INTRODUCTIONIndia represents an economic opportunity on a massive scale, both as a global base and as a domestic market. Indian Retail sector consists of small family-owned stores, located in residential areas, with a shop floor of less than 500 square feet. At present the organized sector accounts for only 2 to 4% of the total market although this is expected to rise by 20 to 25% by next 3 years.
Retail growth in the coming five years is expected to be stronger than GDP growth, driven by changing lifestyles and by strong income growth, which in turn will be supported by favorable demographic patterns and the extent to which organized retailers succeed in reaching lower down the income scale to reach potential consumers towards the bottom of the consumer pyramid. Growing consumer credit will also help in boosting consumer demand.
The structure of retailing will also develop rapidly. Shopping malls are becoming increasingly common in large cities, and announced development plans project at least 150 new shopping malls by 2008. The number of department stores is growing much faster than overall retail, at an annual 24%. Supermarkets have been taking an increasing share of general food and grocery trade over the last two decades.
However, Distribution continues to improve, but it still remains a major inefficiency. Poor quality of infrastructure, coupled with poor quality of the distribution sector, results in logistics costs that are very high as a proportion of GDP, and inventories, which have to be maintained at an unusually high level. Distribution and marketing is a huge cost in Indian consumer markets. It's a lot easier to cut manufacturing costs than it is to cut distribution and marketing costs.
Also, government has relaxed regulatory controls on foreign direct investment (FDI) considerably in recent years, while retailing currently remains closed to FDI. However, the Indian government has indicated in 2005 that liberalization of direct investment in retailing is under active consideration. It has allowed 51% FDI in "single brand" retail.
The next cycle of change in Indian consumer markets will be the arrival of foreign players in consumer retailing. Although FDI remains highly restricted in retailing, most companies believe that will not be for long. Indian companies know Indian markets better, but foreign players will come in and challenge the locals by sheer cash power, the power to drive down prices. That will be the coming struggle. This report discusses the scenario of organized retail industry in India and the opportunities available for companies based on key statistics.
The revolution in retailing industry has brought many changes and also opened door for many Indian as well as foreign players. In a market like India there is a constant clash between challenges and opportunities but chances favour those companies that are trying to establish themselves. So to sustain in a market like India companies have to bring innovative solutions. Indian market has potential to accommodate many retail players, because still a small proportion of the pie is organized.
This paper discusses the challenges like merchandising mix, retail differentiation, supply chain management and also competition from supplier's brand in the Indian perspective.
1.2 Fact about Indian retail sectorRetailing is still in its infancy in India. In the name of retailing, the unorganized retailing has dominated the Indian landscape so far. According to an estimate the unorganized retail sector has 97% presence where as the organized accounts for merely 3%. Industry has already predicted a trillion dollar market in retail sector in India by 2010. However, the retail industry in India is undergoing a major shake-up as the country is witnessing a retail revolution. The old traditional formats are slowly changing into more complex and bigger formats. Malls and mega malls are coming up in almost all the places be it - metros or the...
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