IMPACT OF RETAILING ON INDIAN ECONOMY

Due to the introduction of numerous new businesses, the Indian retail industry has become one of the most dynamic and quick-paced sectors. It contributes to over 10% of the nation's Gross Domestic Product (GDP) and about 8% of employment. India is the fifth-largest international retail market in the world. Due to the introduction of corporations, the ceiling on foreign direct investment (FDI) in the retail sector has been gradually raised.

FINAL PROJECT WORK ON
“IMPACT OF RETAILING ON INDIAN
ECONOMY”
THE PROJECT SUBMITTED TO THE
UNIVERSITY OF MUMBAI
IN PARTIAL FULFILLMENT OF THE
REQUIREMENT
FOR THE AWARD OF DEGREE OF
MASTER OF MANAGEMENT STUDIES (MMS)
BY
BOBADE ASHISH SURESH RAJSHREE
PARLE TILAK VIDYALAYA ASSOCIATION’S
PTVA’S INSTITUTE OF MANAGEMENT
VILE PARLE (E), MUMBAI – 400 057.
2015-2017

CERTIFICATE
I Mr. Abhishek Deokule hereby certify that Mr. Ashish
Bobade, MMS Student of Parle Tilak Vidyalaya Association’s
PTVA’s Institute of Management, has completed a project
titled ‘Impact of Retailing on Indian Economy’ in the
Academic Year 2016. The work of the student is original and the
information included in the project is true to the best of my
knowledge.
Mr. Abhishek Deokule Dr. Harish Kumar S. Purohit
Assistant Professor Director

DECLARATION
I, Mr. Ashish Bobade MMS Student of Parle Tilak Vidyalaya
Association’s PTVA’s Institute of Management, hereby
declare that I have completed the project titled ‘Impact of
Retailing on Indian Economy’ during the Academic Year
2016-17.
The report work is original and the information/data and the
references included in the report are true to the best of my
knowledge. Due credit is extended on the work of
Literature/Secondary Survey by endorsing it in the Bibliography
as per the prescribed format.
(Signature)
Ashish Bobade

INDEX
Sr. No. Particulars Page No.
1. Introduction 1
2. Executive Summary 4
3. Sector overview 5
4. Indian Retail Industry: Summary 6
5. Market Size 7
6. Investment Scenario 10
7. Government Initiatives 14
8. Road Ahead 16
9. E commerce: Summary 18
10. Indian Retail Industry to Indian Economy 22
11. Retail: World Largest Industry 26
12. Suggestions 29
13. Conclusion 31
14. Bibliography 32

INTRODUCTION
The Indian retail industry has emerged as one of the most
dynamic and fast-paced industries due to the entry of several
new players. It accounts for over 10 per cent of the country’s
Gross Domestic Product (GDP) and around 8 per cent of the
employment. India is the world’s fifth-largest global destination in
the retail space. Thanks to the entry of corporate, gradual
increase the limit of Foreign Direct Investment (FDI) in retail
sector, increasing influence of western culture and rising income,
changing customer behaviour & lifestyle, the Indian retail
industry has seen phenomenal growth in the last few years.
Retail, one of India's largest industries, has presently emerged
as one of the most dynamic and fast growing industries of our
times with several players continuously entering the retail market
in India and investing in developing the infrastructure and
construction of the retailing business.
Retail industry can be classified into two broad categories –
organized retail and unorganized retail.
Organized retail - Those traders/retailers who are licensed for
trading activities and registered to pay taxes to the government
Unorganized retail – It consists of unauthorized small shops -
conventional Kirana shops, general stores, corner shops among
various other small retail outlets - but remain to be the radiating
force of Indian retail industry.
Overview
Retail industry, being the fifth largest in the world, is one of the
sunrise sectors with huge growth potential and accounts for 14-
15% of the country’s GDP. Comprising of organized and

unorganized sectors, Indian retail industry is one of the fastest
growing industries in India, especially over the last few years.
According to the Global Retail Development Index 2012, India
ranks fifth among the top 30 emerging markets for retail. The
recent announcement by the Indian government with Foreign
Direct Investment (FDI) in retail, especially allowing 100% FDI in
single brands and multi-brand FDI has created positive
sentiments in the retail sector.
Emerging Areas
Some sectors that occupy a prominent position with the retail
industry are:
Apparel and fashion – Everybody understands the impact of
fashion and textiles on the environment. Almost $19.5 billion
were spent on online apparel shopping in the year 2009 and
increasing since then.
Fashion & Lifestyle - In India the vast middle class and its
almost untapped retail industry are the key attractive forces for
global retail giants wanting to enter into newer markets, which in
turn will help the retail to grow faster.
Food & Beverage retail - Backed by huge potential and
changing lifestyles, the food and beverage retail market is
growing at a robust 30-35 per cent per year.

