UNIT-2
Retail Formats
Organized and unorganized formats – Different organized retail formats –
Characteristics of each format – Emerging trends in retail formats – MNC's
role in organized retail formats.
Table of Contents
2.1.Retail Formats( 2 & 8 marks) .................................................................................................................. 1
Classification of retail formats ...................................................................................................................... 2
2.2.Organised retailing( 2, 8 & 16 marks) ..................................................................................................... 4
CHALLENGES TO RETAIL DEVELOPMENT IN INDIA ....................................................................................... 4
2.3.Characteristics of organized retail formats............................................................................................. 6
2.5.Unorganised retailing( 16 marks) ......................................................................................................... 12
2.6.Characteristics of unorganized retailing ............................................................................................... 13
2.7. Emerging Trends in Modern Retail Formats of India( 8 & 16 marks) .................................................. 16
2.8. Grey Marketers( 2 marks) .................................................................................................................... 17
2.9.The Indian Retail Sector ( General question) ........................................................................................ 18
The Evolution of Retail in India( 8 & 16 marks) .......................................................................................... 18
Drivers of Retail change in India ............................................................................................................. 20
2.10.Classification of Indian retail sector( 16 marks).................................................................................. 20
Recent changes( 2 & 8 marks) .................................................................................................................... 22
2.11.Indian Organised Retail: (MNC’S)(8 & 16 MARKS) .............................................................................. 23
2.1. Retail Formats ( 2 & 8 marks)

Retail format is the store ‘package’ that the retailer presents to the shopper.

A format is defined as a type of retail store that includes location, size, merchandise, display,
service, price that are used by a set of retailers.
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Classification of retail formats
Classification of retail formats
Store based
Non-Store based
Product mix
Service retail
Price
1. Classification on basis of the product mix offered:

Convenience stores
A relatively small stores located near residential areas; they are open for long hours, seven days a week
and offer a limited line of convenience products like eggs, bread, milk, etc.,.

Supermarket
A supermarket, a large form of the traditional grocery store, is a self-service shop offering a wide variety
of food and household products, organized into aisles. It is larger in size and has a wider selection than a
traditional grocery store, but is smaller and more limited in the range of merchandise than a hypermarket
or big-box market.
The supermarket typically comprises meat, fresh produce, and dairy and baked goods aisles, along with
shelf space reserved for canned and packaged goods as well as for various non-food items such as
kitchenware, household cleaners, pharmacy products and pet supplies
Hypermarkets
Hypermarket offers a large basket of products, ranging from grocery. Fries & processed food, beauty &
healthcare products etc.
Example – Spencer’s, Big Bazaar

Specialty stores
Specialty stores are single category, focusing on individuals and group clusters of the same class with
high product loyalty. Examples – Footwear ,stores, gift stores etc.
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Examples- Archie's, Woodland etc.

Category killers
A New Concept imported from U.S- Category Killer is a kind of discount specialty store that offers less
variety but deep assortment of merchandise. By offering a deep assortment in a category at comparative
low prices, category specialist can be able to “kill’ that specific category of merchandize for other
retailers.

Department stores
Department stores have a large layout with a wide range of merchandise mix, usually in cohesive
categories, such as showed towards garments.
Example:- Ebony, Shopper’s stop, Westside
2. Classification on the basis of price of the merchandise offered to the end customer

Consumer co-operatives
It aims at providing essential commodities at reasonable prices. AS s a national policy, consumer
cooperatives have been encouraged and developed as democratic institution owned, managed and
controlled by its members for protection of the interested of the common consumers.

Off price retailers
They buy manufacturers seconds, overrun, off seasons at a deep discount. these outlets are usually seen
by a parent company as a means of increasing the business.

Discount department stores
It range from 80,000 sqft to 130,000 sqft, offers wide variety of merchandise including automotive
parts and services, house wares, home furnishing, apparels and beauty aids.

Outlet stores
It range from 20,000 sqft to 80,000 sqft are typically the discount arms of major department stores .

Warehouse clubs
It ranges from 104,000 sqft to 170,000 sqft, offer a variety of goods in bulk, at wholesale prices.

Super warehouse store
A hybrid warehouse/superstore with 50,000 plus items and the full range of service departments,
featuring high quality perishables and reduced prices.

Limited assortment store
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A low price outlet with minimal service and fewer than 2,000 items. It features numerous private label
products and is popular among stamp recipients seeking to stretch their limited dollars.


