A Microeconomic Analysis of Indian Retail Industry
MODERN RETAIL
MICRO ECONOMICS PROJECT REPORT
ABSTRACT
The growing number of modern retail outlets in India on the one hand and frequent sale seasons and talks of underperformance on the other point to a mixed bag and make us wonder whether the sector is on the right growth trajectory. In this report, rather than providing with just the facts, we have tried to understand the modern retail sector from an economist’s point of view and visualize its future-whether it is in its expansion or contraction phase. Motivated by the rising per-capita incomes and increased spending on consumer goods, modern retail stores are coming up with new strategies and plans to unlock the Pandora box of the untapped and unorganized retail sector. In the course of the report, we try to find out – how the retail sector works, major regulations that affect its functioning and the challenges that await the sector and summarize with our analysis and recommendations.
Note: We have used where we’ve analyzed the situation from a micro-economic point of view.
INTRODUCTION
The retail sector in India can broadly be classified as organized and unorganized where the share of unorganized sector is more than 93% of the total and includes the kirana stores, mom and pop stores and the ilk. The organized or modern retail sector on the other hand captures a mere 7% of the total market share.
Modern retail is defined as a form of retailing whereby consumers can buy goods from a similar purchase environment across more than one physical location and operates under three levels: Specialist stores catering to some particular category of product such as footwear, pharma & beauty, food and grocery etc. - classified under level I. Departmental stores that cater to a few categories of retail put under level II, and malls where we find an agglomeration of many departmental stores, hypermarkets etc - classified under level III retail. The figure 1
MICRO ECONOMICS PROJECT REPORT
ABSTRACT
The growing number of modern retail outlets in India on the one hand and frequent sale seasons and talks of underperformance on the other point to a mixed bag and make us wonder whether the sector is on the right growth trajectory. In this report, rather than providing with just the facts, we have tried to understand the modern retail sector from an economist’s point of view and visualize its future-whether it is in its expansion or contraction phase. Motivated by the rising per-capita incomes and increased spending on consumer goods, modern retail stores are coming up with new strategies and plans to unlock the Pandora box of the untapped and unorganized retail sector. In the course of the report, we try to find out – how the retail sector works, major regulations that affect its functioning and the challenges that await the sector and summarize with our analysis and recommendations.
Note: We have used where we’ve analyzed the situation from a micro-economic point of view.
INTRODUCTION
The retail sector in India can broadly be classified as organized and unorganized where the share of unorganized sector is more than 93% of the total and includes the kirana stores, mom and pop stores and the ilk. The organized or modern retail sector on the other hand captures a mere 7% of the total market share.
Modern retail is defined as a form of retailing whereby consumers can buy goods from a similar purchase environment across more than one physical location and operates under three levels: Specialist stores catering to some particular category of product such as footwear, pharma & beauty, food and grocery etc. - classified under level I. Departmental stores that cater to a few categories of retail put under level II, and malls where we find an agglomeration of many departmental stores, hypermarkets etc - classified under level III retail. The figure 1