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INDIA RETAIL ON THE GLOBAL STAGE- CAN WE BE SUCCESSFUL
Evolution of Retail Market in India.
In the beginning there were only kirana stores called Mom and Pop Stores, the Friendly
Neighborhood stores selling every day needs. In the 1980s manufacturer’s retail chains like
DCM, Gwalior Suitings, Bombay Dyeing etc started making its appearance in India.Multi brand retailers came into the picture in the 1990s. In the food and
FMCG sectors retailers like Food world, Subhiksha, are some of the examples.
Shopping Centres began to be established from 1995 onwards. The millennium year saw the emergence of super markets and hyper markets. Now big players like Reliance, Bharti, Tatas, HLL, ITC are entering into the organized retail segment. The big international retail bigwigs are waiting in the wings as the present FDI guidelines do not allow them to own retail outlets in the country.
CURRENT SCENARIO OF RETAIL INDUSTRY IN INDIA
INDIA TOPS A T KEARNEY’S GRDI(GLOBAL RETAIL DEVELOPMENT INDEX) FOR THE 3RD CONSECUTIVE YEAR.
Magnification of the Indian Retail Industry
Yardstick Situation in 04-05 Projection in 07-08
Value of retail sales $ 224 Billion $ 300 Billion
Annual growth rate 5% 5.7%
Value of organized market $ 769 Million $ 1.35 Billion
Share of organized market in the sector 3.4% 4.6%
Forecasts (after 5 years) about size of organized retail market Over $ 25 Billion $ 50 Billion
Forecasts about growth rate of organized retail market Around 30% Around 40%
CURRENT RETAIL PLAYERS
A. INDIAN COMPANIES
Retailer’s like Reliance, Future group, Bharti Ent, Tata’s, Subhiksha, Raheja group etc have already made a mark in the developing market.
POSITIVES FOR INDIAN COMPANIES IN RETAIL INDUSTRY
1. Have knowledge of the Indian Market, which could help them a lot as they are aware of the Indian mindset.
2. The Laws are clearly on the side of Indian Players as currently FDI has been blocked in direct Retailing thus controlling competition.
3. The initial set up has already been done by them, thus they won’t be newcomers by the time foreign players set up their base.
4. They have the experience of dealing with employees in India as most of them are already established players in their respective fields. This can be of great help for employing skilled as well as un-skilled labour.
5. Indian companies have a better recall value than their foreign counterparts and this can help to gain loyalty. This factor can be of a help in the rural areas as well as for the illiterate people.
DOWNSIDES FOR THE INDIAN COMPANIES IN THE RETAIL INDUSTRY
1. The Indian organised retail industry is still in its initial phases and the concept is relatively new for Indian companies when compared to Foreign Retailers.
2. Opposition from small traders. They have formed their own unions and are revolting in a huge way.
3. Political pressure has been seen in many areas like U.P. and Kerela where the Government has not allowed some formats of retail trade.
B. FOREIGN PLAYERS IN THE INDIAN MARKET
There are companies like Dominos, Lee, Nike and Sony that have already set up base in India. While big foreign players waiting in the lines to enter the Indian Retail space are Wal-Mart and Tesco.
POSITIVES FOR FOREIGN PLAYERS
1. They can bring in huge investment which is not possible by many local players.
2. Having their base in developed nations and retailing since a long time they have better technology which will be of great help when they enter India.
3. There is a class of Indian population which has likeness to foreign brands and will buy them with a misconception that they are of better quality.
4. They have the opportunity to bring in lower priced goods as they can command over their suppliers by buying products in bulk for their global sales.
DOWNSIDES FOR FOREIGN PLAYERS
1. Stringent FDI Laws. Current laws allow only 51% FDI and that too for Single Brands. Thus stopping them from setting up retail outlets.
2. They are comparatively new to India and the Indian conditions like vast differences in culture, high percentage of rural population.
