Organized Retail Industry in India
This case was written by Komal Chary, under the direction of Vivek Gupta, IBS Center for Management Research. It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.
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Organized Retail Industry in India
“We believe that India is a rising star at the beginning of a growth cycle , with consumer spending increasing at a strong rate, and people seeking and demanding a better quality of life. India is going to be one of the fastest-growing regions of the future. All conditions are right to invest in India.” 1 - Jeff Immelt, Chief Executive, “FDI in retail trade can not only organize GE. a significant part of the largely unorganized domestic retailing, but also invite established global retail brands into the Indian market, thereby creating greater outlets for outsourcing and marketing Indian products.” - Recommendations Survey from Economic 2
Retailing is the second largest industry in the US in terms of number of people employed. WalMart, the largest retailer in the world with annual sales of US$ 284 billion is also the largest employer in the US (Refer Exhibit I for share of organized retailing across the globe and Exhibit II for top retailers in the world). The retailing industry in the US employs more than 22 million Americans and generates more than $3 trillion in sales annually. Like the US, many developed and developing economies rely on this sector for growth. In India, the retail industry is broadly divided into the organized and unorganized sectors. The total market in 2005 stood at Rs. 10,000 billion, accounting for about 9-10% of the country s gross domestic product (GDP). Of this total market, the organized sector accounted for Rs. 350 billion 3 (about 3.5 % of the total) of the total revenues. According to AT Kearney , the organized retailing industry is expected to cross Rs. 1000 billion revenue mark by 2010 (Refer Exhibit III for share of organized retailing in India and Exhibit IV for percentage contribution of different sectors to organized retailing in India). Traditionally, the retail industry in India comprised of large, medium and small grocery stores and drug stores which could be categorized as unorganized retailing. Most of the organized retailing in India had recently started and was mainly concentrated in metropolitan cities. The retailing industry seems poised for a significant growth in the coming years owing to the presence of a vast market, growing consumer awareness about product quality and services, higher disposable income of consumers and the desire to try out new products (Refer Exhibit V for shopping trends in India).
“Wal-Mart Assault: India May be Forced to Open its Protected Retail Sector, but Wal-Mart for the First Time Will Face Real Communists in India,” www.indiadaily.com, July 12, 2005. The Economic Survey of India studies the performance of Indian economy across different industrial sectors. It also studies important parameters like production, investments and s avings, employment and poverty. Established in 1926, AT Kearney is a global management consulting firm based at Chicago, US with a presence in 35 countries across the world. 1
In the past couple of years, the organized, multi-outlet retailing concept had gained acceptance in India. Leading global retailers such as Wal-Mart, Tesco and others are keen to enter the Indian retailing industry. The...