PGDM-(AICTE)

Introduction-

Which business considers every individual as a customer? Which business accounts for
less than 10% of the world wide labor force and is still the single largest industry in most
nations? What is common between Wal-Mart, Amazon, and the small kirana stores on
your neighborhood?
The answer is retailing, the last link in the chain of production, which begins at the
extractive changes, moves through manufacturing, and end in the distribution of goods
and services to the final consumers.
Over the last decade there have been sweeping changes in the general retailing business.
Retailing has become such an intrinsic part of our everyday lives that it is often taken for
granted. The nations that have enjoyed the greatest economic and social progress have
been those with a strong retail sector.

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.

Definition:
Retail is the sale of goods to end users, not for resale, but for use and consumption by the
purchaser. The retail transaction is at the end of the supply chain. Manufacturers sell
large quantities of products to retailers, and retailers sell small quantities of those
products to consumers.

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Global overview of retiling-

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 m2) 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 stores,
paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.

With total sales of us$6.6 trillion, retailing is the world’s largest private industry, ahead
of finance (us$5.1 trillion) and engineering (us$3.2trillion).Some of the worlds largest
companies are in this sector: Over 50 fortune 500 companies and around 25 of Asian
top200 firms are retailers.Wal-mart the world’s second largest retailer, has turnover of
us$260 billion, almost one-third India’s GDP.

As many as 10% of the world’s billionaires are retailers. The industry accounts for over
8% of GDP in western countries, and is one of the largest employers. According to the us
department of labour, more than 22 millions Americans are employed in retailing
industry in over 2 million retail stores.

Share of retailing in employment across different countries

Country Employment (%)

India 8
USA 16
Poland 12
Brazil 15
China 7

Source: Presentation to FICCI by Alan Rosling (Chairman, Jardine Matheson

Group);

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Unorganized retailing-

Unorganized retailing is defined as an outlet run locally by the owner or caretaker of a

shop that lacks technical and accounting standardization. It refers to the traditional
formats of low-cost retailing, for example, the local kiranashops, owner manned general
stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.

Unorganized Retail in India:

Retail in India is essentially “unorganized.” 98% of the retail industry is made up of

counter-stores, street markets, hole-in-the-wall shops and roadside peddlers. Indian
retail is dominated by by large number of small retailers consisting of the local kirana
shops, owener manned general stores, chemists, footwear stores, appareal shopes, pan
and beedi shops etc, which together make up the so called Unorganized Retail.
Unorganized retail constitutes of about 96% of the total retail in India with an expected
growth of approximately 10% per annum.It comprises of 15 million tiny outlets
catering to customers needs across the country employing the second largest number of
people after agriculture.

Organized retailing-

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 stores,
paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.

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Difference between Unorganized & Organized Retailing-

Sr. Characteristics Unorganized Retailers Organized Retailers

No.
There is a direct control of
1 Span of control strategy, and centralized decision- There is centralized or coordinated purchasing
making. & decision making.

2 Flexibility in Operations Has flexibility in location & Limited flexibility as well established norms
strategy to be followed

3 Economies of Scale. Lacks the economies of scale Efficiency of using warehousing

facilities, large volume purchases, also
centralized decision-making.
Lower than unorganized retailers
Competition faced. High because of factors such because investment costs are high
4
as ease of entry. individual outlets face competition from
players offering similar assortment of
goods/services.
Some In addition to maintaining consistent
5 Important concerns. Searching for the successors. retail marketing strategies in all
branches, adapting to local needs of the
target market.

The organized retail industry is mainly based on U.K Retail industries, German retail
industries, France Retail industries, U.S Retail industries, Indian Retail industries etc.
Those are as follows-

UK Retail industries-

Introduction---
The grocery industry in the United Kingdom has been dominated in the last ten years by
large chain Supermarkets. There has been a fight for supremacy between the likes of J.
Sainsbury, Tesco, Marks and Spencer, Asda, and further south, Waitrose. Around ten
years ago, Sainsbury's used to have the top spot but their loyal shoppers started turning
their heads towards Tesco and better value for money later on in the nineties.

