Retail Industry in India

Presentation for the Mid-Semester Exam in Strategic Management (MB 402):

Presentation for the Mid-Semester Exam in Strategic Management (MB 402) MBA – 2 nd Year

A Case Study on ..:

A Case Study on .. WHAT LIES IN FUTURE FOR THE RETAILING INDUSTRY IN INDIA ?

CURRENT SCENARIO..:

CURRENT SCENARIO.. India currently having about 5-12 million retail outlets all over the country. Organized retailing constitutes barely 2% of the total retail sector whereas unorganized retailing constitutes the rest 98%. Indian retailing industry is expected to grow from the current US$350M to US$427M by 2010 and to US$635M by 2015.

The common characteristics of the retail outlets in India..:

The common characteristics of the retail outlets in India.. Offer mainly food items & groceries Occupy an average of 500 sq.ft. of area Often managed by family members & running through generations Little investment of land & assets Little or no taxes paid Standard quality of items sold Moderate pricing Personal and one-to-one customer contact Few items sold on credit and payment is collected at the end of the month

ENVIRONMENTAL FACTORS CONTRIBUTING TOWARDS THE GROWTH OF THE RETAIL SECTOR IN INDIA:

ENVIRONMENTAL FACTORS CONTRIBUTING TOWARDS THE GROWTH OF THE RETAIL SECTOR IN INDIA The Economic environment The International environment The Market environment The Political environment The Regulatory environment The Socio-Cultural environment The Supplier environment The Technological environment

ECONOMIC ENVIRONMENT:

ECONOMIC ENVIRONMENT India’s impressive economic growth rate of 9% Increase in population leading to growing size of the consuming class. Increase in per capita income leading to increase in purchasing power.

INTERNATIONAL ENVIRONMENT:

INTERNATIONAL ENVIRONMENT Increased exposure to television and internet resulted in openness and awareness of international developments among Indians. Ease of traveling abroad made people enable to experience the foreign markets.

MARKET ENVIRONMENT:

MARKET ENVIRONMENT Reach of organized retailing has been growing to larger geographic area. In addition to the metropolitan cities like Delhi, Mumbai or Kolkata, cities such as Bangalore, Pune etc are also coming under the reach of the organized retail sector. Retailers are now trying to reach the smaller cities like Nagpur, Lucknow or Cochin. In addition to the traditional systems like street carts, pavement shops, weekly markets etc, organized retail sectors are now using the concepts of supermarkets, departmental stores, specialty stores etc. to attract and reach the maximum number of customers.

POLITICAL ENVIRONMENT:

POLITICAL ENVIRONMENT Since the unorganized retail sector constitutes about 98% of the total retail sector, political parties are often quite offensive towards the growth of the organized retail business in order to protect the unorganized vendors.

REGULATORY ENVIRONMENT:

REGULATORY ENVIRONMENT Foreign investment up to 100% is still not permitted. Real estate laws at the state level not yet clear on the issue of allowing large commercial stores. Tax structure for the retailing industry still needs to be restructured.

SOCIO-CULTURAL ENVIRONMENT:

SOCIO-CULTURAL ENVIRONMENT The changing age-profile of the buyers are impressively acting on the growth of organized retail sector. About 70% of the Indians are below 36 years of age, among which almost 50% are below 18 years of age. About 7 million people in their mid-twenties are now earning over US$ 5000 per year. This new-age group of buyers are contributing most to the growth of organized retail sector. Besides, malls are presented in a way to the buyers that is not just a place for shopping, but also a place to hang out and have some entertainment.

SUPPLIER ENVIRONMENT:

SUPPLIER ENVIRONMENT The biggest constraint to the growth of retail industry in India. Due to the vast geographical size of the country, presence of traditional, fragmented distribution & retailing networks and erratic logistics system and poor SCM system, reaching the customers cost-effectively is a big problem in India.

TECHNOLOGICAL ENVIRONMENT:

TECHNOLOGICAL ENVIRONMENT The progression of IT is now aiding the growth of retail sector also. IT is now providing support to quick information processing, decision making, reduction in processing cost, real time monitoring, security of transactions etc. Implementation of SCM system & CRM are also helping in ordering & tracking inventory items, warehousing, transportation etc.

QUESTIONS..:

QUESTIONS.. 1. Identify the opportunities & threats that the retailing industry in India offers to local and foreign companies.

OPPORTUNITIES:

OPPORTUNITIES ECONOMIC GROWTH # POSITIVE GROWTH RATE # GROWING SIZE OF CONSUMING CLASS INTERNATIONAL MARKET AWARENESS # MORE EXPOSURE TO INTERNATIONAL MARKETS THROUGH TV & INTERNET GROWING MARKET # CONSUMERS FROM LARGER AREA ARE GETTING REACHED SOCIO-CULTURAL CHANGE # INCREASING NUMBER OF YOUTHS & INCREMENT IN INCOME LEVEL ADVANCING TECHNOLOGY # SOFTWARE SUPPORT TO OPERATIONS # BETTER SUPPLY CHAIN MANAGEMENT

THREATS:

THREATS POLITICAL AMBIGUITY # ORGANIZED RETAILERS ARE OFTEN RESISTED IN ORDER TO MAINTAIN SUPPORT FROM UNORGANIZED VENDORS REGULATORY ISSUES # DIRECT FOREIGN INVESTMENT NOT PERMITTED # REAL ESTATE LAWS FOR SETTING UP INFRASTRUCTURE #RESTRUCTURING OF TAX WEAK SUPPLY SYSTEM # DIFFICULTY IN COVERING SUCH A LARGE AREA # TRADITIONAL, FRAGMENTED DISTRIBUTION & RETAIL NETWORKS # ERRATIC LOGISTICS BUYERS’ PSYCHOLOGY #MISCONCEPTION AMONG MIDDLE-CLASS CONSUMERS THAT THE MODERN RETAIL FORMATS ARE MORE EXPENSIVE AND NOT AFFORDABLE FOR THEM.