SOUMITRA MOOKHERJEE

Topics: Retailing, Shopping mall, Product Pages: 13 (3333 words) Published: January 27, 2014


Retail Business In India
The Changes and Challenges Ahead

I. Backgrounder

The retail industry has witnessed phenomenal expansion and the nature and structure of the industry has undergone a dramatic transformation. The concept of organized retailing and international franchising has gathered significant importance and prominence in the developing countries and the tiger economies of Asia. The advent of sophisticated and superior Information Technology tools and reduction in Communication barriers has led to immense opportunities in Direct Selling. This gives the consumers easy and uninterrupted access to products available throughout the world and that too at a lower cost. The consumers not only have a wide spectrum of products to select from, but also have better access to a variety of products. As individuals become more and more computer savvy, they can book the products of their own choice on line. Also, the product manufacturers are gradually exploring ways and means to reduce the number of channels through which their products are distributed for gaining proximity to customers and rationalizing costs.

In India, retailing is one of the largest source of employment after agriculture and has the deepest penetration into rural India generating over 10% of India’s GDP. The retail industry in India remains fragmented, with several small and medium players accounting for a sizeable portion of the total market size. In the rural segment, the consumers and farmers purchase their daily necessities and other items from the unbranded stores and distribution outlets. The urban centres have witnessed the mushrooming of retail/ departmental stores and many Indian group companies have constituted their own retail outlets for circulating and distributing their products. Indian firms are making concerted efforts to reengineer their brands and drive sales volumes. However, the performance success of retail stores lies in their ability to achieve economies of scale and manage operational challenges effectively.

The Government of India is now giving a positive consideration to open up the Retail Trade Sector for Foreign Direct Investment (FDI). This would provide an impetus for foreign firms to enter into alliances and form joint venture agreements with Indian firms and increase their customer base. In India, the population base of over one billion, the demographic profile and the dynamic changes in consumer behaviour provide a base and foundation for capitalizing on the enormous market opportunities. Given the vast potential of the Indian market, a lot remains to be explored for expanding the commercial operations in these sectors.

Companies are adopting leading edge business strategies and evolving key practices in providing exceptional customer value. The integration of world markets will bring the national and international players together and help expand their market base.

II. Factors Propelling Demand:

The following factors will trigger rapid growth in demand for consumer products in India in the forthcoming years:

Healthy GDP growth rate of 6-8% and commitment to economic reform measures Low Per Capita consumption pointing towards latent demand potential Burgeoning Middle Class Population and rising disposable income Entry of MNCs and abundant choice for consumers.

Dramatic change in consumption habits and aspiration for better lifestyle Rising awareness brought about by sophisticated market communication pattern The media revolution and the publicity and brand promotion measures

III. The Competitive Environment:

The Indian retail sector is highly fragmented in nature. The size of the Indian retail market is roughly 10% of India’s GDP. About 45-50% of the market is dominated by grocery products, and it is this area which is encountering huge risks on account of fragmentation and massive wastages. The national food chain incurs huge losses annually due to deficiencies in...
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