Retail in India -Revolution or Evolution Essay Example
Retail in India -Revolution or Evolution Essay Example

Retail in India -Revolution or Evolution Essay Example

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  • Pages: 6 (1566 words)
  • Published: November 10, 2017
  • Type: Research Paper
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The retail industry in India has gone through a gradual transformation, starting from small Kirana stores and evolving into supermarkets. At first, it was an unorganized sector, but it was driven forward by the textile industries through the dealer model.

As the retail industry in India grows, it is evolving into both supermarkets and hypermarkets. The drivers behind this evolution include changes in customer buying behavior, a rise in disposable income among the middle class, infrastructure development, and evolving customer preferences. Retailers aim to target younger middle class earners who make up over 20% of the total population. Growth in the sector is also driven by innovative ideas such as offering unique buying options at different stores, including cash & carry and "Sabse Sasta Din" (lowest price day), which attracts a wider customer base.



, the retail industry included only apparel and footwear. Over time, the industry evolved and now also includes food chains, book and CD stores (such as Landmark), and electronics (such as CROMA, a retail chain owned by Tata). This evolution was gradual, rather than a sudden revolution. This paper provides information on the journey of retail in India, various retail formats, factors driving the industry, as well as barriers to its growth.

Retail in India has undergone both revolution and evolution throughout its history. The journey started with local shopkeepers and the Kirana store. The concept of shopping centers was introduced in 1869 with Mumbai's Crawford market and Kolkata's New Market following in 1874. Later, in the late 1970s, the underground shopping complex Palika Bazar was established in New Delhi, and mini malls on Bangalore's Brigade Road emerged in the 1980s. Th

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government of India also introduced franchises called Khadi Bhandar to enter rural India.

In the 1980s, village industries such as Khadi, matchstick and incense stick makers, wood and earth decorative item producers, non-violent honey and leather goods makers began to be sold through retail outlets. These outlets were established through a dealer network, with products being made available by big textile industry groups.

The concept of retailing was introduced by e.Raymond, S. Kumar, Bombay Dyeing, and Grasim. The pioneers in the manufacturing sector were the DCM group and Bata. Titan established a number of showrooms for premium watches, introducing an organized retail concept.

All the retailing efforts mentioned previously were undertaken by manufacturers. However, pure retailer approaches emerged in the 1990s with the establishments of "Ansal's Plaza" in Delhi and Crossroads in Mumbai. Since 2003, numerous other organizations have either planned to enter into the retail market through retail stores or have already started establishing their own operations. Currently, several popular groups operate organized retail in various formats.

Table-1 displays India's major retailers and their corresponding formats. RPG Retail boasts a hypermarket known as Spencer's, as well as a specialty store named Health ; Glow. Piramal's offers Trumart, a discount store, while Pantaloon Retail operates several retail formats including Food Bazaar (super market), Big bazaar (hyper market), and Central (mall). K Raheja Group has both supermarket and hypermarket formats that are currently undisclosed. Tata/Trent manages Star Bazaar India, which is a hyper market, while Landmark Group runs an unnamed hypermarket. Reliance Group owns multiple retail stores such as Nilgiri's (super markets), Subhiksha and Margin free (discount stores), Apna Bazaar (grocery store), and specialty electronics outlets like Vivek's and Vijay

sales. The organized retailing industry in India has experienced growth due to the rise in household income of the educated middle class - growing steadily at 3.6% since 1991 with future projections indicating it will reach 5.3%.

Forecasts predict that the growth rate of the Indian middle class will rise by 4.6%, with urban households surpassing rural ones. The estimated average real household disposable income, which considers inflation and taxes, is expected to reach $6,977. The graph depicted below showcases the anticipated increase in disposable income for the middle class.

The McKinsey Global Institute reports that the average household disposable income in India, measured in thousands of Indian rupees, is indicated by circled figures representing compound annual growth rates. The report also notes that the 20-30 year age group, which comprises more than one-fifth of the total population, significantly influences household purchasing decisions. Furthermore, over 60% of India's population is currently under 30 years old according to the same report.

After India's economy was liberalized in 1991, the younger middle class started to earn more money. As a result, they began favoring international brands like Macdonalds instead of saving money. Retailers have since focused on this demographic as their main target audience. (A) cites Table-2 which shows India's population distribution. From 2003 onward, significant progress was made in infrastructure sectors such as roads, ports, aviation and basic necessities due to heavy government investment. This development made India an attractive option for foreign investors seeking opportunities in retail.