Pharmaceutical Retail – Driven by therapies like anti-diabetic,
vitamin, anti-infective and dermatology, it accounted for a robust
15% growth in 2011.
E-commerce or E-tailing – the next big revolution - With the
advent of e-commerce in the retail industry, retail stores are
facing stiff competition from e-stores. The rising demand for e-
shopping has lead to a new debate cropping up in the world.

EXECUTIVE SUMMARY
This study attempts to find out the effect of retailing development
on Indian economy and new trends that contributes to the growth
to the Indian economy in terms of following factors:
 Shift in the Indian Shopping Landscape.
 Changing lifestyle and buying behaviour of consumer.
 Growth of organised sector ad new technology in Retail
sector.
 E-Commerce developments.
 Investment policies to support growth of Indian Retail
sector.
 Global opportunities for Indian retail sector.
It is observed from various reports on retail that “Retail in India
is at the crossroads. It has emerged as one of the most dynamic
and fast paced industries with several players entering the
market. That said, the heavy initial investments required make
break even hard to achieve and many players have not tasted
success to date. However, the future is promising; the market is
growing, government policies are becoming more favourable
and emerging technologies are facilitating operations.”
Thus, this report identifies and investigates the findings from
these discussions to understand how Indian retailers are gearing
themselves to drive profitable growth in the digital age and
developing the Indian economy

SECTOR OVERVIEW
Retailing is one of the pillars of the economy in India and
accounts for 13% of GDP. The retail industry is divided into
organized and unorganized sectors. Over 12 million outlets
operate in the country and only 4% of them being larger than
500 sq. ft. (46 m 2) in size. Organized retailing refers to trading
activities undertaken by licensed retailers, that is, those who
are registered for sales tax, income tax, etc. These include the
corporate-backed hypermarkets and retail chains, and also the
privately owned large retail businesses. Unorganized retailing,
on the other hand, refers to the traditional formats of low-cost
retailing,
for example, the local kirana shops, owner manned general st
ores, paan/beedi shops, convenience stores, hand cart and
pavement vendors, etc. Most Indian shopping takes place in
open markets and millions of independent grocery shops
called kirana. Organized retail such supermarkets accounts for
just 4% of the market as of 2008. Regulations prevent most
foreign investment in retailing. Moreover, over thirty
regulations such as "signboard licenses" and "anti-hoarding
measures" may have to be complied before a store can open
doors. There are taxes for moving goods to states, from states,
and even within states. India’s retail market, valued at US$ 353
billion in 2010, is projected to grow at a rate of 12 per cent per
annum. India has one of the largest numbers of retail outlets in
the world. The sector is witnessing exponential growth, with
retail development taking place not only in major cities and
metros, but also in Tier-II and Tier-III cities.

INDIAN RETAIL INDUSTRY: SUMMARY
 Accounts for 13% of GDP and 8% of total
employment
 Over 90% is unorganized
 Valued at US$ 400 billion (2011)
Projected to grow at a rate of 12 % per annum to
US$ 785.12 billion by 2015.
 India currently allows 51 per cent FDI in single-
brand retail and 100 per cent in wholesale cash-
and-carry operations.
 India will announce new rules for foreign
investment in retail by April 2012.
RETAILING FORMAT IN INDIA:
Mom-and-Pop stores:
Mom-and-pop stores: they are family owned business
catering to small sections; they are individually handled
retail outlets and have a personal touch.
Malls:
The largest form of organized retailing today. Located
mainly in metro cities, in proximity turban outskirts.
Ranges from 60,000 sq. ft. To 7,00,000 sq. ft. and
above. They lend an ideal shopping experience with an
amalgamation of product, service and entertainment, all
under a common roof. Examples include Shoppers Stop,
Pyramid, and Pantaloons. Specialty Stores: Chains such
as the Bangalore based Kids Kemp, the Mumbai books
retailer Crossword, RPG's Music World and the Times
Group's music chain Planet M, are focusing on specific