3. Vast geographies making it difficult for new companies to set up a pan India presence.
FUTURE OF INDIAN RETAIL INDUSTRY
THUMBS UP
1. INR 1 Trillion investment in the pipeline over the next five years.
2. A country with the largest young population in the world- over 867 million people below 45 years of age and a total population on 1.1 Billion.
3. More English speaking people in India than of in the whole of Europe.
4. 300 million odd middle class - the Real consumers - is catching the attention of the world.
5. A lot of scope left to develop E-Retailing as another form of selling.
6. According to a survey published in the ET, Kirana Stores are still going strong and the local consumer still prefers them for daily purchases.
CAUTION
1. Lack of proper Supply Chain Management and cold storage facilities.
2. Inadequate infrastructure can be a serious hindrance.
3. Hindrances from the govt. as seen in UP and Kerela.
4. There will be a talent crunch to find enough work force to handle such developments.
5. Availability of good quality Retail Space and rising land prices can have a negative impact.
6. Strict FDI laws.
7. A total of 13 Million Retail outlets in the country making it to fragmented.
RECOMMENDATIONS
1. Atleast allow controlled FDI in the form of JV’s with local players.
2. To cater to the local needs of each area and have a multiple format stores as per the requirement of the region.
3. Invest in technology and supply chain management, especially in Cold Storage facilities as food constitutes about 62% of retail sales.
4. Put in place a system of Reverse Logistics which is pretty non-existent in India.
5. Look for potential in the rural areas.
6. 700 million Sq. Ft. of quality retail space will be required by year 2010 as compared to a supply of 200 million Sq feet creating a gap of 500 million Sq. ft.
7. Have high Quality measures so as to keep the confidence of the retail customers.
8. Big retail players should participate with local Kirana stores by giving them franchises and smaller outlets.
9. Invest enough in education & training to sustain the boom and have proper man power to handle it.
10. Giving the sector an Industry status by the Government.
Despite some of the negative areas of the retail boom it seems INDIA CAN SURELY SUSTAIN THE COMPETITION ON THE GLOBAL STAGE.
Evolution of Retail Market in India.
In the beginning there were only kirana stores called Mom and Pop Stores, the Friendly
Neighborhood stores selling every day needs. In the 1980s manufacturer’s retail chains like
DCM, Gwalior Suitings, Bombay Dyeing etc started making its appearance in India.Multi brand retailers came into the picture in the 1990s. In the food and
FMCG sectors retailers like Food world, Subhiksha, are some of the examples.
Shopping Centres began to be established from 1995 onwards. The millennium year saw the emergence of super markets and hyper markets. Now big players like Reliance, Bharti, Tatas, HLL, ITC are entering into the organized retail segment. The big international retail bigwigs are waiting in the wings as the present FDI guidelines do not allow them to own retail outlets in the country.
CURRENT SCENARIO OF RETAIL INDUSTRY IN INDIA
INDIA TOPS A T KEARNEY’S GRDI(GLOBAL RETAIL DEVELOPMENT INDEX) FOR THE 3RD CONSECUTIVE YEAR.
Magnification of the Indian Retail Industry
Yardstick Situation in 04-05 Projection in 07-08
Value of retail sales $ 224 Billion $ 300 Billion
Annual growth rate 5% 5.7%
Value of organized market $ 769 Million $ 1.35 Billion
Share of organized market in the sector 3.4% 4.6%
Forecasts (after 5 years) about size of organized retail market Over $ 25 Billion $ 50 Billion
Forecasts about growth rate of organized retail market Around 30% Around 40%
CURRENT RETAIL PLAYERS
A. INDIAN COMPANIES
Retailer’s like Reliance, Future group, Bharti Ent, Tata’s, Subhiksha, Raheja group etc have already made a mark in the developing market.
POSITIVES FOR INDIAN COMPANIES IN RETAIL INDUSTRY
1. Have knowledge of the Indian Market, which could help them a lot as they are aware of the Indian mindset.
2. The Laws are clearly on the side of Indian Players as currently FDI has been blocked in direct Retailing thus controlling competition.