Supercenter
Wholesale club
A retail /wholesaler hybrid that offers consumers and small business a limited and economical selection
of food and non-food products.

Dollar stores
A traditional format that not sells 20-80% of groceries and other consumables products at discounted
prices.
2.2.Organised retailing( 2, 8 & 16 marks)
Organized retail is nothing but a retail place all the items are segregated and brought under one roof,
unlike the unorganized retail where there are different things are sold in different shops. It also aims to
bring maximum of different brands making the same type of product together.

Organised retailing refers to trading activities undertaken by licensed retailers, that is, those who
are registered for sales tax, income tax, etc.

These include the publicly traded supermarkets, corporate-backed hypermarkets and retail chains,
and also the privately owned large retail businesses
CHALLENGES TO RETAIL DEVELOPMENT IN INDIA
Organized retail in India is little over a decade old. It is largely an urban phenomenon and the
pace of growth is still slow. Some of the reasons for this slow growth are: THE KIRANAS CONTINUE
The very first challenge facing the organized retail industry in India is competition from the
unorganized sector. Traditionally retailing has established in India for centuries. It is a low cost structure,
mostly owner operated, has negligible real estate and labor costs and little or no taxes to pay. Consumer
familiarity that runs from generation to generation is one big advantage for the traditional retailing sector.
On the other hand, organized sector have big expenses to meet and yet have to keep prices low enough to
compete with the traditional sector.
RETAIL NOT BEING RECOGNIZED AS AN INDUSTRY IN INDIA
Lack of recognition as an industry hampers the availability of finance to the existing and new
players. This affects growth and expansion plans.
THE HIGH COSTS OF REAL ESTATE
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Real estate prices in some cities in India are amongst the highest in the world. The lease or rent
of property is one of the major areas of expenditure; a high lease rental reduces the profitability of a
project.
HIGH STAMP DUTIES
In addition to the high cost of real estate the sector also faces very high stamp duties on transfer
of property, which varies from state to state (12.5% in Gujarat and 8% in Delhi). The problem is
compounded by problems of clear titles to ownership, while at the same time land use conversion is time
consuming and complex as is the legal process for settling of property disputes.
LACK OF ADEQUATE INFRASTRUCTURE
Poor roads and the lack of a cold chain infrastructure hampers the development of food and
grocery retail in India. The existing supermarkets and foods retailers have to invest a substantial amount
of money and time in building a cold chain network.
MULTIPLE AND COMPLEX TAXATION SYSTEM
The sales tax rates vary from state to state, while organized players have to face a multiple point
control and system there is considerable sales tax evasion by small stores. In many locations, retailers
have to face a multi point octroi with the introduction of value Added Tax (VAT) in 2005, certain
anomalies in the existing sales tax system causing disruption in the supply chain are likely to get
corrected over a period of time.
There is price war between different retail organizations. Each and every one is saying to provide
goods at low cost and offers various promotional schemes. In such a case it is difficult to keep one’s
customers with oneself.
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2.3.Characteristics of organized retail formats

Direct interaction with customers

Employment generation

Boosts to exports

Improvement of government revenues

Dominant in food, grocery & apparel.

Provide ideal shopping

Expose shoppers

Expanded business opportunities.
Importance of organized retailing

Price advantage

Merchandise

Dearth of time

Employment opportunities

Better social infrastructure

Benefit to tourism

Better realization of taxes
Indian organized retail market

Indian organized retail market is growing at a fast pace due to the boom in the India retail
industry. In 2005, the retail industry in India amounted to Rs 10,000 billion accounting for about
10%.

Retail market in the Indian organized sector is expected to cross Rs 1000 billion by
2010.Traditionally the retail industry in India was largely unorganized, comprising of drug stores,
medium, and small grocery stores.

Most of the organized retailing in India have started recently and is concentrating mainly in
metropolitan cities. The growth in the Indian organized retail market is mainly due to the change
in the consumers’ behavior. This change has come in the consumer due to increased income,
changing lifestyles, and patterns of demography which are favorable.
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
Now the consumer wants to shop at a place where he can get food, entertainment, and shopping
all under one roof. This has given Indian organized retail market a major boost

Retail market in the organized sector in India is growing can be seen from the fact that 1500
supermarkets, 325 departmental stores, and 300 new malls are being built.