market segments and have established themselves
strongly in their sectors.
Discount Stores:
As the name suggests, discount stores or factory outlets,
offer discounts on the MRP through selling in bulk
reaching economies of scale or excess stock left over at
the season. The product category can range from
a variety of perishable/ non-perishable goods.
Department Stores:
Large stores ranging from 20000-50000 sq. ft., catering
to a variety of consumer needs. Further classified into
localized departments such as clothing, toys,
home, groceries, etc. Departmental Stores are expected
to take over the apparel business from exclusive brand
showrooms. Among these, the biggest success is K.
Raheja's Shoppers Stop, which started in Mumbai and
now has more than seven large stores (over 30,000 sq.
ft.) across India and even has its own in store brand for
clothes called Stop.
Hyper marts/Supermarkets:
Large self-service outlets, catering to varied shopper
needs are termed as Supermarkets. These are located
in or near residential high streets. These stores today
contribute to 30% of all food& grocery organized retail
sales. Super Markets can further be classified in to mini
supermarkets typically 1,000 sq. ft. to 2,000 sq. ft. and
large supermarkets ranging from of 3,500sqft to 5,000
sq. ft. having a strong focus on food & grocery and
personal sales.
Convenience Stores:
These are relatively small stores 400-2,000 sq. feet
located near residential areas. They stock a limited

range of high-turnover convenience products and are
usually open for extended periods during the day, seven
days a week. Prices are slightly higher due to the
convenience premium
Category Killer:
Small specialty stores that offer a variety of categories.
They are known as category killers as they focus on
specific categories, such as electronics and sporting
goods. This is also known as Multi Brand Outlets
or MBO's

Market Size
India’s retail market is expected to nearly double to US$ 1 trillion
by 2020 from US$ 600 billion in 2015, driven by income growth,
urbanisation and attitudinal shifts. While the overall retail market
is expected to grow at 12 per cent per annum, modern trade
would expand twice as fast at 20 per cent per annum and
traditional trade at 10 per cent.
India’s Business to Business (B2B) e-commerce market is
expected to reach US$ 700 billion by 2020. Online retail is
expected to be at par with the physical stores in the next five
years.
India is expected to become the world’s fastest growing e-
commerce market, driven by robust investment in the sector and
rapid increase in the number of internet users. Various agencies
have high expectations about growth of Indian e-commerce
markets. Indian e-commerce sales are expected to reach US$
120 billion! By 2020 from US$ 30 billion in FY2016.Further,
India's e-commerce market is expected to reach US$ 220 billion
in terms of gross merchandise value (GMV) and 530 million
shoppers by 2025, led by faster speeds on reliable telecom
networks, faster adoption of online services and better variety as
well as convenience.
India’s direct selling industry is expected to reach a size of Rs
23,654 crore (US$ 3.51 billion) by FY2019-20, as per a joint
report by India Direct Selling Association (IDSA) and PHD.

Investment Scenario
The Indian retail trading has received Foreign Direct Investment
(FDI) equity inflows totalling US$ 537.61 million during April
2000–March 2016, according to the Department of Industrial
Policies and Promotion (DIPP).
With the rising need for consumer goods in different sectors
including consumer electronics and home appliances, many
companies have invested in the Indian retail space in the past
few months.
 International Finance Corporation (IFC), the investment
arm of The World Bank, plans to invest up to Rs 134 crore
(US$ 19.86 million) in Kishore Biyani's Future Consumer
Enterprises Ltd, which is expected to aid the company in
driving its growth plans.
 Amazon India has opened six new fulfillment centres
across Chennai, Coimbatore, Delhi, Jaipur and Mumbai,
which will open up 5.5 million square feet of storage space
for sellers on the marketplace who use the ‘Fulfilled by
Amazon’ service.
 IKEA, the world’s largest furniture retailer, plans to invest
Rs 10,500 crore (US$ 1.56 billion) to set up 25 stores
across India and hire over 15,000 permanent employees
and 37,500 temporary employees to assist in running its
stores.
 Amazon Inc. has announced that the company would invest
an additional US$ 3 billion in India operations, thereby
taking its committed investment in the country to over US$
5 billion.
 Aditya Birla Fashion and Retail Limited (ABFRL) has
announced that it will acquire exclusive online and offline
rights of Forever 21, an American fast fashion brand, in the
Indian market.
 Lenskart, India's largest online eyewear retailer, has raised
Rs 400 crore (US$ 59.3 million) in series D round of funding
led by World Bank's investment arm International Finance

