indian institute of management kozhikode
Managing Demand Fluctuations in Supply Chain System of MORE Project Proposal
SCM Section A
Retail Industry in India
India’s retail industry accounts for 10 percent of its GDP and 8 percent of the employment to reach $17 billion by 2010. The Indian retail market is estimated at US$ 350 billion. But organized retail is estimated at only US$ 8 billion. Organized retail seems to be a mar 5 % of the industry. The sector is dominated by the local kirana shops, owner-managed general stores, chemists to drug stores, footwear shops, apparel shops, paan and beedi (small corner shops) and handcart vendors. However this is changing very fast and many foreign and domestic players have entered market with huge chains of stores. With potential driven by an emerging middle class, highly qualified labour force and high acceleration rate of most of the major economic indicators as favouring factors India’s retail market seem promising. India has been ranked fourth on Global Retail Development Index (GRDI). Other than the three major factors pointed out earlier other factors for India to become a sort after destination includes High saving and investment rates;
Huge amount of FDI inflow (FDI from April 2000 to Feb 2012 stood at US$246.6bn) the service sector is attracting the biggest chunk Internet and technological advancement: Another retail market includes e-retail which is as reported by industry body Assocham is growing at 35% annually and India is soon going to have third largest number of internet users in the world which could further drive up the growth rate.
The exposure to brands have increased significantly and as it keeps growing further they would become more discerning consumers
According to Department of Industrial Policy and Promotion the FDI in single brand retail in India is 46mn USD. The lax that government showed for regulatory changes is hitting retail sector hard. Only few major players have showed any interest to enter Indian soil after the bill for 100% FDI bill got passed. London based premium leather footwear pavers was the first to approach FIPB (Foreign Investment Promotion Board).
The issue of multi brand retail is even more complicated. After allowing 51% FDI in Dec 2011 both ruling party and opposition is delaying any further liberalization perplexed by estimated job loss in millions on one side and lobbying by business community on the other side. Indians are continuing to urbanize and they have started to spend as much on non-food items as they spent on food items. If we focus on the positive side of what retail outlets can bring the list goes like; Improvements in India’s supply chain infrastructure
lower the wastage of farm output
better supply to consumers
Help ease inflationary pressure
better control on prices of food items which are sold in open markets currently tax benefits to government
Promised and improved quality
Behavioural pattern, preferences and expenditure capacity of Indian consumers: The focus of most consumers is shifting from on the corner kirana shops to a family visit to retail chains. Retailers’ are giving wide range of choices that the customers find less time consuming then going to several shops for purchase. Income level is increasing and as Indians are inclined towards socializing there spending is increasing too. Growing consumer power in tier 2 and tier 3 cities in India: Yes bank and Confederation of Indian Industry (CII) have estimated the rural market form retail to be worth $60 mn. Many players have recently realized the importance of this market with ITC’s introduction of the country’s first rural mall, Choupal Sagar, Hariyali Kisaan Bazaar of DCM Sriram Group and addition of Great Value and George to Easyday (the supermarket chain of Bharti Airtel which recently entered retail market with known giant...
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