3. The initial set up has already been done by them, thus they won’t be newcomers by the time foreign players set up their base.
4. They have the experience of dealing with employees in India as most of them are already established players in their respective fields. This can be of great help for employing skilled as well as un-skilled labour.
5. Indian companies have a better recall value than their foreign counterparts and this can help to gain loyalty. This factor can be of a help in the rural areas as well as for the illiterate people.
DOWNSIDES FOR THE INDIAN COMPANIES IN THE RETAIL INDUSTRY
1. The Indian organised retail industry is still in its initial phases and the concept is relatively new for Indian companies when compared to Foreign Retailers.
2. Opposition from small traders. They have formed their own unions and are revolting in a huge way.
3. Political pressure has been seen in many areas like U.P. and Kerela where the Government has not allowed some formats of retail trade.
B. FOREIGN PLAYERS IN THE INDIAN MARKET
There are companies like Dominos, Lee, Nike and Sony that have already set up base in India. While big foreign players waiting in the lines to enter the Indian Retail space are Wal-Mart and Tesco.
POSITIVES FOR FOREIGN PLAYERS
1. They can bring in huge investment which is not possible by many local players.
2. Having their base in developed nations and retailing since a long time they have better technology which will be of great help when they enter India.
3. There is a class of Indian population which has likeness to foreign brands and will buy them with a misconception that they are of better quality.
4. They have the opportunity to bring in lower priced goods as they can command over their suppliers by buying products in bulk for their global sales.
DOWNSIDES FOR FOREIGN PLAYERS
1. Stringent FDI Laws. Current laws allow only 51% FDI and that too for Single Brands. Thus stopping them from setting up retail outlets.
2. They are comparatively new to India and the Indian conditions like vast differences in culture, high percentage of rural population.
3. Vast geographies making it difficult for new companies to set up a pan India presence.
FUTURE OF INDIAN RETAIL INDUSTRY
THUMBS UP
1. INR 1 Trillion investment in the pipeline over the next five years.
2. A country with the largest young population in the world- over 867 million people below 45 years of age and a total population on 1.1 Billion.
3. More English speaking people in India than of in the whole of Europe.
4. 300 million odd middle class - the Real consumers - is catching the attention of the world.
5. A lot of scope left to develop E-Retailing as another form of selling.
6. According to a survey published in the ET, Kirana Stores are still going strong and the local consumer still prefers them for daily purchases.
CAUTION
1. Lack of proper Supply Chain Management and cold storage facilities.
2. Inadequate infrastructure can be a serious hindrance.
3. Hindrances from the govt. as seen in UP and Kerela.
4. There will be a talent crunch to find enough work force to handle such developments.
5. Availability of good quality Retail Space and rising land prices can have a negative impact.
6. Strict FDI laws.
7. A total of 13 Million Retail outlets in the country making it to fragmented.
RECOMMENDATIONS
1. Atleast allow controlled FDI in the form of JV’s with local players.
2. To cater to the local needs of each area and have a multiple format stores as per the requirement of the region.
3. Invest in technology and supply chain management, especially in Cold Storage facilities as food constitutes about 62% of retail sales.
4. Put in place a system of Reverse Logistics which is pretty non-existent in India.
5. Look for potential in the rural areas.
6. 700 million Sq. Ft. of quality retail space will be required by year 2010 as compared to a supply of 200 million Sq feet creating a gap of 500 million Sq. ft.
7. Have high Quality measures so as to keep the confidence of the retail customers.
8. Big retail players should participate with local Kirana stores by giving them franchises and smaller outlets.
9. Invest enough in education & training to sustain the boom and have proper man power to handle it.
10. Giving the sector an Industry status by the Government.
Despite some of the negative areas of the retail boom it seems INDIA CAN SURELY SUSTAIN THE COMPETITION ON THE GLOBAL STAGE.