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The UK retail market is set to increase in size by 15% over the next five years, taking its
value to just over £312bn (UK Retail Futures 2011: Sector Summary, Data monitor).
However this represents a slowing down of annual growth and with operating costs and
the cost of credit set to rise, the retail sector faces challenging times. Companies who
cannot compete against shrinking margins will suffer. The electrical sector is currently
the best performer, with a predicted growth of 24% (UK Retail Futures 2011: Sector
Summary, Data monitor), while the home sector retailers face a tough period as falling
house prices make people more cautious about moving home.

The retail industry employs over 3 million people (data collected March 08). This equates
to 11% of the total UK workforce.

Almost 8% of the Gross Domestic Product (GDP) of the UK is generated by the retail
sector.

UK retail sales were approximately £265 billion in 2007, which is larger than the
combined economies of Denmark and Portugal.

53% of UK consumers feel that their lifestyle has been impacted by the recession.
Suddenly, they have been forced to re-evaluate their spending, including where
they do their grocery shopping as well as their in-store choices.

39% of UK shoppers are 'frequent buyers' of private label products.

German retail industries—

The Industrial Revolution reached Germany long after it had flowered in Britain, and the
governments of the German states supported local industry because they did not want to
be left behind. Many enterprises were government initiated, government financed,
government managed, or government subsidized. As industry grew and prospered in the
nineteenth century, Prussia and other German states consciously supported all economic
development especially transportation and industry.

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U.S Retail industries---

Retail industry in the United States of America is expected to maintain the same trend of
growth in future as well. This industry provides huge employment opportunities for the
Americans. The United States is home to a number of leading brands in global retain
industry like Wal-Mart, Apple store, Disney store, and many more. Wal-Mart alone
employs more than 1 million people in the US.

Yearly sales turnover of retail industry in the United States is huge and it accounts for
more than 12% of total trade volume of all the US based businesses. US retail industry is
primarily characterized by prevalence of single-store businesses. These businesses
account for nearly 95% of retailers doing business in the country. Total volume of
transactions of single-store businesses is less than half of the yearly transaction of retail
industry in the United States of America. Gross margin varies for different segments of
the US retail industry; but generally it remains under 33% for most of the segments.

American retail industry provides more than 11% of total employment opportunities in
the country. In the coming years, this sector is expected to provide more than 14% of
total employment opportunities in the country. According to available data, the industry’s
total sale volume in 2007 was nearly US$4,500 billion, while the corresponding figure in
the 2006 that was around US$3,900 billion. At the same time, e-commerce retail sale that
was around US$122 billion in 2006, contributed nearly US$131 billion in 2007.

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The following table presents some more data about retail industry in US:

Segment Total Sales Year

Motor Vehicle and Motor Parts Dealers US$901 billion 2006

Building Materials Dealers and Others US$359 billion 2006

Food & Beverage Stores US$542 billion 2006

Gasoline Stations US$404 billion 2006

Clothing & Accessories US$215 billion 2006

General Merchandise Stores US$552 billion 2006

Food Services & Drinking Places US$426 billion 2006

Nonstarter Retailers US$270 billion 2006

Exports of Goods US$1,037 billion 2006

Imports of Goods US$1,855 billion 2006

Sales (Shopping Centers) US$2.25 trillion 2006

Size of the US Retail Industry:

According to the U.S. Census Bureau, the total sales for the U.S. Retail Industry in 2007
(including food service and automotive) was $4.48 trillion. Total sales for the U.S. retail
industry declined just 0.1% overall in 2008 according to the Census Bureau, to $4.475
trillion. Retail industry sales declined each of the last six months of 2008.

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Worlds Top 5 Retail Industries—

The Worlds Top 5 Retail industries are as follows-

Wal-Mart-

History

Wal-Mart is the biggest retailer in the world with an annual turnover that exceeds the
gross national product of 75 percent of the world’s countries. A colossus of an
organization, Wal-Mart dwarfs all competition due to its multifaceted approach to
retailing.

The Wal-Mart Stores segment includes Discount Stores, Supercenters, and Neighborhood
Markets in the United States, as well as Walmart.com. Wal-Mart currently operates 1,276
Wal-Mart stores, 1,838 Supercenters, 92 Neighborhood Markets, and 556 SAM’s Clubs
(wholesale outlets) in 50 states in the United States. The company also own various retail
formats in Argentina, Brazil, Canada, Germany, Mexico, Puerto Rico, South Korea, and
the United Kingdom.

Carrefour (France)-

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Carrefour SA is an international supermarket group headquartered in France, with a

global network of supermarkets. It is the second largest retail group in the world in terms
of revenue after Wal-Mart.