Corporation (IFC), which will be used to enhance its
technology, supply chain, lens manufacturing, and expand
the reach of its high-quality eyewear products across Tier-
3 and Tier-4 cities of India.
 Neil Barrett, one of the leading Italian fashion brands, has
forayed into the Indian market by establishing its retail
presence through an exclusive partnership with Fervour, a
multi-brand boutique that stocks international designer
brands.
 Gurgaon-based e-commerce firm Shopclues has raised
US$ 150 million from Singapore government's GIC and its
existing investors Tiger Global and Nexus Venture
Partners, at a valuation of US$ 1.1 billion, thereby
becoming the latest among several e-commerce
companies from India reaching a billion-dollar valuation.
 Amazon India expanded its logistics footprint three times to
more than 2,100 cities and towns in 2015, as Amazon.com
invested more than US$ 700 million in its India operations
since July 2014.
 Adidas AG, reknowned for its Adidas and Reebok sports
brands, has become the first foreign sports company to get
government approval to open 100 per cent foreign-owned
stores in India.
 Walmart India plans to add 50 more cash-and-carry stores
in India over the next four to five years.

 Textile major Arvind Limited has announced a partnership
with Sephora, owned by LVMH Moet Hennessy Louis
Vuitton, a French luxury conglomerate, in order to enter into
the beauty and cosmetics segment.
 Mobile wallet company MobiKwik has partnered with
Jabong.com to provide mobile payment services to
Jabong’s customers.
 .
 Aditya Birla Retail, a part of the US$ 40 billion Aditya Birla
Group and the fourth-largest supermarket retailer in the

country, acquired Total hypermarkets owned by Jubilant
Retail.
 With an aim to strengthen its advertising segment, Flipkart
acquired mobile ad network AdiQuity, which has a history
of mobile innovations and valuable experience in the ad
space.
 US-based Pizza chain Sbarro plans an almost threefold
increase in its store count from the current 17 to 50 over the
next two years through multiple business models.

Government Initiatives
The Government of India has taken various initiatives to improve
the retail industry in India.
 Government of India has allowed 100 per cent Foreign
Direct Investment (FDI) in online retail of goods and
services through the automatic route, thereby providing
clarity on the existing businesses of e-commerce
companies operating in India.
 The Government of Andhra Pradesh signed pacts worth Rs
1,500 crore (US$ 222.36 million) in a wide range of sectors
including retail and steel and gas with Walmart India, Future
Group, Arvind Lifestyle Brands Ltd and Spencer’s Retail,
during the Partnership Summit in Visakhapatnam, while
also unveiling a retail policy aimed to attract retail
businesses to invest in the state.
 The Ministry of Urban Development has come out with a
Smart National Common Mobility Card (NCMC) model to
enable seamless travel by metros and other transport
systems across the country, as well as retail purchases.
 IKEA, the world’s largest furniture retailer, bought its first
piece of land in India in Hyderabad, the joint capital of
Telangana and Andhra Pradesh, for building a retail store.
IKEA’s retail outlets have a standard design and each
location entails an investment of around Rs 500–600 crore
(US$ 74–89 million).
 The Government of India has accepted the changes
proposed by Rajya Sabha select committee to the bill
introducing Goods and Services Tax (GST).
Implementation of GST is expected to enable easier
movement of goods across the country, thereby improving
retail operations for pan-India retailers.
 The Government has approved a proposal to scrap the
distinctions among different types of overseas investments
by shifting to a single composite limit, which means portfolio
investment up to 49 per cent will not require government

approval nor will it have to comply with sectoral conditions
as long as it does not result in a transfer of ownership
and/or control of Indian entities to foreigners. As a result,
foreign investments are expected to be increase, especially
in the attractive retail sector.

