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What are the effects of globalisation on retail market?


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2008-11-09 17:57:06
2008-11-09 17:57:06

Retail in the Era of Globalization INDIAExecutive Summary The retailing industry in India estimated at Rs 930,000 crore (2003-04) is expected to grow at 5% p.a. In line with predictions made in 2002, organised retailing is well on its way to become a Rs 35,000 crore market by 2005. The size of organised retailing market stands at RS 28,000 crore in 2004, thereby, making up a mere 3% of the total retailing market. Moving forward, organised retailing is projected to grow at the rate of 25-30% p.a. and is estimated to reach over an astounding Rs 100,000 crore by 2010. Its contribution to total retailing sales is likely to rise to 9% by the end of the decade. In this scenario of feverish activity, this paper aims to map the global scene to the Indian retail Industry. It looks at the factors that have been fuelling this boom so far and what will drive the growth of the industry in the future. Urban India represents only a fraction of the opportunity that the retail sector can hope to exploit. Significant portion of future growth has to come from the rural market. This paper takes a look at the modern retailing formats being experimented with, both in the cities and the countryside and highlights how they are different from one another. To fully harness the potential benefits that a huge leap in retail can offer to all its stakeholders in India, the roadblocks in its way have to be removed. This paper analyses the issues that currently impede the realisation of the maximum progress possible. It also tries to come up with recommendations that, if implemented, can provide a fillip to the current growth rate of the industry and truly make the Indian Retail Revolution a success story that the world will have to sit up and take notice of. 1. Introduction Retailing is the final step in the distribution of merchandise - the last link in the Supply Chain - connecting the bulk producers of commodities to the final consumers. It covers diverse products such as food, apparels, consumer goods, financial services and leisure. 1.1 Retail Value Proposition The value proposition that retail offers to a consumer is easy availability of the desired product in the desired size at the desired time. 1.2 Retailing in India · Total Consumer Spend in the Year 03-04 - INR 9300 billion (USD 375 billion) growing over 5% annually · Retail sales - 55% at INR 280 billion (USD 205 billion) · Organised Retail - Only 3% but growing at 30% · Organised retail to cross INR 1000 billion mark by 2010 · INR 200 billion investment in the pipeline · Top 6 cities account for 66% of total organized retailing 1.3 Trends Affecting Indian Retail Industry · Changing age profile & Disintegration of joint family

India is believed to have an average age of 24 years for its population as against 36 years for the USA and 30 years for China. A younger population tends to have higher aspirations and spends more as it enters the earning phase. Also, nuclearisation of families has led to enhanced demand. · Growing disposable income

More Indian households are getting added to the consuming class with the growth in income levels. Also, with declining interest rates, the aversion of domestic consumers to taking loans is also fast disappearing. · Globalization

Growing media penetration is leading to a convergence of aspirations of various classes of consumers, bridging the rural-urban divide. The modern consumer cannot be satisfied by any product or service that is lesser in quality than the best offered in any other place on the globe. Page - 3 Till 1980s, India knew only kirana stores. Things started to change slowly after that, with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim opening their company owned outlets. Later on, Titan, maker of premium watches, successfully created an organized retailing concept in India by establishing a series of elegant showrooms. In recent years in line with the global retail scenario, India has seen different retail formats being experimented with. 2. Retail Formats Broadly, the organized retail sector can be divided into 2 segments. · In-store Retailers: Operate through fixed point of sale outlets located and designed to attract a high volume of walk-in customers. Also referred to as brick-and mortar format. · Non-store Retailers: Reach out to the customers at their homes or offices through direct selling, tele marketing and e-commerce. Major formats of In-store retailers have been listed in Table below: - Format Description Value Proposition Branded Stores Exclusive showrooms either owned or franchised out by a manufacturer. Complete range available for a given brand, Certified product quality. Specialty Stores (Multi-Brand) Focus on a specific consumer need, carry most of the brands available. Greater choice to the consumer, comparison between brands possible. Page - 4 FormatDescription Value Proposition Department Stores Large stores having a wide variety of products, organized into different departments, such as clothing, house wares, toys, etc. One stop shop catering to varied consumer needs, service as differentiator. Supermarkets Extremely large self-services retail outlets. One stop shop catering to varied consumer needs. Discount Stores Stores offering discounts on the retail price through selling high volumes and reaping the economies of scale. Low prices. Hyper-mart Larger than a Supermarket, sometimes with a warehouse appearance, generally located in quieter parts of city. Low prices, vast choice available including services as cafeterias. Convenience Stores Small self-service formats located in crowded urban areas. Convenient location and extended operating hours. Shopping Malls An enclosure having different formats of in-store retailers all under one roof. Variety of shops available close to each other. Of the Top-200 Global Retailers, 21% of retailers fall in the specialty stores category, followed by 18% in supermarket, 12% in department and 9% each in hypermarket and discount stores. In line with the global evolution, Indian Retailing has also witnessed a series of experiments across the country with new format being tested out; old ones tweaked around or just discarded. Some of these are listed in the table below: - Retailer Old Format New Format Experimented With Shoppers' Stop Department Store Quasi-mall Ebony Department Store Quasi-mall, smaller outlets, adding food retail Crossword Large Bookstore Corner shops Piramyd Department Store Quasi-mall, food retail Pantaloon Own Brand Store Hypermarket Subhiksha Supermarket Considering moving to self service Vitan Supermarket Suburban discount store Foodworld Food Supermarket Hypermarket, Foodworld express Globus Department Store Small fashion stores


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