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Home » MBA Articles » MBA - Retail Management Articles » Indian Retail Industry: Current Scenario

Indian Retail Industry: Current Scenario

CLICK HERE : Expert Suggestions on Computer Based CAT : 2017 - 2018

Indian
retail industry is going through a transition phase. Most of the
retailing in our country is still in the unorganized
sector. The spread out of the retails in US and India
shows a wide gap between the two countries. Though retailing in India is
undergoing an exponential growth, the road ahead is full of challenges.

What is retailing?


The word "Retail" originates from a
French-Italian word. Retailer-someone who cuts off or sheds a small
piece from something. Retailing is the set of activities that markets
products or services to final consumers for their
own personal or household use. It does this by
organizing their availability on a relatively large scale and supplying
them to customers on a relatively small scale. Retailer is a Person or
Agent or Agency or Company or
Organization who is instrumental in reaching the Goods
or Merchandise or Services to the End User or Ultimate Consumer.

SCENARIO OF RETAILING IN INDIA

Retailing
is the most active and attractive sector of last
decade. While the retailing industry itself has been
present since ages in our country, it is only the recent past that it
has witnessed so much dynamism. The emergence of retailing in India has
more to do with the increased
purchasing power of buyers, especially
post-liberalization, increase in product variety, and increase in
economies of scale, with the aid of modern supply and distributions
solution.

Indian retailing today is at an
interesting crossroads. The retail sales are at the
highest point in history and new technologies are improving retail
productivity. though there are many opportunities to start a  new retail
business, retailers are facing
numerous challenges.

KEY CHALLENGES:

1) LOCATION:
"Right Place, Right choice"
Location
is the most important ingredient for any business that relies on
customers, and is typically the prime
consideration in a customers store choice. Locations
decisions are harder to change because retailers have to either make
sustainable investments to buy and develop real estate or commit to long
term lease with developers. When
formulating decision about where to locate, the retailer
must refer to the strategic plan:

* Investigate alternative trading areas.
* Determine the type of desirable store location

* Evaluate alternative specific store sites

2) MERCHANDISE:
The
primary goal of the most retailers is to sell the right kind of
merchandise and nothing is more central to the strategic thrust of the
retailing firm.
Merchandising consists of activities involved in
acquiring particular goods and services and making them available at a
place, time and quantity that enable the retailer to reach its goals.
Merchandising is perhaps, the most
important function for any retail organization, as it
decides what finally goes on shelf of the store.

3) PRICING:
Pricing
is a crucial strategic variable due to its direct relationship with a
firm's goal and its
interaction with other retailing elements. The
importance of pricing decisions is growing because today's customers are
looking for good value when they buy merchandise and services. Price is
the easiest and quickest variable to
change.

4) TARGET AUDIENCE:
"Consumer the prime mover"
"Consumer
Pull", however, seems to be the most important driving factor behind
the sustenance of the industry. The purchasing power of the customers
has
increased to a great extent, with the influencing the
retail industry to a great extent, a variety of other factors also seem
to fuel the retailing boom.

5)  SCALE OF OPERATIONS:
Scale
of operations includes
all the supply chain activities, which are carried out
in the business. It is one of the challenges that the Indian retailers
are facing. The cost of business operations is very high in India.

PRESENT INDIAN SCENARIO


* Unorganized market: Rs. 583,000 crores
* Organized market: Rs.5, 000 crores
* 5X growth in organized retailing between 2000-2005
* Over 4,000 new modern Outlets in the last 3 years

* Over 5,000,000 sq. ft. of mall space under development
* The top 3 modern retailers control over 750,000 sq. ft. of
retail space
* Over 400,000 shoppers walk through their doors every week
*
Growth in organized retailing on par
with expectations and projections of the last 5 Years:
on course to touch Rs. 35,000 crores (US$ 7 Billion) or more by 2005-06

* Major players

- Food and grocery
- Fashion
- Others
- Food world

- Shoppers' Stop
- Vivek's
- Subhiksha
- Westside
- Planet M
- Nilgris
- Lifestyle
- Music World
- Adani- Rajiv's
- Pyramid
- Crossword
- Nirma-Radhey
- Globus
- Life spring