Road Ahead
E-commerce is expanding steadily in the country. Customers
have the ever-increasing choice of products at the lowest rates.
E-commerce is probably creating the biggest revolution in the
retail industry, and this trend would continue in the years to
come. Retailers should leverage the digital retail channels (e-
commerce), which would enable them to spend less money on
real estate while reaching out to more customers in tier-2 and
tier-3 cities.
Both organised and unorganised retail companies have to work
together to ensure better prospects for the overall retail industry,
while generating new benefits for their customers.
Nevertheless, the long-term outlook for the industry is positive,
supported by rising incomes, favourable demographics, entry of
foreign players, and increasing urbanisation.
Exchange Rate Used: INR 1 = US$ 0.02 as on March 15, 2017
The Indian retail industry is one of the fastest growing in the
world. Retail industry in India is expected to grow to US$ 1.3
trillion by 2020, registering a Compound Annual Growth Rate
(CAGR) of 16.7 per cent over 2015-20.
India is the fifth largest preferred retail destination globally. The
country is among the highest in the world in terms of per capita
retail store availability. India’s retail sector is experiencing
exponential growth, with retail development taking place not just
in major cities and metros, but also in Tier-II and Tier-III cities.
Healthy economic growth, changing demographic profile,
increasing disposable incomes, urbanisation, changing
consumer tastes and preferences are the other factors driving
growth in the organised retail market in India.
India’s population is taking to online retail in a big way. The online
retail market is expected to grow from US$ 6 billion to US$ 70
billion during FY15-FY20.
Increasing participation from foreign and private players has
given a boost to Indian retail industry. India’s price
competitiveness attracts large retail players to use it as a
sourcing base. Global retailers such as Walmart, GAP, Tesco

and JC Penney are increasing their sourcing from India and are
moving from third-party buying offices to establishing their own
wholly-owned/wholly-managed sourcing and buying offices.
The Government of India has introduced reforms to attract
Foreign Direct Investment (FDI) in retail industry. The
government has approved 51 per cent FDI in multi-brand retail
and increased FDI limit to 100 per cent (from 51 per cent) in
single brand retail, and plans to allow 100 per cent FDI in e-
commerce, under the arrangement that the products sold must
be manufactured in India to gain from the liberalised regime.

E commerce: Summary
Although the trend of e-Commerce has been making rounds in
India for 15 years, the appropriate ecosystem has now started
to fall in place. The e-Commerce market in India has enjoyed
phenomenal growth of almost 50% in the last five years.
Key factors driving the growth story of e-Commerce in India
include:
 Considerable rise in the number of internet users
 Growing acceptability of online payments
 Proliferation of internet-enabled devices
 Favourable demographics
The number of users making online transactions in India is
expected to grow from 11 million in 2011 to 38 million in
2015.Venture capitalists (VC) and private equity players have
demonstrated their faith in the growth of e-Commerce in the
country. This is amply substantiated by the significant increase
in the total investments (US$305 million in 2011 against US$55
million in 2010).

Modes of e-Commerce transactions
Based on participants involved in the transaction e-Commerce
transactions can be segmented into three broad categories or
modes:
 Consumer-to-consumer (C2C) – Online classifieds, online
travel
 Business-to-consumer (B2C) – Online retail, online
retail/e-tailing, online classifieds, digital downloads,
financial services, online travel
 Business-to-business (B2B) – Online classifieds
Size of the e-Commerce market in India
India’s consumer-facing e-Commerce market (B2C-C2C) grew
at a whopping CAGR of 49.1% from 2007 to 2011 to reach a
market size of US$9.9 billion. Online travel, the largest
domestic B2C e-Commerce segment, accounted for 81%
revenues in 2011.
Consumer-facing e-commerce market size (US$ billion)

India’s e-Commerce ecosystem
Pros
 Annual disposable income per household to grow by two-
and-a-half times by 2015
 Discretionary spending expected to form a major portion
of expenditure in India
 Proliferation expected in the sales of PCs, tablets and
smartphones
 More Indians increasing time spent online
 Probability of growth in internet user base, mirroring that
of the voice user base
 Volume and average value of transactions higher for credit
cards than debit cards
 Increase in the number of payment options
Cons
 Low average broadband speed and flat average internet
speed cause for concern
 Online payment landscape marred by low penetration of
credit and debit cards
Online travel
Online travel has traditionally been the largest e-Commerce
sub-sector (by revenue) in India. To improve margins with
online retail, online travel players are diversifying their offerings
to include hotel reservations, along with the regular ticketing
services. They however need to develop skill sets that are
different from the ones required in the ticketing segment. Also,
they need to manage challenges associated with a diverse
supplier base, technological constraints, customer experience,
authenticity of information and grievance redressal.