Many Indian companies are entering the Indian retail market which is giving Indian organized
retail market a boost. One such company is the Reliance Industries Limited. It plans to invest US$
6 billion in the Indian retail market by opening 1000 hypermarkets and 1500 supermarkets.

Pantaloons is another Indian company which plans to increase its retail space to 30 million square
feet with an investment of US$ 1 billion. Bharti Telecoms an Indian company is in talks with
Tesco a global giant for a £ 750 million joint venture.

A number of global retail giants such as Walmart,Carrefour, and Metro AG are also planning to
set up shop in India. Indian organized retail market will definitely grow as a result of all this
investments
Classifying Indian retail:
 (A)Modern Format retailers
1) Supermarkets (Food world)
2) Hypermarkets (Big Bazaar)
3) Department Stores (Shoppers Stop)
4) Specialty Chains (Ikea)
5) Company Owned Company Operated (BP)
 (B)Traditional Format Retailers:
1) Kiranas: Traditional Mom and Pop Stores
2) Kiosks
3) Street Markets
4 )Exclusive /Multiple Brand Outlets

(C)Large Indian retailers
I. Hypermarket
1) Big Bazaar
II Department store
1) Lifestyle
2) Pantaloons
3) Pyramids III Entertainment
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4) PVR
 The well established organized retail sector in India are Pantaloon Retail, Shoppers Stop,
Spencer's, Hyper CITY, Lifestyle, Subhiksha & newly emerging Reliance etc. Over 20,000 new
retail outlets are expected to open within this segment. Major corporate retail like Wal-Mart and
have started to try and take over the Indian retail sector
 Advantages of Organized Retail in India
1.Enhanced Welfare Gains for ConsumersThe emergence of organized retail undoubtedly gives consumers a wider choice of goods, more
convenience, and a better shopping environment, among other benefits. Organized retail can
appear small but spread in all local markets, providing the convenience of a neighborhood kirana
store but with procurement on a mass scale that keeps prices low and provides greater variety.
2. Gains for FarmersOrganized retailers have already started procuring fruit and vegetables from farmers directly
bypassing the various intermediaries who add more costs than value to the food chain. They are
investing heavily on logistics in the form of centralized warehousing and distribution centers,
transport and cold storage, either directly or through engaging third party logistics companies.
They are also employing a large number of unskilled workers for sorting, grading, packaging and
labeling. All these will enhance farmer’s realizations, improve quality of products at the shop and
reduce the ultimate consumer price.
3. Link with ManufacturingThe Planning Commission has identified four sectors as the major employment generating sectors
for the Eleventh Plan period, 2007-12. They are: (i) food processing industry; (ii) textiles and
clothing; (iii) tourism; and (iv)construction.
4. Boost to Exports
some of the international retailers that have plans for India in the future have already developed
suppliers in the country and have started exporting from India. For example, Wal-Mart exported
an equivalent of US$ 600 million, and IKEA about Euros from India in 2006-07.
5. Impact on Growth and ProductivityOrganized retail will enhance the growth and productivity of India by helping the farmers,
consumers and other sectors by providing high quality products.
6. Improvement of Government Revenues- Another significant advantage of organized
retailing is its contribution to government revenues. Unorganized retailers normally do not pay
taxes and most of them are not even registered for sales tax, VAT, or income tax. Organized
retailers, by contrast, are corporate entities and hence file tax returns regularly.
7. Impact on Employment and Prices-
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The growth of organized retail will enhance the employment potential of the Indian economy.
While providing direct employment in retail, it will drive the growth of a number of activities in the
economy which in turn will open up employment opportunities to several people. An important point to
be noted is that while the jobs that organized retail displaces are the low-end, low-quality,
underproductive ones, the new jobs created are the high quality, productive ones. It also generates a
number of jobs for unskilled labour for the tasks of sorting, grading, labeling, etc.
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Challenges
Weakness of Player
 Retail not being recognized as an industry in India.
 The lack of recognition as an industry hampers the availability of finance to the existing and
new players. This affects growth and expansion plans
The high cost of real estate:
 Real estate price in some cities in India are amongst the highest in the world.
 The lease or rent of the property is one of the major areas of expenditure, high
lease rentals eat into the profitability of a project.
Lack of adequate infrastructure