The Home Depot (US)-

The Home Depot, Inc. is the biggest home improvement retailer in the world, operating
out of the United States, Canada, and Mexico. The company provides its products and
services through home depot and EXPO design center stores. Its Home Depot stores sell
a range of building materials, home improvement products and lawn and garden products,
as well as providing various installation services. The EXPO design center stores offer
various interior design products and installation services for kitchens, baths, appliances,
and flooring as well as products for lighting, decorating and storage and organization
projects. These stores also provide project management and installation services.

Metro AG (Germany)-

Metro Group is a diversified retailer and wholesale/cash and carry group based in
Germany. It has the largest market share in its home market and is one of the most
globalizing retail and wholesale corporations. It was established in 1964 by Otto
Beisheim.

If all of the group's operations are included for comparison purposes, Metro is Europe's
second largest retailer, after Carrefour of France.

If Metro's cash and carry operations, which are its largest division, are not counted as
retail, it also ranks behind Tesco.

Kroger (US)-
Kroger is the nation's largest supermarket chain with 2,532 grocery stores in 32 states. It
is also the third largest retailer in the US and the fifth largest in the world. Barney Kroger
opened his first food store in 1883. He bought out his partner the following year and
opened a second store. In 1999, Kroger merged with Fred Meyer in a $13 billion deal that

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formed the nation's largest food retailer. Kroger states that it holds at least the primary or
secondary position in 40 of its 52 major markets. A major market for Kroger is one with
9 or more Kroger stores.

Kroger also operates 795 convenience stores in 16 states. Plus, it runs 436 fine jewelers
stores under names like Fred Meyer Jewelers’, Littman Jewelers’, Barclay Jewelers’, and
Fox's Jewelers’.

The following table shows the percentage of organized and unorganized retail trade in
different countries:

country % of organized % of Unorganized

retail Trade retail Trade
India 6 94
China 20 80
Vietnam 22 78
South Africa 32 68
Brazil 75 25
USA 85 15

Source: EIU, AT Kearney analysis and with author’s calculation.

Evolution of Indian Retail-

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The Indian retail market, which is the fifth largest retail destination globally, has been
ranked the second most attractive emerging market for investment after Vietnam in the
retail sector by AT Kearneys seventh annual Global Retail Development Index (GRDI),
in 2008. The share of retail trade in the country's gross domestic product (GDP) was
between 8–10 per cent in 2007. It is currently around 12 per cent, and is likely to reach 22
per cent by 2010.

India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3
trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. As a
democratic country with high growth rates, consumer spending has risen sharply as the
youth population (more than 33 percent of the country is below the age of 15) has seen a
significant increase in its disposable income. Consumer spending rose an impressive 75
per cent in the past four years alone.

Also, organized retail, which accounts for almost 5 per cent of the market, is expected to
grow at a CAGR of 40 per cent from US$ 20 billion in 2007 to US$ 107 billion by 2013.

India retail industry is expanding itself most aggressively; as a result, a great demand for
real estate is being created. Indian retailers preferred means of expansion is to expand to
other regions and to increase the number of their outlets in a city. It is expected that by
2010, India may have 600 new shopping centers.

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In the Indian retailing industry, food is the most dominating sector and is growing at a
rate of 9% annually. The branded food industry is trying to enter the India retail industry
and convert Indian consumers to branded food. Since at present 60% of the Indian
grocery basket consists of non- branded items.

The Retail Sector in India

Number of persons employed 21 Million
Estimated the number of new jobs in next two years 02 Million
Typical space occupied by Mom & Pop store 100-500 Sq.ft.
Space occupied by a modern Retail 35 Million Sq.ft.
Opening of malls in 2007 114
New Malls under construction 361
Space occupied by Malls in the pipeline 117 Million Sq.ft.
New investment by 2011 USD 30 billion

The Indian Retail Sector can be classified in to-

Food Retailers

Health & Beauty

Clothing & Products
Footwear

Indian Retail Sector

Home Furniture & Durable Goods

Household Goods

Leisure &
Personal Goods

Categories’ of Indian retail-

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Mall-

The largest form of organized retailing today. Located mainly in metro cities, in
proximity to urban 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, Piramyd, and
Pantaloon.

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:

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

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from of 3,500 sq ft 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.

