laptops has fuelled the growth of organised retail in India. The Indian consumer is gradually moving from the local kirana shopping to Mall Hopping. With a number of domestic and international brands available in stores in metros and

smaller cities and with a wide range of product offerings from food and grocery to furniture and fixtures, the Indian consumer is fast embracing modern retail. With the countrys income pyramid changing dramatically, there has been a definite shift from the saving tendency to the spending attitude. Increased consumer exposure to the latest trends and brands driven by the mass media is contributing to the soaring retail revenues. There has been a marked increase in the number of new entrants in the retail sector with player revenues increasing across all the retail segments. Higher disposable incomes Disposable incomes are on the rise with the economy providing new avenues of employment in IT/ITeS and other sunrise sectors like biotechnology. The increase of per capita income has been more pronounced in the metros and the emerging cities, with a progressive growth in the standard of living with employers offering attractive compensation packages and perquisites to the pool of skilled Indian professionals. National per capita income (NNP at factor cost) stood at US$ 717 in 2006-07, an

increase of 11 per cent over 2005-06. Delhi, the seat of Indian Government and the centre of thriving economic activity has the highest per capita income, mirroring the higher standard of living. Urban Indias disposable incomes are ricocheting with favourable and conducive economy and employment trends. Increasing urbanization Indias urban population is estimated at 286 million, constituting 27.8 per cent of the total population of 1,029 million as on 2001. The urban population is projected to increase to 468 million, constituting 33.4 per cent of the total projected population of 1,400 million by 2010. With over 34 cities having a population of over 1 million, this number is projected to grow rapidly. Urban population has grown over five times over the past five decades, with Indias urban population being second largest in the world, in numerical terms, next only to China. Increased subscription of credit cards in the last 3-4 years indicates a definitive change in the consumer habits of the Indian population. The number of credit cards issued was at 16.6 million in 2005-06, growing at a compound

annual growth rate of 28 per cent in the last 6 years. The number of debit cards have increased manifold and touched 53.7 million by 2005-06. The growing acceptance of plastic money across small and medium sized stores and retail outlets has stimulated the rapid growth in issuance of credit cards. International retail giants are increasingly choosing India as the target market, with most of the global retail power-houses exploring entry options into the countrys retail market. Wal-Mart has entered into a 50:50 Joint Venture and Franchisee agreement with Bharti Retail Ltd. and plans to set up its first cash-ncarry outlet by 2007-08. It is anticipated that the Starbucks Pepsi Co. joint venture would provide Indian market access to the worlds largest coffee chain. Carrefour, Frances retail major is set to finalize its entry route to Indian retail sector. Increasing technology adoption With modern retail store formats growing players are increasingly deploying advanced Information Technology tools for managing their supply chain, warehousing and logistics requirements.

Retail sector constituted 8 per cent of the IT export revenues in 2005-06. Apart from the industry giants, the small scale retailers are also embracing IT solutions to optimise their operational efficiencies. Big league IT firms like IBM India, Oracle and SAP are developing solutions for smaller retailers requirements. Metros on the growth lane The growing disposable incomes, the consuming class and the increasing standard of living across these cities translate to opportunities across all the retailing formats and verticals. The mushrooming lifestyle formats in these cities is stimulated by the increasing exposure of consumer base to international brands and willingness to spend for quality. These cities most often also serve as the test beds for any innovative store formats. Metros-in-the-making Many metro retailers are expected to open outlets in these cities to benefit from the First-Mover advantage, and gain a foothold in these cities. These cities provide ample opportunities, especially for the food and grocery formats, with lower lease rentals and

high availability of retail space, access to farms and agricultural produce. Consuming class accounts for over 60 per cent of the total households, offering potential in the food and grocery, consumer goods and apparel verticals. The First -Mover advantage More than 72 per cent of Indias population resides in small towns and rural areas with agri-produce retailing forming the largest share of total retail pie in these regions, offering immense potential for the food and grocery vertical with customer preference tuned towards value retailing. Players like Reliance Retail, Aditya Birla Nuvo Groups Trinethra Supermarket etc. have aggressive plans to tap opportunities in these emerging cities in suitable formats. Players who have already established their presence in the top metros of the nation are already planning their establishments in these emerging cities and regions to gain the firstmover advantage over other entrants. Innovative formats Formats like Wedding Malls, which are unheard of in the far west are found to be very successful in the Indian market. The

Wedding Malls for instance, stock the complete range of wedding product offerings from apparel to jewellery. The retail industry players are successfully blending knowledge from the experiences of the global retail industry with the unique requirements and preferences of the Indian consumer. Such customisation to the latent needs of the Indian consumer has brought about a great deal of innovation in the product offerings as well the retail formats in which they are being sold. Khadi & Village Industries Commission is set to roll out a string of swanky Khadi Plazas, which would showcase the traditional handloom textiles in a completely new form. Over 7,000 existing outlets are to be beefed up to cater to the changing tastes of the young Indian consumer and thereby provide a boost to the presently stagnant sales of the khadi textiles. The latest addition to the list of diverse retail formats are the Village Malls, with the fair price shops being revamped to cater to larger needs of local populations. The Government of Gujarat has spearheaded one such initiative with 512 Village malls launched in the state with further plans for 508 such malls.