Poor roads, lack of a cold chain infrastructure, etc , hamper the development of food and fresh
grocery retail in India.
 The existing supermarkets and food retailers have to invest a substantial amount of money and
time in building a cold chain network.
 Multiple and complex taxation system
The sales tax rates very from state to state while organized players have to face a multiple point
control and tax system; there is considerable expense to transfer good from one store to another.
 Foreign direct investment:The fact that foreign direct investment (FDI) is not permitted in pure retailing is seen as one of
the prime reasons for the slow growth of retail in India.
A global retailer can enter India only by way of a franchise with an Indian partner or through
technological alliances.
 Purchasing power of money
As the Indian population mostly consists of middle class families and low wages worker they
don't want to go in the super market or retail market
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2.5. Unorganised retailing( 16 marks)

Unorganised retailing, on the other hand, refers to the traditional formats of low-cost retailing, for
example, the local mom and pop store, owner manned general stores, pan/beedi shops,
convenience stores, hand cart and pavement vendors, etc.
Characteristics of unorganized retail formats
 Lack of inventory control & supply chain management
 Labor intensity
 Family run stores
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 Lack of standardization
 Crowded format
 Absence of real competition
 Low productivity
 Unique operation.
Reasons for popularity of unorganized sector

Fulfilling the needs of customer

Easy daily assortment

Support

Proximity of the store

Providing number of options.
2.6. Characteristics of unorganized retailing
Small-store (kirana) retailing has been one of the easiest ways to generate self-employment, as it
requires limited investment in land, capital and labour.
It is generally family run business, lack of standardization and the retailers who are running
this store they are lacking of education, experience and exposure. Unorganized retail sector is still
predominating over organized sector in India, unorganized retail sector constituting 98% (twelve
million) of total trade, while organized trade accounts only for 2%.
1 In smaller towns and urban areas, there are many families who are traditionally using
these kirana shops/mom and pop stores offering a wide range of merchandise mix. Generally
these kirana shops are the family business of these small retailers which they are running for more
than one generation.
2. These kirana shops are having their own efficient management system and with this
they are efficiently fulfilling the needs of the customer. This is one of the good reasons why the
customer doesn't want to change their old loyal kirana shop
3. A large number of working class in India is working as daily wage basis, at the end of
the day when they get their wage, they come to this small retail shop to purchase wheat flour, rice
etc for their supper. For them this the only place to have those food items because purchase
quantity is so small that no big retail store would entertain this
4. Similarly there is another consumer class who are the seasonal worker. During their
unemployment period they use to purchase from this kirana store in credit and when they get their
salary they clear their dues. Now this type of credit facility is not available in corporate retail
store, so this kirana stores are the only place for them to fulfill their needs.
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5. Another reason might be the proximity of the store. It is the convenience store for the
customer. In every corner the street an unorganized retail shop can be found that is hardly a
walking distance from the customers house. Many times customers prefer to shop from the
nearby kirana shop rather than to drive a long distance organized retail stores.
6. This unorganized stores are having n number of options to cut their costs. They incur little to
no real-estate costs because they generally operate from their residences. Their labor cost is also
low because the family members work in the store. Also they use cheap child labor at very low
rates. As they are operating from their home so they can pay for their utilities at residential rates.
Even they cannot pay their tax.
.
The suggestions might be
(a) Establishment of Retailer co-operatives among retailers which is highly required for the
sustenance of the unorganized retail sector
(b)Merger and buy-out of weak retailers by a stronger one that would give a new horizon to the
small retailer
(c) Setting up of franchisee organization may also help in strengthening the position of the
retailers. The franchiser can exert a tremendous control over the way retailing is done.
(d) There must be good network connection between retail organizations, the suppliers and other
channel members to use compatible technology so that they can build strong distribution set up to
satisfy the customers.
(e) Setting up of more and more non-store retailing centers would also ensure a strong retailing
organization. Non-store retailing makes implementation of modern principles easier and less
costly.
(f) Moreover there must be a change in the mindset of the unorganized retailer. They have to
understand the pulse of the trend. They have to understand, come forward & lead this change
management then only this sector not only can exist but flourish.
Advantages of unorganized retail
1. Employment Impact
Unorganized retail outlets employ more family labour than hired labour; on an average
they employ 1.5 persons per shop from the family, and hired employees of 1.1 persons in India. It
is a way of livelihood for Indian people.
2. Location Advantage for the Unorganized RetailersLocation is a comparative advantage for unorganized retailers as the mean distance to
the residence for consumers at unorganized outlets is 1.1 km compared to 2.6 km for consumers
at organized outlets. A majority of consumers walk to traditional retailers because it is
convenience to reach.
3. Credit Facilities
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Consumers get credit facilities in small unorganized retail stores and can make a deferred
payment which is not possible in organized retail stores.
4. Purchase of small quantities
It’s a typical attitude of Indians to purchase in small quantities of various goods which
they can purchase from small shops than organized retail stores.
ORGANISED v/s UNORGANISED

The Indian retail market, over the last decade, has been increasingly leaning towards organized
retailing formats.