Online retail
This segment has evolved and grown significantly over the past
few years. Cash-on-delivery has been one of the key growth
drivers and is touted to have accounted for 50% to 80% of
online retail sales. Players have adopted new business models
including stock-and-sell, consignment and group buying;
however, concerns surrounding inventory management,
location of warehouses and in-house logistics capabilities are
posing teething issues.
Online classifieds
Classifieds, the earliest entrant in the e-Commerce space in
India, is undergoing a shift in operational model from vertical to
horizontal offering. Players now offer a gamut of services
ranging from buying/selling cars to finding domestic
help/babysitter.
Challenges for the e-Commerce sector in India
The phenomenal growth of the e-Commerce sector is
accompanied by certain challenges:
 Absence of e-Commerce laws
 Low entry barriers leading to reduced competitive
advantages
 Rapidly changing business models
 Urban phenomenon
 Shortage of manpower
 Customer loyalty

Indian Retail Industry to Indian Economy
What, How and for whom the presence of retail sector in India
has been in limelight for the last few years. Its significance has
been undoubted. Policymakers are quite optimistic that the
evolution and steady maturation of organized retailing will take
the economy to new highs. Besides, it will also help strengthen
the linkages between the different sectors so as to break the
vicious circle of poverty and ensure a bright future for the next
generation. The benefit of retailing to general public includes
growing awareness and brand consciousness.
Indian Retail: Past Vs Present
It is widely accepted that the retail industry has undergone a
drastic change in last five years and there is yet more to
come. Let us compare the image of Indian retailing in 2004-
05 to that of its status in 2007-08 in the following table:
Magnification of the Indian Retail Industry
Yardstick Value of
retail
sales
Annual
growth
rate
Value of
organized
market
Share of
organized
market in
the sector
Forecasts
(after 5
years)
about
size of
organized
retail
market
Forecasts
about
growth
rate of
organized
retail
market
Situation
in 04-05
Rs.
10,20,000
crore
5% Rs
35,000
crore
3.4% Over Rs.
1,00,000
crore
Around
30%

Situation
in 07-08
Rs
12,00,000
crore
5.7% Rs
55,000
crore
4.6% Rs.
2,00,000
crore
Around
40%
The above table clearly shows that the retail market as well
as the mind-set required for it has experienced a thorough
revisal in the last three years. This is just the beginning and
Indians are sanguine that the sector will see rosy days in the
future. This confidence has helped India acquire the No.1
position among 30 most attractive retailing destinations in the
world according to the Global Retail Development Index of
2005 (by AT Kearney, India). Among emerging markets,
India holds the second position after China in the list of most
favoured retail destinations.
The retail industry employs a huge share of the total
workforce in India. It is the second largest employer after
India. Presently 7 percent of the total labour force is
employed in the retail sector. According to available data it is
also the largest employer in the services sector and
maximum growth in the non-agricultural sector has been
witnessed by retail trade. According to market analysts 300
new malls, 1,500 supermarkets and 325 departmental stores
are going to come up in India in the next few days. The
shopping revolution that has led to this retail boom is going
to continue and this is a good news for the government as
well as those who wish to work in the organized sector.
The boom in the retail industry is mainly due to the following
reasons;
 Increase in the purchasing power of middle class Indians
 Indians becoming more and more quality conscious
 Change in taste and living styles
 Emergence of big international names in the retail sector

 The entry of FDI in the retail sector
 Rapid growth of IT and engineering sectors
At present the organized retail sector is catching up very fast.
The impact of the alterations in the format of the retail sector
changed the lifestyle of the Indian consumers drastically. The
evident increase in consumerist activity is colossal which has
already chipped out a money-making recess for the retail sector
of Indian economy.
With the onset of a globalized economy in India, the Indian
consumer's psyche has been changed. People have become
aware of the value of money. Nowadays the Indian consumers
are well versed with the concepts about quality of products and
services. These demands are the visible impacts of the Retail
Sector of Indian Economy.
Since the liberalization policy of 1990, the Indian economy, and
its consumers are getting whiff of the latest national &
international products, the with help of print and electronic
media. The social changes with the rapid economic growth due
to trained personnel’s, fast modernization, enhanced
availableness of retail space is the positive effects of
liberalization.
The growth factors of the retail sector of Indian economy:
 Increase in per capita income which in turn increases the
household consumption
 Demographical changes and improvements in the standard of
living
 Change in patterns of consumption and availability of low-cost
consumer credit
 Improvements in infrastructure and enhanced availability of
retail space
 Entry to various sources of financing