Emergence of India as the retail sourcing hub Riding on the back of a strong manufacturing industry, India is fast emerging as an important global sourcing hub for top international brands India has had a continued presence in the global scenario as one of the leading exporters of apparels and textiles. The expiry of the Multi Fiber Arrangement has further widened the global markets for apparel. Many international brands have identified India as one of the important supply centres for procurement of textiles and apparels. Wal-Marts sourcing operations was estimated at US$ 1 billion, Tescos around US$ 100 million and Marks & Spencer around US$ 145 million from India for the year 200506. Unilever sources major portion of their fast moving consumer goods from its wholly owned Indian subsidiary, Hindustan Unilever Limited. Adidas, Next and Calvin Klein are expected to follow suit, with Adidas opening its first office in Bangalore. Online retailing The Click-to-buy phenomenon is fast catching up in India, with increase in number

of broadband and dial-up internet connections, limited personal time for shopping, increased use of plastic money and large base of young population that spends a considerable time online. The stated factors are facilitating rapid growth of online shopping with the industry players scaling up to meet the consumer requirements. Most retailers are developing and maintaining their own online sale portals for easy consumer access, facilitating online purchase of merchandise. Tata Indicoms i-choose.in and G&Bs godrejlifespace.com are good examples of this trend. Players like Rediff.com, eBay.in, Indiatimes.com were some of the early entrants in the Indian online retail space, clocking impressive revenues through online transactions. Some of the more recent players to enter this niche market include Pantaloons Retail India Ltd., through its Futurebazaar.com venture. Many smaller retail portals are also thriving on the internet, meeting the niche Indian consumer requirements such as ethnic apparel, handicrafts and jewellery. Demand for these portals, which has been primarily

driven by the non-resident Indians, is gaining popularity on the Indian soil as well, with the young urban Indian consumers increasing exposure to the virtual world of internet. With value-added services like cash-on-delivery to facilitate online transactions by consumers without credit/ debit card, unique bidding schemes etc, e-commerce is fast gaining acceptance in India. Rural retailing Rural retailing constitutes more than 95 per cent of total retail revenues, with more than 70 per cent of Indias population concentrated in the rural areas. Rural hypermarkets are growing at a blistering pace meeting the unique requirements of the rural consumer. The range of services provided by the rural retailers extends from creating a platform to buy and sell farm produce, to banking services, to restaurants etc. One of the key players in the rural retail segment is ITC with its Choupal Saagar initiative. ITC has 14 outlets in operation presently and plans to increase the number to 700 over the next 7-10 years. ITCs Choupal Saagar retails products and also acts as a procurement hub for ITCs e-choupals where

farmers are offered better rates for their agriculture produce, compared with the prevalent market rates for the same. Other examples of players and their services in the rural retail segment are DSCLs Hariyali Kisan Bazaar and Indian Oil Corporations Kisan Seva Kendra. DSCLs Hariyali Kisan Bazaar has over 70 outlets presently and the company proposes to operate a total of 200 outlets over the next 12 months. The outlets provide a spectrum of offerings including agronomist-consultations, agri-inputs, and financial services, apart from the conventional retailing services. Indian Oil Corporations Kisan Seva Kendra offerings extend over fuel, agri-produce, fast moving consumer goods and other value added services. The company has a network of over 1400 outlets presently. Reliance Retail andPantaloon Retail India Ltd. are expected to undertake more ventures to capture the vast untapped potential in the rural investors are actively pursuing an entry route into India for opportunities in the luxury segment. Delhi and Mumbai are the prime contributors to the luxury retail revenues and have the highest density of luxury brand outlets in the

country. However, currently the location of these outlets is primarily limited to five-star hotel mall spaces, with limited footfalls and consumer exposure. Industry players have aggressive expansion plans in the pipeline, with investor confidence reinforced by the booming sales in the luxury segment. The two Louis Vuitton stores in Mumbai and Delhi averaged monthly sales of US$ 13 million in 2005-06. Hugo Boss is expanding to other metros in the country, encouraged by 30 per cent increase in its India sales in the past year. Cashing in on the transit Channels Infrastructue sector in India is booming with several capacity building measures being undertaken aggressively by the central and state governments. Construction of new airports and development of metro rail systems equalling premium global standards is opening a new realm of retailing opportunities in these transit points. Airports Authority of India has commenced the up gradation of 9 metro airports and 15 nonmetro airports, with emphasis also on development of retail space in the airports.