The pattern in domestic retailing is altering in the favor of organized modern retailing, a big
change from the traditional plethora of unorganized family-owned businesses.

Rapid urbanization, changes in shopping pattern, demographic dividend and pro-active measures
by the Government are abetting the growth of the retail sector in India.

Organised retail in India is expected to increase from 5 per cent of the total market in 2008 to 14 18 per cent of the total retail market and reach US$ 450 billion by 2015

According to a report titled 'India Organised Retail Market 2010', published by Knight Frank
India, during 2010-12 around 55 million square feet (sq ft) of retail space will be ready in
Mumbai, national capital region (NCR), Bangalore, Kolkata, Chennai, Hyderabad and Pune.
Besides, between 2010 and 2012, the organized retail real estate stock will grow from the existing
41 million sq ft to 95 million sq ft.

Driven by the growth of organized retail coupled with changing consumer habits, food retail
sector in India is set to be more than double to US$ 150 billion by 2025.
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Recent Trends
Traditionally three factors have plagued
the retail industry:
Unorganized : Vast majority of the twelve million
stores are small "father and son" outlets
Recent changes:
Experimentation with formats: Retailing in
India is still evolving and the sector is witnessing a
series of experiments across the country with new
formats being tested out. Ex. Quasi-mall, suburban discount stores, Cash and carry etc.
Fragmented : Mostly small individually owned
businesses, average size of outlet equals 50 s.q. ft.
Though India has the highest number of retail
outlets per capita in the world, the retail space per
capita at 2 s.q. ft per person is amongst the lowest.
Store design : Biggest challenge for organized
retailing to create a “customer-pull” environment
that increases the amount of impulse shopping.
Research shows that the chances of senses
dictating sales are upto 10-15%. Retail chains like
MusicWorld, Baristas, Piramyd and Globus are
laying major emphasis & investing heavily in store
design.
Rural bias: Nearly two thirds of the stores are
located in rural areas. Rural retail industry has
typically two forms: "Haats" and “Melas". Haats are
the weekly markets : serve groups of 10-50 villages
and sell day-to-day necessities. Melas are larger in
size and more sophisticated in terms of the goods
sold (like TVs)
Emergence of discount stores: They are
expected to spearhead the organized retailing
revolution. Stores trying to emulate the model of
Wal-Mart. Ex. Big Bazaar, Bombay Bazaar, RPGs.
Unorganized retailing is getting organized: To
meet the challenges of organized retailing such as
large Cineplex's, and malls, which are backed by
the corporate house such as 'Ansals' and 'PVR‘ the
unorganized sector is getting organized. 25 stores
in Delhi under the banner of Provision mart are
joining hands to combine monthly buying.
Bombay Bazaar and Efoodmart formed which are
aggregations of Kiranas.
2.7. Emerging Trends in Modern Retail Formats of India ( 8 & 16 marks)
 Most of grocery retailers are region centric to suit different segments and taste preferences.
 Trial & error: Now a number of retailers are in a mode of experimentation and trying several
formats which are essentially to fit into the consumer mind space. For example Pantaloon Retail
India is experimenting with several retail formats to cater to a wide segment of consumers in the
market.
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 Govt. is also promoting the development of modern retail formats by policies like tax
exemptions as Punjab government did.
 Increasing acceptance of rural markets- Real estate developers are jumping very fast to take
mall culture further from Metro cities to smaller cities.
 Emergence of Private-Label Brands: The private labels are offering flexibility to both the
retailer and the consumer on price front.
 Emergence of convenient stores: In India, Convenience stores occupied 23 thousand sq. meter
of retail space with sales of about Rs 1347 million in 2005 and are expected occupy 85 thousand
square meter of selling space by 2010. It offers ease of shopping and customized service to the
shoppers
 Category Killer: A New Concept imported from U.S- Category Killer is a kind of discount
specialty store that offers less variety but deep assortment of merchandise. By offering a deep
assortment in a category at comparative low prices, category specialist can be able to “kill’ that
specific category of merchandize for other retailers.
 Hyper markets- Hypermarkets not only offer consumers the most extensive merchandise mix,
product and brand choices under one roof, but also create superior value for money advantages of
hypermarket shopping. With product categories on offer ranging from fresh produce and FMCG
products to electronics, value apparels, house ware, do it yourself (DIY) and outdoor products,
the hypermarkets are emerging as one of the popular formats in India. Eg pantaloon’s Big Bazaar.
 Most of the customers still rely on traditional supermarkets which sells grocery, fresh, cut
vegetables, fruits, frozen foods, toiletries, cosmetics, small utensils, stationery and Gift items.
 e-Retailing or internet retailing is also emerging as a new trend all over the world. Eg. e Bay and
rediff are providing a platform to vendors to sell their products online and they do not take the
responsibility of delivering the product to buyer.
 Rural Retailing- rural retailing is witnessing explorations by companies – ITC's Choupal Sagar,
HLL's project Shakthi and Mahamaza are some of the models being tried out.
 Dollar stores & e-tailing.
2.8. Grey Marketers( 2 marks)
These are unauthorized small stores which are owned by any private individual. They do not
have a particular shop. These stores are a biggest threat to both organized & unorganized retailers. Exaroadside small sellers.
In the developed economies, organized retail is in the range of 75-80 per cent of total retail,
whereas in developing economies, the unorganized sector dominates the retail business. The share of
organized retail varies widely from just one per cent in Pakistan and 4 per cent in India to 36 per cent in
Brazil and 55 per cent in Malaysia
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Modern retail formats, such as hypermarkets, superstores, supermarkets, discount and
convenience stores are widely present in the developed world, whereas such forms of retail outlets have
only just begun to spread to developing countries in recent years. In developing countries, the retailing
business continues to be dominated by family-run neighborhood shops and open markets.
As a consequence, wholesalers and distributors who carry products from industrial suppliers and
agricultural producers to the independent family-owned shops and open markets remain a critical part of
the supply chain in these countries.
2.9.The Indian Retail Sector ( General question)
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.