MBO’s:
Multi Brand outlets, also known as Category Killers, offer several brands across a single
product category. These usually do well in busy market places and metros.

A report on different products sells figure during the year 2005-2010

2005 2006 2007 2008 2009 2010

Retail trade

Retail sales (Rs bn) 15,409 17,360 19,465 21,715 24,215 27,107
Retail sales (US$ bn) 349.4 385.8 421.3 467.0 516.3 564.7
Retail sales volume growth (%) 6.0 7.5 7.7 6.9 6.8 7.3
Retail sales US$ value growth (%) 13.6 10.4 9.2 10.8 10.6 9.4
Clothing, cosmetics & household goods

Clothing, sales value (US$ m) 58,352 65,818 74,505 84,724 96,130 107,883
Perfumes & fragrances, sales value (US$ m) 2,103 2,291 2,464 2,696 2,941 3,169

Electronic & domestic appliances

Television sets (stock per 1,000 population) 91 94 97 101 109 118

Television sets, sales volume ('000) 8,867 9,436 10,029 10,655 11,204 11,795
Cable-TV subscribers (per 1,000 population) 28 29 30 31 32 33
Personal computers, sales volume ('000) 693 789 894 1,026 1,178 1,352
Refrigerators, sales volume ('000) 4,230 4,626 5,048 5,505 5,996 6,542
Video recorders, sales volume ('000) 121 121 125 127 128 129
Source: Economist Intelligence Unit.

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A graphical report of different products sell’s growth in Indian Retail market-

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Players in Indian Retail sector--

The Players in Indian Retail sectors are as follows-

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Players Revenues Retail Format

for Space as on
2006-07 May 2007
in US$ (Sq. ft.)
millions
Future Group (Pantaloon
821.0 6,630,000 F&G, Specialty
Retail)
Raheja Group (Shoppers’
219.7 1,590,000 F&G, Specialty
Stop)
Tata Group (Trent, Infiniti Speciality Retail, Electronics, Hyper
145.2 880,000
Retail) Markets
RPG Retail 146.0 810,000 F&G, Specialty
A V Birla Group 61.0 890,000 F&G
Source: TSMG

Pantaloon retail India limited (PRIL)-

Pantaloon Retail is the flagship enterprise of the Future Group. Pantaloon Retail (India)
Limited has spread across various businesses and cities in India. Pantaloon owns multiple
retail formats and is able to cater to a large section of the society. The company has over
140 stores across 32 cities in India and 14000 employees. The headquarters of the
company are situated at Mumbai.

The organization made an incursion into the modern retail (fashion) in 1997. Big Bazaar,
a hypermarket chain, was introduced in the year 2001, with an Indian touch of
convenience and hygiene. Food Bazaar, food and grocery chain, and Central Mall located
at various Metros are other important parts of the group. Others include Collection (home
improvement products), E-zone (consumer electronics), Depot (books, music, stationery
and gifts), Blue Sky (fashion accessories) and Shoe Factory (footwear). The company has
also launched a retailing venture known as futurebazaar.com.

RPG Group-

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The history of RPG Enterprises goes back to the 19th century. In 1979 Mr. RP Goenka
took the initiative to set up RPG Enterprises. Presently it has a turnover of US$ 1.65
billion (Rs. 7472 crore) and assets worth US$ 1.8 billion. Among the fastest growing
groups in India, it is operating successfully through more than 20 companies in 7
business sectors, namely Retail, IT & Communications, Power, Transmission,
Entertainment, Life sciences and Tyres.
The organization believes in responding to a business opportunity, making optimum
utilization of resources, and inspiring people to foster teamwork. Quality is another
important parameter for the enterprise to improve continuously and satisfy customers in
the best possible manner.

The organization operates through various retail formats such as supermarkets,

hypermarkets, music stores and health and beauty products outlet.
Its largest chain of Spencers offers a complete array of products and durables. It is
operating through 80 stores spread in 20 cities, and is still growing rapidly. Every month
nearly 2.6 million people walk in its stores. The stores are located in Bangalore, Mumbai,
Delhi, Chennai, Trivandrum, and Hyderabad.

The music store of RPG Enterprises - MusicWorld delivers its products through 170
outlets spread in 21 cities.