The joint venture between Shoppers Stop and The Nuance Group AG has won the contract for setting up duty-free and duty-paid retailing outlets at the upcoming Bangalore and Hyderabad International Airports. The Mass Rapid Transit System, currently in operation in Delhi, and under construction at other metro cities like Bangalore and Hyderabad is also expected to offer immense retail potential. With the Delhi Metro Rail Corporation (DMRC) inviting tenders for retail development in the 53 metro stations in operation and 79 stations proposed to come up by 2010 in Delhi, retailers are in the fray to exploit the commercial potential of the retail space. SEZ synergies Special Economic Zones are government driven initiatives attracting higher investment into India, with about 154 Special Economic Zones notified as on Oct 3, 2007 spread over states and union territories of India . SEZs offer ample retail opportunities, with a percentage of the SEZ area earmarked for retailing in the non-processing zone. The size of the area in the retailing space is calculated considering various parameters like the type of SEZ, projected size of the residential

population in SEZ, and population in the catchment area. IT/ITeS based SEZs offer impressive retailing opportunities; the target segment for such SEZs would be the urban population with high-disposable incomes. Tourism related opportunities With tourists inflow increasing impressively with each passing year, tourism holds the key to a large retailing opportunity. In 2005-06, approximately 4.45 million foreign tourists arrived in India, registering a growth of 13.5 per cent over 2004-05. Retailing of regional handicrafts and artifacts holds an opportunity to capture the interest of foreign tourists, given the rich and diverse cultural heritage of India. The Indian Tourism Boards initiatives like Dilli Haat (a crafts bazaar located in Delhi) retails the regional crafts of various states, attracting a large number of tourist footfalls. The concept is fast gaining traction in other destinations in India such as Jaipur, Mumbai and Hyderabad. Reliance fresh retail stores

Reliance is gearing to be a major player in the Indian Retail Revolution. They are aggressively working on a pan-India network of retail outlets in various formats. State-ofthe-art technology, a seamless supply chain infrastructure and unmatched customer experience, is what the initiative is all about. Reliance Retail, the 100% subsidiary of Reliance Industries, entered the retail foray involving a minimum investment of Rs 25,000 crore. They plan to achieve a target of Rs 10billion revenue by 2010 employing 5,00,000 people. Hinting at an impending IPO, Reliance retail, has renamed Ranger Farm to Reliance Fresh Ltd, having hived the name of their most popular format. The companys name will sound familiar to the investors once the company plans to tap the capital markets by facilitating brand recall. The first of their format is Reliance Fresh, a convenience store. These stores, range from 2,000 to 5,000 sq feet, provide customers with a variety of fresh fruits, vegetables, staple foods and other products in a worldclass ambience. They aggressively partnered farmers by following a farm-to-folk strategy to ensure fresh fruits and vegetables at

affordable prices. They chose Hyderabad to test waters, as the city offers real estate at a price that does not quite pinch. They selected the cream crowd from pioneers in organized retailers to head the organization. With such a strong foothold, they ventured and their cash counters clicked Rs 3.5 to Rs 6.5 lakh per day and some outlets at prime locations are averaging Rs 5 lakh per day. Vegetable vendors and small retail shopowners are accusing Reliance of directly hitting their business. Reliance Fresh will not compete with local vendors due to political reasons, and their inability to create a robust supply chain. This is different from their original plans. In states like Kerala, West Bengal and Orissa, where they face opposition, they have changed their retail strategy by introducing large supermarkets, where they will not trade in fruits and vegetables. This is a critical factor in assessing the impact of retail giants on the unorganized segment. These Reliance Super stores are large supermarkets with an area of 4,000-10,000 sq ft and will stock grocery, stationary, pharmaceutical products and apparel only.