The Indian retail sector is highly fragmented with more than 90 per cent of its business being
carried out by traditional family run small stores.
 This provides immense opportunity for large scale retailers to set-up their operations – a slew of
organized retail formats like departmental stores, hypermarkets, supermarkets and specialty stores
are swiftly replacing the traditional formats dramatically altering the retailing landscape in India.
 India is the third-most attractive retail market for global retailers among the 30 largest emerging
markets, according to US consulting group AT Kearney’s report published in June 2010.
The Evolution of Retail in India( 8 & 16 marks)
 Retail in India has evolved to support the unique needs of our country, given its size and
complexity Haats, Mandis and Melas have always been a part of the Indian landscape. They still
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continue to be present in most parts of the country and form an essential part of life and trade in
Various areas.
 The PDS (Public Distribution System) would easily as the single largest retail chain existing in
the country. the evolution of the PDS of Grains in India has its origin in the “rationing system”
introduced by the British during world war II
 The Khadi & Village industries (KVIC) was also set up post independence. The cooperative
movement was again championed by the government.
 In the past decade, the Indian marketplace has transformed dramatically. However from the
1950,s to the 80,s, investment in various industries was limited due to low purchasing power in
the hands of the consumer and the government’s policies favoring the small scale sector.
 The first attempts at organized retailing were noticed in the textiles sector. One of the pioneers in
this field was Raymond’s which set up stores to retail fabric.
 Raymond’s distribution network today comprises 20,000 retailers and over 256 exclusive
showrooms in over 120 cities of the country
 Other textile manufacturing who set up their own retail chains wee Reliance- which set up Vimal
showrooms and Garden Silk Mills, which set up Garden Vareli showrooms.
The Evolution of retail in India
Traditional
Formats
Itinerant Salesman
Haats
Melas
Mandis etc.
Established
formats
Kirana shops
Convenience/
department stores
PDS/
fair price shops
Pan/ Beedi shops
Emerging
Formats
Exclusive retail outlets
Hypermarket
Internal retail
Malls / Specialty Malls
Multiplexes
Fast food outlets
Service galleries
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Drivers of Retail change in India
Major drivers :
1. Changing Income Profiles: Steady economic growth fuelled the increase in disposable income
in India.
2. Diminishing difference between Rural and urban India: Rural India accounts for over 75% of
India population and this in itself offers a tremendous opportunity for generating volume driven
growth. Tax benefit.
In year 2002-03 LIC sold 50% of its policies in rural India. Same BSNL also sold its 50%
connection in small towns .
3. Changes in Consumption patterns: Occupational changes and expansion of media have caused
a significant change in the way the consumer lives and spends his money.
The changes in income brought about changes in the aspirations and the spending
patterns of the consumers. the buying basket of the consumer changed
4. The emergence of a young Earning India : Nearly 70% of the Indian population is below the age
of 34 taking advantages of employment opportunity in the booming service sector these young
Indians are redefining service and consumption patterns
2.10.Classification of Indian retail sector( 16 marks)
a) FOOD RETAILERS
There are large number and variety of retailers in the food-retailing sector Traditional types
of retailers, who operate small single-outlet businesses mainly using family labour, dominate this sector
In comparison, super markets account for a small proportion of food sales in India, However
the growth rate of super market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of hygiene and attractive
ambience.
b) HEALTH & BEAUTY PRODUCTS
With growth in income levels, Indians have started spending more on health and beauty
products. Here also small, single-outlet retailers dominate the market .However in recent years, a few
retail chains specializing in these products have come into the market. Although these retail chains
account for only a small share of the total market their business is expected to grow significantly in the
future due to the growing quality consciousness of buyers for these products.
C) CLOTHING & FOOTWEAR
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Numerous clothing and footwear shops in shopping centers and markets operate all over India.
Traditional outlets stock a limited range of cheap and popular items; in contrast, modern clothing and
footwear stores have modern products and attractive displays to lure customers. However, with rapid
urbanization, and changing patterns of consumer tastes and preferences, it is unlikely that the traditional
outlets will survive the test of time
D) HOME FURNITURE & HOUSEHOLD GOODS
Small retailers again dominate this sector. Despite the large size of this market, very few large
and modern retailers have established specialized stores for these products. However there is considerable
potential for the entry or expansion of specialized retail chains in the country.
E) LEISURE & PERSONAL GOODS

