WHAT LIES IN STORE FOR THE RETAILING INDUSTRY IN INDIA

India is not known as the 'nation of shopkeepers' yet has as 5 million retail outlets of all shapes and sizes. Some other optimistic estimates place the number as high as 15 million. Whatever be the number, India can claim to have the highest number of retail outlets per capita in the world. But a large majority of these are small outfits occupying an average 500 square feet in size, managed by family members, having negligible investment in land and assets, paying little or no tax, and known as the kirana dukaan ('mom and pop' stores in the US or the corner grocery stores in the UK). These are estimated on the higher side to be about 12 million. These outlets offer mainly food items and groceriesthe staple of retailing in India. Customer contact is personal and one-on-one often running through generations. There are a limited number of items offered often sold on credit the payment to be collected at the end of the month. The quality of items is standard with moderate pricing.

There is considerable hype about the growth and prospects of organised retailing industry in India possibly because of the keen interest of the inter- national retailers. It must be noted, however, that organised retailing constitutes barely 7.5 per cent of the total retailing industry in India in 2013 and expected to rise to 10 per cent by 2018. The rest is under the control of unorganised, informal sector of kirana dukaans. Market research agencies and consultants come up with encouraging forecasts about this segment of the retailing industry. For instance, A.T.Kearney's Global Retail Development Index ranks 30 emerging countries on a 100-point scale. Its 2007-ranking placed India at number one for three consecutive years dropping to rank 20 in 2014, an indication of how optimism can be ephemeral when country attractiveness and operating risks are taken into account. Overall, the Indian retailing industry contributes 18 per cent to GDP. It is expected to grow from US $520 billion in 2013 to US $950 billion by 2018. The size of the organised retailing industry is estimated at US $40 billion in 2013 and projected to grow at a compound annual growth rate of 19 per cent to US $95 billion by 2018. High potential is projected in the key retail segments such as apparel, food, mobile and telecom, jewellery, and pharmacy among others.

The economic environment in the post-liberalisation period after 1991 had created several factors that have made high growth of the organised retailing industry possible. India's impressive economic growth rates were the prime driver of increasing disposable incomes in the hands of consumer. The growing size of the consuming class in India in tandem with the entry and expansion of organized sector players in recent years has set the pace for corporate investment in retail business. Practically every major Indian business group have been looking for opportunities in the growing retailing industry. Among them are the big names in the Indian corporate sector such as the Aditya Birla group, Bharti, Godrej, Indian Tobacco Company (ITC) group, Mahindras, Reliance, R.P. Goenka (RPG), Tatas, and the Wadia group. There are major retail brands from companies such as Future Group, FabIndia, Raheja Group, and Gitanjali. Mergers and acquisitions have been the popular strategy by the companies to adopt inorganic expansion.

The international environment presently is replete with examples of the fast-paced growth of retailing industry in many developing countries around the world. In the post-liberalisation period, there is more openness and awareness of the international developments among Indians. The ease of travel abroad and the exposure through television and Internet have increased the awareness of the urban Indian consumer to the convenience of modern shopping. The modern retail formats thus have gained acceptance in India. Single-brand retailers such as Bosch, Columbia Sportswear, Michael Kors, and Stuart Weitzman have opened retail out- lets. Carrefour, Metro AG, Tesco, and Wal-Mart are the international players already operating in India with several others such as Ingvar Kamprad Elmtaryd Agunnaryd (IKSA) and Liberty Shoes having plans to enter soon. These international companies bring to India the latest developments in the retailing industry and help to set up benchmark for the domestic players.

The market environment is one of the most significant in terms of the growth and prospects of retailing industry in India. In terms of geography, the reach of the organised retailing industry has been growing. In addition to the megacities other cities are also witnessing a boom in organised retail activity. Retailers are now trying to focus on Tier II and Tier III cities which are relatively smaller cities. There are interesting possibilities regarding the retail formats. Traditionally street carts, pavement shops, kirana stores, public distribution system, kiosks, weekly markets, and such other formats are unique to India and have been in existence for a long time. At present, most organized retail formats are imitations of those used abroad. These include hypermarkets and supermarkets, convenience stores, department stores, and specialty chains. Among these formats, a notable trend has been the development of integrated retail-cum-entertainment centres and malls as opposed to stand-alone developments. Besides these, there are some attempts at indigenous for- mats aimed at the rural markets. Retail format is an area of organisational learning where the players are trying to replicate and adapt the international business models to Indian conditions. Online retailing is a big potential area with expected high growth. Cash-on-delivery options have already proved successful though inventory management and logistics and infrastructural bottlenecks remain challenging. Combinations of click-and-brick are being used by many existing consumer goods companies. Pricing is an important issue in the retailing industry. Generally, the bulk buying yield lower costs of procurement for the big retailers a part of which they pass on to the customer in the form of lower prices. In food retailing, for instance, there is a clear trend of low prices being the determining factor in purchase decisions by the cost-conscious Indian consumer. But, lower prices may not be a major issue with the higher-income groups that may place greater emphasis on the quality of products and retail service, store ambience, and convenience of shopping. For the majority of Indian consumers, however, price is likely to remain a significantly important issue in purchase decision. Competition has already accelerated with many Indian business groups having entered or likely to enter this booming industry.