In the foods business, they have consciously segregated its vegetarian and non-vegetarian items by having a separate brand - Delight for the latter, with a separate distribution centre. This may be a smart move as vegetarians are sensitive to these issues. Seeing huge opportunities, they have introduced own brands like Dairy Pure for milk, ghee, (the only other major player being Amul) and Reliance Select for other categories like staples. This will optimize margins and streamline supply chain because of bulk procurement. Reliance Fresh will also retail FMCG, home, consumer durables, IT, pharmaceuticals, and auto accessories, in different formats like hypermarkets, supermarkets and discount stores; however, food will be a major account. Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz (apparel), Reliance Footprint (footwear, handbags, accessories), Reliance Wellness (health), Reliance Jewels, Reliance Timeout (books and gifts) and Reliance Super (mini mart) are various formats that Reliance has introduced. There are 491 Reliance Fresh stores and this figure is likely to touch 1,400 by the end of

next fiscal, currently spanning 2.2-million sq. ft. In addition, Reliance Retail has entered into an alliance with Apple for a chain of Apple Specialty Stores branded as iStore, Bangalore. With Marks and Spencer they are exploring apparel, gourmet food and cafes. Diversifying into various categories gives them an opportunity to tap the growing segments with immediate effect and further minimize potential losses. After the successful launch of consumer-good super market Reliance Fresh and Consumer Electronic and Digital, Reliance Mart (1,50,000-3,00,00 sq. ft.) is the company's hypermarket format. Around 23 percent of the hypermarket floor space will be allocated to garment brands, while the rest will stock footwear, home goods and other products. Luxury products will cover a floor space of 11 percent. Reliance Retail Limited (RRL) announced a Joint Venture with Pearle Europe for the launch of a chain of optical stores. This will bring a world-class range of private label frames, lenses and sunglasses. The optical industry is on the brink of major growth and has few organized players. Even the Tatas have ventured in this segment.

Reliance has bought properties ranging from Rs 1,000 per sq ft to as high as Rs 22,000 per sq ft or more for their expansion. Reliance now plans the franchisee route for further expansion. Faced with expensive real estate costs and delays in retail space acquisition, the company is co-opting existing small retailers in all formats other than Reliance Fresh and Reliance Hypermarket. This is yet another success formula for giant retailers. Given their economies of scale and huge resources, excellent business acumen, and governmental support, the ever-strategic Reliance Fresh has become an ambitious and strong force to reckon with. They are able to provide their merchandise at cheaper rates than any other retailer, and have signed real estate deals at breakneck speed for mega projects across India. Reliance and Future Group are the early birds at making a dent in the large profit from the retail sector in India, at excellent real estate rates for properties in prime locations. The retail sector employs around 40 million people in India. Trade/retailing contributes to 14 percent of the service sector. The fact that about 4 percent of the population is employed

in the unorganized retail trade makes it vital to the socio- economic equilibrium in India. Organized retailing and supply chain integration displace labour in a labour-surplus society. These chains negate a large and growing proportion of added value away from producers to companies. Bulk procurement decreases producers margins. By controlling both ends of the chain, the company can buy cheap and sell dear, thus severely undercutting the small retailers and creating a monopolistic situation. In addition, retail trade also has a sky rocketing effect on the real estate prices. Markets, wholesale sales and retail form one axis of the economy, while productive sectors like agriculture, textile, and industries form the other. Ambitious MNCs are trying to control both the axes of the economy on the pretext of privatization, liberalization, and globalization. Therefore, Reliance Fresh along with other domestic corporations have a moral standing. Along with the support of the government, they must pave a path for an efficient retail market (no monopoly) in India and help maintain a socio-economic equilibrium. This

will remain the biggest challenge for Reliance who leads the way as a corporate citizen. The growth must be through value creation. This will help the Indian retail sector to remain fresh in a hygienic and ethical market.

Strategic Issues in Retailing Consumer purchases are often the results of social influences and psychological factors. Need to create marketing strategies to increase store patronage. Location: Least flexible of strategic retailing issues and one of the most important. Need to consider: cost location of the target market kinds of products being sold availability of public transportation customer characteristics competitors location

relative ease of traffic flow, incl. pedestrian parking and major thorough fares complementary stores Handout...All Decked Out, Stores... Discusses the recent developments in retail location, stores moving back to urban areas. It talks about why stores are doing this, which stores are doing this and the implications of (re) locating down-town. Product Assortment: Wide and shallow, deep and narrow? Look at merchandising policies. Handout...Target `Micromarkets' its way to success... Retail Positioning: Competition is intense. Need to identify an undeserved market segment and service the segment distinguishing yourself from others in the minds of consumers, IE position as high price, high quality with many services, or reasonable quality at "everyday low prices". Atmospherics: Describes the physical elements in a store's design that appeals to consumers and encourages consumers to buy. Warm, fresh, functional exciting.