Increasing household incomes due to better economic opportunities have encouraged
consumer expenditure on leisure and personal goods in the country. There are specialized retailers
for each category of products (books, music products, etc.) in this sector.

Today’s trend is the development of integrated retail cum Entertainment centers or shopping
malls. An increasing number of retailers are focusing on malls now as opposed to stand-alone
developments.

While the number of shopping malls has seen a massive surge in the recent past in the metros
and their suburbs, the latest trend in this sector is the increasing focus on providing leisure
activities such as multiplexes, facilities for kids' entertainment, eateries etc. within the mall
premises.

Customer less the time consumes and more entertainment with his family in malls because they
within shopping mall number of retail shop and variety of products and selected
the product they want.

Good environment in mall, Less crowed and these are enclosed, air-conditioned, multi-level malls
of at least 100,00 sq ft. The most popular Indian anchors include Shoppers' Stop, Globus,
Pantaloon, Lifestyle and hypermarkets like Big Bazaar and Giant. Cinemas also often anchor
malls. Driven by the lucrative tax breaks, the old single screen theatres are being divided into
three-five smaller screens, as was done in the US, years ago, for example Wave and PVR.
F) DURABLE GOODS
The Indian durable goods sector has seen the entry of a large number of foreign companies
during the post liberalization period.
A
greater
variety
of
consumer
electronic items and
household appliances became available to the Indian customer. Intense
competition among companies
to sell their brands provided a strong impetus to the growth for retailers doing business in this sector.
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Recent changes( 2 & 8 marks)
Retailing in India is still evolving and the sector is witnessing a series of experiments across the country
with new formats being tested out. Ex. sub-urban discount stores, Cash and carry etc.
Emergence of discount stores:
They are expected to spearhead the organised retailing revolution. Stores trying to emulate the
model of Wal-Mart. Ex. Big Bazaar, Bombay Bazaar, RPGs.
Unorganized retailing is getting organized: To meet the challenges of organized retailing such as
large Cineplex's, and malls, which are backed by the corporate house such as 'Ansals' and 'PVR‘ the
unorganized sector is getting organized. 25 stores in Delhi under the banner of Provision mart are joining
hands to combine monthly buying. Bombay Bazaar and E -foodmart formed which are aggregations of
Kiranas.
. The sales per hour of $22 million are incomparable to any retailer in the world. Number of employees in
Wal-Mart are about 1.3 million where as the entire Indian retail industry employs about three million
people. One-day sales record at Wal-Mart (11/23/01) $1.25 billion - roughly two third of HLL's annual
turnover.
Evolution of Indian retail
Historic/Rural
Reach
Traditional/Pervasive
Reach
Government
Supported
Modern Formats/
International
Exclusive Brand Outlets
Hyper/Super Markets
Department Stores
Shopping Malls
PDS Outlets
Khadi Stores
Cooperatives
Convenience Stores
Mom and Pop/Kiranas
Weekly Markets
Village Fairs
Melas
Source of
Entertainment
Neighborhood
Stores/Convenience
Availability/ Low
Costs /
Distribution
Shopping
Experience/Efficiency
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2.11.Indian Organised Retail: (MNC’S)(8 & 16 MARKS)
Indian organised retail sector is in a nascent stage, with a few major players, compared to the 15
million kirana stores through which more than 90% of retailing happens in India. However, with the
middle class Indian population and disposable income of the young population increasing, organised
retailers were almost on the verge of a major breakthrough. New players are entering the retail sector