Thanks to the advancements in infrastructure like telecommunications, IT, internet, and satellite TV, the accessibility of information has expanded significantly in recent years. The internet has enabled customers to become better

informed about products and their features. Moreover, satellite TV channels have played a crucial role in increasing awareness about global products within local markets. Therefore, rapid progress in the infrastructure sector remains pivotal in driving retail growth in India.

Although fragmented, the Indian retail industry is predicted to undergo substantial growth in the future. This development is due to the participation of worldwide powerhouses like Wal-Mart, Carrefour, Marks ; Spencer and Gap as well as domestic competitors such as Ambanis and Mittals. In 2006, the complete Indian retail market was evaluated at US$202.6 billion with a projected rise of 30% over five years. Nevertheless, progress slowed down because of the financial crisis in 2008.

According to forecasts, the organized retail sector will achieve a yearly expansion of 25-30%, resulting in earnings of up to US$24 billion by 2010. This is a notable increase from its existing worth of US$7.7 billion. The modern retail industry's portion of the market is projected to escalate from 2% to between 15-20% within the next decade.

According to a report from the Economist Intelligence Unit and A. T. Kearney, there has been growth in India's retail industry and many large retailers are planning new mega projects. The information is conveyed within a


The retail industry in India has witnessed the arrival and expansion of foreign retailers such as Wal-Mart and Tesco. The sector is growing rapidly, particularly with the emergence of major players like Wal-Mart partnering with Bharti group to open several wholesale stores. However, due to limitations on FDI in retail, financial details are undisclosed. Mukesh Ambani has also set up Reliance Retail Limited - a wholly-owned company that plans to

invest Rs.

Over the years, approximately INR 25,000 crore will be invested in the retail business with around 1,600 stores being established in phases. Saks Fifth Avenue, a New York-based fashion retailer, collaborated with DLF Properties to open a store in a New Delhi mall. Arvind Brands, one of India's largest integrated mills and a prominent menswear manufacturer, partnered with Hong Kong-registered Tommy Hilfiger.

The Aditya Birla Nuvo Group's Madura Garments has a distribution license agreement with Esprit and currently operates 12 stores in India. Their plan is to open over 100 within the next three years. Tommy Hilfiger has also begun operating in India. Additionally, Tesco, the largest UK retailer, is preparing to establish a wholesale cash-and-carry business in India.

Tesco has teamed up with Tata Group to provide products to Trent's Star Bazaar hypermarkets through its new wholesale business as it expands in India. ITC intends to increase the number of its Wills and John Player's retail outlets to 300 within a few years, but environmental obstacles are proving problematic for the rapidly growing Indian retail industry. Despite stiff competition from the unorganised sector, industry players are striving to surmount these barriers in order to achieve even more rapid growth.

Local shopkeepers have formed a collective group to purchase goods at wholesale prices that enable them to decrease their inventory costs. Meanwhile, smaller traders are against foreign investment in the retail industry. As a result, the government has banned foreign investment in real estate business. A prevailing issue hindering the retail sector is the steep pricing of quality real estate and infrastructure which is caused by exorbitant stamp duty rates on property transfers.

The growth of the

retail industry is hampered by a scarcity of retail space in central and downtown areas, as well as time-consuming and complex land-use conversion. Procuring retail space is difficult due to rigid building laws and prolonged property dispute settlement. Additionally, non-residents cannot own property unless they are of Indian origin, and import of goods in India is subject to customs duties, making entry barriers high. The retail sector in India has evolved from Kirana stores to super markets, initially unorganized but then transitioning through the franchise model.

It can be said that the evolution of the retail market was a result of regulatory changes, rather than a revolution. This is discussed in a research paper titled "KIRANIZATION OF INDIAN MALLS: The Snow White and the Seven Dwarfs Effect" by Johree Rajan, Singh Ruhbani, and Makhaniya Karan (A)(B). The market transformed into a pure retail market due to these changes.

The A. T. Kearney global index for development in 2008, 2007, 2006, 2005, and 2004 can be found in the KPMG-FICCI report available at www.indiainbusiness.

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