TRADITIONAL RETAIL SCENE IN INDIA

India
is the country having the most unorganized retail market. Traditionally
the retail business is run by Mom & Pop having Shop in the front
& house at the back. More
than 99% retailers function in less than 500Sq.Ft of
area. All the merchandise was purchased as per the test & vim and
fancies of the proprietor also the pricing was done on ad hock basis or
by seeing at the face of customer.
Generally the accounts of trading & home are not
maintained separately. Profits were accumulated in slow moving &
non-moving stocks which were to become redundant or consumed in-house.
Thus profits were vanished without
their knowledge. The Manufactures were to distribute
goods through C & F agents to Distributors & Wholesalers.
Retailers happen to source the merchandise from Wholesalers & reach
to end-users.  The merchandise
price used to get inflated to a great extent till it
reaches from Manufacturer to End-user. Selling prices were largely not
controlled by Manufacturers. Branding was not an issue for majority of
customers. More than 99% customers
are price sensitive & not quality or Brand Sensitive
at the same time they are Brand conscious also. Weekly Bazaar in many
small tows was held & almost all the commodities were on the scene
including livestock. Bargaining
was the unwritten law of market. Educational
qualification level of these retailers was always low. Hence market was
controlled by handful of distributors &/or Wholesalers. Virtually
there was only one format of retailing &
that was mass retail. Retailer to consumer ratio was
very low, for all the categories without exception. Varity in terms of
quality, Styles were on regional basis, community based & truly very
low range was available at any
given single place.  Almost all the purchases / (buying)
by mass population was need oriented & next turn may be on
festivals, Marriages, Birthdays & some specific occasions.

Impulsive
buying or consumption is
restricted to food or vegetables etc. Having extra pair
of trousers or Shirts or Casuals & Formals & leisure wear &
sports wear & different pair of shoes for occasions is till date is a
luxury for majority
population except for those living in Metros. Purchasing
power of Indian urban consumer is very low and that of Branded
merchandise in categories like Apparels, Cosmetics, Shoes, Watches,
Beverages, Food, Jewellery, are slowly
seeping into the lifeline of Indian City folks. However
electronic & electrical home appliances do hold appropriate image
into the minds of consumers. Brand name does matter in these white goods
categories. In the coming times
also majority of organized retailers will find it
difficult to keep balance with rest of the unbranded retail market which
is very huge.

INDIAN RETAIL IS MOVING INTO SECOND GEAR

1) FIRST GEAR:

(Create awareness)
* New retailers driving awareness
* High degree of fragmentation
* Real estate groups starting retail chains
* Consumer expecting 'value for money' as core value

2) SECOND GEAR:

(Meet customer expectations)
* Consumer-driven
* Emergence of pure retailers
* Retailers getting multi-locational and multi-format
* Global retailers evincing interest in India

3) THIRD GEAR:

(Back end management)
* Category management
* Vendor partnership
* Stock turns
* Channel synchronization
* Consumer acquisition
* Customer relation's management

4) FOURTH GEAR:
(Consolidation)

* Aggressive rollout
* Organized retail acquitting significant share
*
Beginning of cross-border movement
* Mergers and acquisitions

Conclusion

For
a start, these retailers need to invest much more in capturing more
specific market. Intelligence as well as almost real-time customer
purchase behavior information. The retailers also
need to make substantial investment in
understanding/acquiring some advanced expertise in developing more
accurate and scientific demand forecasting models. Re-engineering of
product sourcing philosophies-aligned more towards
collaborative planning and replenishment should then be
next on their agenda. The message, therefore for the existing small and
medium independent retailers is to closely examine what changes are
taking place in their immediate
vicinity, and analyze Whether their current market
offers a potential redevelopment of the area into a more modern
multi-option destination. If it does, and most commercial areas in India
do have this potential, it would be very
useful to form a consortium of other such small
retailers in that vicinity and take a pro-active approach to pool in
resources and improve the overall infrastructure. The next effort should
be to encourage retailers to make some
investments in improving the interiors of their
respective establishments to make shopping an enjoyable experience for
the customer.

As
the retail marketplace changes shape and competition increases, the
potential for
improving retail productivity and cutting costs is
likely to decrease. Therefore, it will become important for retailers to
secure a distinctive position in the marketplace based on value,
relationships or experience.


Finally, it is important to note that these strategies
are not strictly independent of each other; value is function of not
just price, quality and service but can also be enhanced by
Personalization and offering a memorable
experience. In fact, building relationships with
customers can by itself increase the quality of overall customer
experience and thus the perceived value. But most importantly for
winning in this intensely competitive marketplace,
it is critical to understand the target customer's
definition of value and make an offer, which not only delights the
customers but also is also difficult for competitors to replicate.





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