A Comparative Study of Retailing in India by International Retailers

Topics: Retailing, Discount store, Wal-Mart Pages: 14 (4877 words) Published: January 8, 2013
Gagandeep Kaur
MBA(IB)2011-13, 13 C
A Comparative Study of Retailing in India by International Retailers


According to AT Kearney, India’s retail industry comprises US$ 435 billion. It entails only 6 per cent of itself as organised retail segment as of 2010, according to Booz and Co (India) Pvt Ltd. Hence, there is a great potential to be explored by domestic and international players, especially after Cabinet's decision to allow up to 51% foreign direct investment (FDI) in multi-brand retail sector and 100% FDI in single-brand retail. (Why India is a big market: refer page 23, Annexure) The Business Monitor International (BMI) India Retail Report for the fourth-quarter of 2011 forecasts that the total retail sales will grow from US$ 411.28 billion in 2011 to US$ 804.06 billion by 2015. The report has underlined factors like economic growth, population expansion, increasing wealth of individuals and rapid construction of organized retail infrastructure as major drivers for the optimistic forecast figures. (Refer Annexure, fig 2) According to a research report named ‘Retail Sector in India’ by Research and Markets, Indian retail sector accounts for 22 per cent of the country’s gross domestic product (GDP) and contributes to 8 per cent of the total employment. FDI in single-brand retail currently is 0.03% of cumulative FDI of around $149 billion from April 2000 to September 2011. The announcement is expected to generate 10 million jobs over three years, without impacting smaller and domestic retailers. FDI in retail will provide the farming community a new support by investing in good farming practices and providing them with better prices. The international players will bring a sophisticated front-end that will boost investment in infrastructure by retail players, third-party supply-chain companies and the government. This will improve efficiencies in the supply chain, cut wastage, increase efficiency and bring down consumer prices. India has been ranked as the fourth most attractive nation for retail investment among 30 emerging markets by the US-based global management consulting firm, A T Kearney, in its Global Retail Development Index (GRDI) 2011. India’s MGR (Mass Grocery Retail) sector remains dominated by small-scale traditional retail outlets. All four key modern formats (supermarkets, hypermarkets, convenience and discount stores) are already present within India’s MGR market but these stores are largely operated by a handful of local retailers. Structure of India’s MGR market till 2010 (Estimated number of Outlets: fig3, Sales by Format: fig4) is given in Annexure. Collaborative model for international products — Joint ventures (JVs) are emerging as the preferred model for new entrants, wherein foreign players leverage the knowledge of the local player and focus on key issues such as quality, pricing, promotions and brand management. Key examples include the Bharti Group‘s JV with Wal-Mart for retail in the Indian market.

MGR sales growth for 2011 = +19.7%; compound annual average growth rate to 2015 = +17.6% (Refer Annexure Fig 5) Increased exposure to Western consumption habits has fuelled consumerism in developed and emerging Asia. Wealthy consumers in major towns and cities turn to modern formats in search of the convenience and quality that they now desire and can increasingly afford. A lot of international retailers are planning to enter and expand their operations in India after the reforms introduced in the FDI policy in retail sector, like Walmart, United Colors of Benetton (UCB), Da Milano. According to a report by research firm CB Richard Ellis India, over 6 million square feet of retail mall space was added across India in the first six months of 2011 (Refer Annexure Fig 6); primarily due to aggressive expansion by organized retailers. The potential cities which are good for entering are given in Annexure Fig...
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