Exterior Atmospherics-store front, display windows, important to attract new customers. Surrounding businesses, look of the mall etc. Interior Atmospherics-lighting, color, dressing room facilities etc Displays enhance and provide customers with information. Need to determine the atmosphere that your target market seeks. Store Image: Mental picture that a retailer tries to project to the consumer. To a consumer, it is a persons attitude towards a store. Need to project an image, a functional and psychological image in consumer's minds that is acceptable to the target market. Depends on the atmospherics, reputation, number of services offered, product mix, pricing etc. FAO Schwartz "It is important to leave people with a memorable image of your store. At Disneyland, its Cinderellas castle. For us, its the clock." Relationship Marketing: Handout...Department Stores target...

Importance of relationship marketing in order to target your loyal customers. Importance of Logistics Handout...How Wal-Mart Outdid A Once Touted Kmart in Discount Store Race. 10 Insider Tips for Retail Success Location Where you at? Choosing your location is the most important step in making your dream of owning a retail store come true. What good is it if you have a great staff and awesome merchandise but no customers? You should choose a location that has a high traffic count. A new retail store isn't going to have a following unless it's a franchise with a wellknown name, [so if you're independent,] you'll need all the help you can get. Ideally, you'll want to be next to non-competitive retail businesses that have steady clients; the overflow from these businesses will drive your walk-in traffic and bring in new business for you immediately. If you're looking into a new shopping plaza, you'll need to ask for the demographics of the area. This will ensure that you're not opening a high-end store in a low-end part of town. Be aware of your

surroundings, and take your time choosing the perfect location. Don't choose a location just because it' close to your house. Big brother. Mall management has a job to do, and it's to make sure stores coming into the mall or those already in the mall are following all the guidelines and policies that pertain to each individual lease. But management should help new tenants become more familiar with the mall because malls are run by a strict set of rules, and breaking one of the rules can break your pocketbook. Opening late, for example, is prohibited and requires a monetary fine to be paid to the mall. Mall management teams are very professional, and it's best to have done your research before attempting a meeting or negotiating with leasing managers. Merchandise Stocking your shelves. Selecting merchandise for your store can be the most time-consuming and expensive part of opening a business. This duty shouldn't be taken lightly! Before opening your store, you should visit wholesale marts to get an idea of the merchandise you'd like to carry. Decide what your mark-up will be and what's

appropriate for your area. Choosing the merchandise can be fun, but remember to maintain a general theme and purpose for your products. Discuss ideas with other retailers at the mart, and ask the sales reps for their ideas and suggestions. You'll find most people are willing to help and discuss their experiences with certain products. This will help you decide and narrow down [your choices to] products that will do well in your store. Keeping a theme. I maintain a theme in my store by staying true to our name: Glamdora-It's a Girl Thing. Customers know what to expect when they come into our store: They expect to see merchandise for girls--not many stop in to see what we have for boys. Keeping with our tagline, we include merchandise for girls of all ages: nail files, gifts, room decor, shoes, accessories. They're all chosen for their colors and merchandised by theme. Our stores are hot pink and lime green with zebra and leopard accents. With that theme, I choose merchandise that appropriately fits my store. I choose the nail files in hot pink, gifts in bright colors, room decor in zebra or leopard, and so on. [Sticking] to your theme will help

you build loyal customers and create a unique store in the process. Stay current and stay true. Don't think you know it all when it comes to trends. Keep up with local as well as national trends. You might see a particular look plastered all over the TV or in fashion magazines, but know your market. Will it sell in your store? Does it fit your theme? And don't attempt to sell anything that's way out of your normal buying budget just because it's trendy. The best thing to do is listen to your customers. Customers will always let you know what they're looking for, but only if you ask. Visit your nearest wholesale mart to preview upcoming trends and new products. Hiring and Management Good kids. It's inevitable--you're going to have young people work for you. Hire a young person who has a desire to know more about your type of business. A person who's really interested in cars but wants to work in your clothing store might not be as suitable as someone who's attending classes in fashion design. When interviewing a young person, ask them about their interests and hobbies, and what they feel they can offer you as an

employee. I like to ask what they feel is their best attribute. Second in command Check all management applicants' references, and require a resume. Advertise for a manager if your budget allows and only if you're prepared to offer competitive pay. A management candidate should have at least one year of management experience and two years of retail experience. Ask them numerous questions about software, cash handling and, most important, management skills pertaining to customer service and employees. Loss prevention. You can always expect theft--count on it and set your prices because of it. The only way to find out how much you're losing is to do inventory. I have a POS [point-of-service] system that's run from my PC and has real-time inve