The infrastructure of the retail sector will evolve radically. The
emergence of shopping malls a*re going steady in the metros
and there are further plans of expansion which would lead to
new ones. As the count of super markets is going up much
faster than rate of growth in retail sector, it is taking the lions
share in food trade. The non-food sector, segments comprising
apparel, accessories, fashion, and lifestyle felt the significant
change with the emergence of new stores formats like
convenience stores, mini marts, mini supermarkets, large
supermarkets, and hyper marts. Even food retailing has
become an important retail business in the national arena, with
large format retail stores, establishing stores all over India. With
the entry of packaged foods like MTR, ITC Ashirvad, fast foods
chains like McDonald's, KFC, beverage parlors like Nescafe,
Tata Tea, Café Coffee and Barista, the Indian food habits has
been altered. This stores have earned the reputation of being
'super saver locations'.
With the arrival of the Transnational Companies (TNC), the
Indian retail sector will confront the following round of
alterations. At present the Foreign Direct Investments (FDI) is
not encouraged in the Indian organized retail sector but once
the TNC'S get in they would try to muscle out their Indian
counterparts. This would be challenging to the retail sector in
India.

Retail: world largest industry
Retail, with total sales of $ 6.6 trillion, is the world’s largest
private industry ahead of financial industries $ 5.1 trillion. It is
also home to a number of the world’s largest enterprises. Over
50 of the Fortune 500 companies, and around 25 of the Asian
top 500 companies, are retailers. The industry accounts for over
8 per cent of the GDP in western economies.
Largest private industry in the world economy
A Study by Mc Kinsey states that organized retail accounts for
just around 2 per cent (out of which modern retail formats
account for 7 per cent of trade) presently is set to grow at
exponential exceeding 35 percent. Fitch estimates the current
share of organized retail to grow from 2percent presently to
around 15 to 20 per cent by 2010.
Table 1:
Retail Consumption
areas
US $
billion
Existing Companies in the
organized sector
Food Retailing 130 Food Bazaar (Pantaloons) Food
World.
Clothing & Apparel 12 Pantaloons Westside, Shoppers
Stop
Jewellery, Watches 7 Tanishq, Titan, Gold Bazaar
(Pantaloons)
Home Furnishing 5 Home Store, Arcus
(Pantaloons)

Foot wear 1.7 Bata, Woodland
Beauty Care 3.6 VLCC, Health & Glow
Traditionally, most retailers have had very localized operations.
This localized nature of the industry is changing as retailers face
low rates of growth and threatened profitability at home. New
geographies will help them sustain top-line growth as well as
permit global sourcing. Profits in retail have steadily been rising
and have generated 18 per cent shareholder returns between
1994 and 1999. Significantly, retail is also one of the world’s
largest employers, accounting for instance 16 per cent of the US
workforce, Poland 12 per cent, China 8percent, India 10 per cent
and Brazil 6percent. Factors such as scale in sourcing,
merchandising, operational effectiveness and ambience have
driven the spread of organized retail.
Grocery, electronics are examples of categories that compete on
the strength of better pricing, which in turn is driven by superior
sourcing and merchandising and cost-efficient operations. Wal-
Mart, Home Depot and Kingfisher are benchmark retailers in
these fields.
In apparel, home furnishings and furniture, the advantage is
driven by the marketers’ ability to provide better products in a
comfortable ambience at affordable prices. In these cases
sourcing capability has to be backed by strong design capability
and store management. IKEA and GAP are good examples of
this model of retailing.
Over the last few decades, retail formats have changed radically.
The basic department stores and co-operatives of the early
20th Century have given way to mass merchandisers,
hypermarkets, warehouse clubs, category killers, discounters

and convenience stores. Each of these formats has been driven
by marketer’s need to offer relevant, distinctive and economic
propositions to an evolving consumer base.
Global retailers have also reached a position of strength that
enables their brand to be leveraged across a wide range of
services. Many of them have expanded their offering, over the
years to include fuel retail, car retail, convenience services and
personal financial services. This has put them in a position where
they are not only beginning to capture growth from geographical
expansion, but are also entering large new areas of business.
The recent evolution of the Internet has helped further broaden
the scope of operations of large retailers. Further, a large
number of retailers are pursuing innovative aggregation and
supply chain-streamlining initiatives using B2B technology.