with different formats and incumbents are continuously experimenting to attract customers. But
understanding the Indian customer remains a tough task as many of the retailers have failed to establish
their formats and many are only moderately successful.
The most successful model seems to be Future Group’s Big Bazaar which had received lot of accolades
for the innovative model and ‘dead cheap’ prices that even the lower class can afford. Starting from a
small showroom in Mumbai, Pantaloon Retail has changed to a rolling juggernaut named Future
Group. With lots of shop-in-shop formats and many other independent retail chains, Future Group is in
an admirable position in the retailing field of India. However, Future Group is not free from
competition though many of its competitors are far behind. One of the competitors, a late comer to the
field of retailing, ITC (earlier Imperial Tobacco Company) has changed its image of a cigarette maker
to a socially responsible conglomerate through its innovative initiatives in retailing and agribusiness.
Its rural retailing initiative through rural shopping mall Choupal Sagar and innovative IT project, echoupal, intended to help farmers had helped it to change the retailing picture in the rural areas. Soon,
with its retail-wholesale vegetable and fruit outlet Choupal Fresh, it made a grand entry to the urban
retail sector. Moreover, its food and staples brands such as Ashirvaad and Kitchens of India are best
selling national brands and are sold even through its competitors’ outlets and a great number of kirana
stores. But ITC’s retailing strength lies in Lifestyle Retailing Business Division (LRBD), which sells
the Wills Lifestyle brands of casual and formal wears. With the help of latest technology and a desire
to make it big, LRBD has already become famous with its brands like John Players and Miss Players.
The potential of Indian retail sector has lured many of the business corporations since its inception.
One of the latest entrant in the retail field is the largest public company in India, Reliance Industries
Limited (RIL). Though initial retailing model of Reliance Fresh, a retail chain to sell fruits, vegetables
and staples, was not a success, RIL had planned a huge entry to the Indian retail. Through its retail
arm, Reliance Retail Limited (RRL), RIL has opened independent retail chains on 14 verticals. Its
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exorbitant models were rolled out with enough flamboyancy. The models and formats were innovative,
different and appealing. RRL and its ‘retail conglomerate’ model was expected to be a success.
However, the competition that RRL had to face was stringent as it had to compete with specialty chains
in each of the verticals. Incumbents ITC and Future Group also gave a tough time to RRL. Still the
capital intensive model of RRL was expected to survive and things were fine until global recession hit
India in 2008. The recession had damaged the growth of Indian organised retail considerably; forcing
many of the famous retailers shift locations or close unviable stores. The three major groups had also
suffered from the credit crunch and drop in the conversion rates in the stores. While Future Group has
managed to find a comparatively better growth rate, ITC’s LRBD had shifted its store locations. RRL
is facing dire consequences as the competition in each vertical stiffens and sales drop. The viability of
its ‘retail conglomerate’ model seems distant.
However, Indian organised retail sector is fast recovering from the devastating effects of recession,
thanks to India’s strong economy. However, capital intensive retail models like that of RRL will have
to wait. Finding the right retail format that can appeal to the Indian customer remains a challenge to the
organised retailers.
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