Indian Retail Sector
Essay Preview: Indian Retail Sector
Report this essay
THE INDIAN RETAIL SECTOR
BUSINESS ENVIRONMENT
TOPIC
Pg. No.
1. Introduction
2. Legal / Political / Economic Env. & Government’s role
3. Demographic env. & Customers
4. Technological env.
5. Social / Cultural env.
6. Global env. & Globalisation
7. Competition
8. Intermediaries in the retail sector: Suppliers & Distributors
9. Indian Retail Sector: The road ahead
INTRODUCTION
Retailing- is the most active and attractive sector of the last decade. While the retailing industry itself has been present through history in our country, it is only in the recent past that it has witnessed so much dynamism. It is the latest bandwagon that has witnessed hordes of players leaping onto it. The word retailing is derived from the French word �retailer’, which means �to cut up’ or �break the bulk’. Retailing includes all the activities involved in selling goods or services directly to final customers for personal, non business use. Retailing is the final stage in the distribution process.
Retailing is emerging as a sunrise industry in India and is presently the largest employer after agriculture. In the year 2004, the size of Indian organized retail industry was Rs 28,000 Crore, which was only 3% of the total retailing market. In the year 2004, Rs 28,000 Crore organized retail industry had Clothing, Textiles & fashion accessories as the highest contributor (39%), where as health & beauty had a contribution of 2%. Food & Grocery contributed to 18% whereas Pharma had a contribution of 2%.
Retailing, one of the largest sectors in the global economy, is going through a transition phase not only in India but the world over. For a long time, the corner grocery store was the only choice available to the consumer, especially in the urban areas. This is slowly giving way to international formats of retailing. The traditional food and grocery segment has seen the emergence of supermarkets/grocery chains (Food World, Nilgiris, Apna Bazaar), convenience stores (HP Speedmart) and fast-food chains (McDonalds, Dominos). It is in the non-food segment; however that foray has been made into a variety of new sectors. These include Lifestyle/fashion segments (Shoppers Stop, Globus, Lifestyle, Westside), Apparel/accessories (Pantaloon, Levis, Reebok), Books/music/gifts (Archies, MusicWorld, Hallmark, Crosswords, Landmark), Appliances and consumer durables (Viveks, Jainsons, Vasant & Co.), Drugs and pharmacy (Health & Glow, Apollo). The emergence of retailing in India has more to do with increasing in the purchasing power of buyers, especially post- liberalization, increase in product variety, and also increasing economies of scale, resulting from use of modern supply and distribution management solutions.
In this report we have analysed various aspect of the Macro and Micro environment of the Indian Retail Industry so as to assess its strengths, weaknesses, the opportunities available to it and the possible threats facing it.
LEGAL / POLITICAL / ECONOMIC ENVIRONMENT & GOVERNMENT’S ROLE
As established earlier, the retail industry is becoming one the biggest booms in India and quite the hot topic for discussion for many business analysts. Consequently this sector is affecting the Indian economy to a great extent and the business patterns in India. Also it has led to reforms in many economic factors such the FDI flowing in the country. Also it has affected many other sub-sectors in the country such as agriculture. Owing to these substantial consequences of the Indian retail industry, it is obvious that there would be some governmental activities with regard to it. This section of the report covers these aspects of the external environment of the Indian retail sector.
This industry continues to attract fresh private investment in the country. Many large business groups, including Reliance Industries, Birla group, Bharti Enterprises have announced their intention to cumulatively invest over US$10 billion over the next five years to capture a share in the fast-growing pie of the organized retail sector. Foreign direct investment, a good indicator of confidence in the potential of a country’s economy, also serves to demonstrate India’s importance as a globally significant market. Foreign direct investment in India, as measured in inflows of US dollars, has increased from $3.6 billion in 2000 to $4.6 billion in 2003 and $5.3 billion in 2004. In January 2006, the government approved new FDI norms for the retail sector and allowed up to 51% FDI in single-brand retailing. Various foreign players like Wal-Mart and Tesco have announced their intentions to enter the domestic market via a joint venture with a domestic Indian player. Forecasts from the Morgan Stanley consumer analyst indicate that India’s organized retail market is likely to grow from the current US$4 billion (2.1% of total relevant consumer spending) to US$ 64 billion (10.8%) by year 2015.
However, the decision to allow foreign direct investment in the multi-product retail chain stores has been delayed and remains a politically sensitive issue. There are some political groups who are opposing this decision due to its perceived implications on the mom and pop shops. However it should be considered that if participation of foreign players is allowed in partnership with domestic players, it can help evolve the sector in a more efficient manner as these foreign players bring technology and expertise. Increased presence of the foreign players can also potentially help Indian manufacturers participate in the international goods outsourcing market — an area where India has struggled to compete with China.
Another aspect that the government needs to pay attention to in order to build the retail sector in India is the growth of infrastructure. Although some push to infrastructure investments is expected from the private sector as it attempts to build an organized supply chain, there is clearly a need for a strong response from the government in building the infrastructure needed for quick transition in the supply chain. We believe that the primary responsibility for development of