The political environment in India is ambiguous in terms of its support to the organised retailing industry. This is obvious as the unorganised sector employs nearly 8 per cent of the Indian population and is widely spread geographically. The overwhelming presence in terms of unorganised sector in the total retailing industry also is a significant political issue. In a democracy, the politics of numbers make it imperative for the political class to adopt an ambiguous stand. In some cases, politicians have acted in favour of the unorganised sector by disallowing the setting up of large retail outlets in some states. Overall, however, there is ambiguity as there are several environmental trends in favour of the development of the organised retailing industry.

In the regulatory environment there has been gradual easing of the restrictions albeit at a slow pace in view of the ambiguous political stance as indicated above. In India, the retailing industry is categorised into two: single-brand and multi-brand retail trading. Foreign direct investment under single-brand retailing is permitted to 100 per cent while for multi-brand retailing there is a cap of 51 per cent with government approval and conditionalities. Liberalisation of FDI policies in retail, expected adoption of goods and services taxation system and further clarity on provisions regarding sourcing, in- vestment in back-end, and limiting the role of regulation are some factors that are expected to make life easier for the industry participants.

The socio-cultural environment offers many interesting insights into the changing tastes and preferences of the urban and semi-urban Indian consumer. There are several encouraging signals: there is a large rural market to be tapped; rising disposable incomes; increasing urbanisation, highly aware and affluent young population, growing number of working women, and changing consumer preferences are some of the major factors in the socio-cultural environment. A majority of India's consumers are young and these people have deep roots in the local culture and traditions yet are eager to get connected and know the outside world. This group constitutes people who are enthusiastic spenders and like to visit the new format retail outlets for the convenience and time-saving they offer. Malls are also being perceived as not just places for shopping but for spending leisure time and meeting places. There is the emergence of a combination of the retail outlet and entertainment centres having multiplexes, with food courts and video game parlours. But there are some pitfalls too. For instance, organised retailing in India has had to deal with the misconception among middle-class consumers that the modern retail for- mats being air conditioned, sophisticated places are bound to be more expensive and not welcoming to the masses.

The supplier environment probably offers the biggest constraint on the growth of the retailing industry in India. Reaching India's consumers cost effectively is a distribution nightmare owing to the sheer geographical size of the country and the presence of traditional, fragmented distribution and re- tailing networks, and erratic logistics. For instance, the apparel segment that is one of the two top segmentsthe other being foodhave had to invest in back-end processes to support supply chains. Supply chain management and merchandising practices are increasingly converging and apparel retailers are establishing collaboration with their vendors. Another area of concern is the severe shortage of skills in retailing. Human resource development for the re- tailing industry has picked up lately but may take time to fill the gap caused due to the shortage of personnel. On the brighter side, developments such as favourable real estate and infrastructural development, easy availability of credit and bank loans, innovative physical and online channels, and increasing service-orientation in company cultures may make the supplier environment more prospective.

The technological environment for the organised retailing industry straddles many areas such as IT support to supply chain management, logistics, transportation, and store operations. Some global retailers have demonstrated that innovative use of technology can provide substantial strategic advantage. The large number of store items, the diversity of sourcing, and the gigantic effort required to co- ordinate actions in a large retail context is ideal for using IT as support function. For instance, innovative use of IT can help in a wide variety of functions such as quick information processing and timely decision-making, reduction in processing costs, real- time monitoring and control of operations, security of transactions, and operations integration. The availability of supply chain management, customer relationship management, and merchandising soft- ware can help much in performing activities such as ordering and tracking inventory items, warehousing, transportation, and customer profiling.

Overall, the Indian scenario offers an interesting mix of possibilities and challenges. A successful model of large-scale retailing appropriate for the Indian context is yet to emerge. The modern retail formats accepted globally are in the process of implementation and their acceptability is yet to be established. The retailers are wary and involved in improving backend operations, adopting low-cost business models, controlling capital spending and operational costs and reducing store size with careful selection of locations.

Question:

1.Identify, at least, five opportunities and five threats for domestic and foreign companies from this review case of the retailing industry in India.

2.Prepare, ETOP for a company interested in entering the retailing industry in India.

My requirement, I want,

1.New Title for the above case

2.Rewrite the "summary" of the above case

3.Analysis of the case

4.Problem (question 1 and 2, already given)

5.Solution to these above problem (solution to these question 1 and 2)

6.Recommendation

7.Conclusion

Word count for my requirement from (1 to 7) is between 500 to 1000