Suggestion
To make Indian retailing world class, there are many challenges
are to be overcome by the industry. Some suggestions to
improve the situation are offered below.
Establishment of Retailer co-operatives, which will maintain
warehouses etc. to work as a distribution centre for the member
retailers can help Indian retailer attain a respectable position in
the relationship matrix mentioned above. The whole organisation
will run at a no-profit, no-loss basis. This would enable the
retailers to buy the products they want directly from the original
manufacturers in huge quantity This would make the application
of the concepts of QR (Quick Response) and ECR (Efficient
Consumer Response) possible to a certain extent.. However,
many inherent difficulties may make the functioning or even
establishment of such a co-operative difficult. Nevertheless,
these problems are inevitable and must be dealt with firmly.
Merger and buy-out of weak retailers by a stronger one,
especially in metros and big cities may be another step towards
this direction. This would give the new retailer the desired
leverage to be world class.
Use of technology to the greatest extent possible may also help
strengthening the retailer’s position in the marketing channel.
First step may be taken with setting up of a network of
independent firms believing in use of technology for business
excellence. Then a collection of strong retail organisations may
pressurise the suppliers and other channel members to use
compatible technology. This may open the door for
implementation of QR or ECR or other relevant concepts for the
retailers.

An overall change is to bring about in the mind-set of the
retailers. They will have to think differently. They must find out
and satisfy service outputs of the target customers Unless there
is a drastic change in the mind-set of at least large and medium
retailers and as well as that of the manufacturers, the required
change is not going to come by easily. The retailers must learn
and understand to lead the chain from the front.
Setting up of more and more non-store retailing centres would
also ensure a strong retailing organisation. Non-store retailing
makes implementation of modern principles easier and less
costly.
Setting up of franchisee organisation may also help in
strengthening the position of the retailers. The franchiser can
exert a tremendous control over the way retailing is done.
Transnational service organisation like McDonald and KFC are
being able to offer a centralised control over purchase and
operation. Large and medium sized retailers may take up the
concept of franchising to reach the market in a more meaningful
way. Though the management of franchisee network is difficult
than managing a retail chain in view of high level of investment
and other obligations, Indian retailers should spread out its wings
it’s in this profitable and efficient way.

Conclusion
Indian retailing, thus enjoys many unique features, is still done in
a primitive way. Barring a few exceptions, Indian retailers,
particularly FMCG retailers, are not in a position to implement
world-class practices of supply chain management. The
concepts of Quick Response or Efficient Consumer Response
are unheard of in Indian retailing. The two bases of modern
retailing management, the Electronic Data Interface and a
mutually respectable partnership among retailers and suppliers
(the manufacturers) are missing to a great extent in Indian
context. Also, Indian marketing channel members are performing
some unnecessary tasks, which makes the channel structure
heavy and inefficient. Though these inefficiencies are observed
in all retailing irrespective of industry, the symptoms are more
evident in Indian FMCG retailing. Inefficiency in retailing leads to
lower profitability of the retailers and lower service outputs for the
consumers.
Ways and means to strengthen the position of the retailing
industry, doing away with the causes for the inefficiencies,
therefore, are to be taken up in an urgent manner. Such
measures may include establishment of retailer’s co-operatives,
merger and buy-out, use of technology to the greatest possible
extent, setting up of non-store retailing centres and increase in
franchisee network.

Bibliography
1. E-Commerce: Referred on
http://www.ey.com/in/en/industries/technology/re-birth-
of-e-commerce-in-india/(14thMarch2017)
2. Market Size: Referred on
http://www.ey.com/in/en/industries/technology/re-birth-
of-e-commerce-in-india/(07thMarch2017)
3. Overview: Referred on
https://www.wetfeet.com/articles/industry-overview-
retail/(07thMarch2017)
4. Retail Industry Overview: Referred on
http://info.shine.com/article/retail-industry-
overview/1476.html/ (14thMarch2017)
5. Impact of retailing: Referred on
http://www.economywatch.com/business-and-
economy/indian-retail-contribution.html(14thMarch2017)
6. Impact of retailing: Referred on
http://business.mapsofindia.com/sectors/retail.html(14th
March2017)
7. Contribution to retail: Referred on
http://www.economywatch.com/business-and-
economy/indian-retail-contribution.html/(15thMarch2017)