Shoppers' Stop—
K. Raheja group of companies founded Shoppers' Stop on October 27, 1991. The
organization had already made its presence felt in the hospitality and real estate sector,
and now it has created a landmark in the Retail sector with Shoppers' Stop. Shoppers'
Stop is famous for the expertise and acumen relating to the current practices of the
industry. It provides quality services, products and the right kind of shopping
environment. It has developed itself as a household name and has set high standards for
itself.

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In 2005, the company had 25 stores with a turnover of Rs. 1000 crores and7 lakh sq. feet
retail space in the year 2005. The average age of the employees in the organization is 25
years.

RRL( Reliance Retail Limited)-

On june 26, 2006, mukesh Ambani, C & MD, Reliance industries limited, announced his
plans to foray in to the retail sector with an initial investment of US$ 5.6 bn. RRL was
expected to have its presence across India withdifferent retailing formats such as
warehouse clubs, hypermarkets, supermarkets, specialty stores and convenience storess .
Reliance also had plans to open restaurant outlets within its stores.

In Nov 2006, RIL launched its first retail store 'RELIANCE FRESH' at Hyderabad. The
store catered to consumer needs by providing fresh fruits, vegetables, groceries and dairy
products.

Lifestyle International—
Lifestyle is an international fashion store of the Landmark Group, a Dubai-based
company. Lifestyle created a revolution in the Indian Retail Industry by bringing a truly
international shopping experience. It was launched in Chennai, and now it is one of the
largest professional retailers spread across 3,25,000 sq. ft. in various cities such as
Chennai, Gorgon, Mumbai, Hyderabad and Bangalore. It is a heaven for shoppers with a
vibrant and spicy lifestyle. It provides a wide choice of products at affordable prices with
a convenient world-class environment and a friendly layout. Being one of the best
shopping destinations, it has won the ''Most Respected Company in the Indian Retail
Sector' and the 'Most Admired Large Format Retail Company' awards in India.

Globus-

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Globus was launched in 1998 as a part of the Rajan Raheja Group. The company opened
its first outlet in Indore followed by two more in Chennai. The flagship store was opened
on 1st November 2001 in Mumbai, followed by a vibrant store in New Delhi.
Subsequently, its stores were launched in Bangalore, Ghaziabad, Kanpur, Ahmadabad,
Noida,Lucknow,VaranasiandHyderabad.

The organization has an innovative and adaptive environment. Globus has achieved
customer delight by presenting value products and services through continuous
improvement. It has a team of dedicated and passionate employees maintained by
constant training.

Globus has developed long lasting relationships with its business partners. It employs the
best practices of the industry through cost analysis. It has brought about a veritable
revolution in the retail industry through its constant efforts and innovation in apparels. It
has been a benchmark for many upcoming retailers. It has brought about an important
change in the industry and has distinguished itself from others. Globus has acquired the
best processes and procedures in various fields, such as Marketing & Brand
Development,Research&Design,etc.

The group wishes to add 100 fashion stores by the end of 2008. It has blended its
resources of technology and people in such a way as to get a competitive advantage over
others.

Subhiksha-

It is a chain of food and pharmacy discount retail stores. It is based in Chennai and has a
strong presence in southern India.

Vishal Group –

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It launched their first hyper market Vishal Mega mart in Udaipur this month. Spread over
25,000 sq.ft, the store offers extensive range of men's, women's and kids' range of fashion
clothing. Beside fashion attire, it will also have separate sections and counters for
watches, sunglasses, fashion accessories, gifts and novelties, electrical appliances, digital
diaries, perfumes, cosmetics and grocery items etc. Currently, Vishal Mega Mart operates
29 fully integrated and self-owned stores spread over a total shopping area of 5, 70, 000
sq.ft in 21 cities.

Growth in Retail India

(Value in INR Billion with projection)

YEAR RETAILMARKET ORGANIZED RETAIL

2004 9300 280
2005 10300 375
2006 12000 550
2007 13300 783
2008 14800 1120
2009 16400 1600
2010 18100 2300

Foreign Direct Investment in Retail-----

Foreign investment will play a bigger role in retailing. The opening of the retail sector to
foreign direct investment (FDI)—a policy change that would alter radically the face of
the Indian economy—is happening slowly. Since February 2005 the government has
taken several liberalising steps, but it continues to disallow FDI by retailers of multiple
brands, keeping out the big hypermarket groups and discounters. This is a carefully
crafted decision designed to cause minimum political damage domestically, while
showing foreign investors that liberalisation remains on track. Foreign firms will continue
to lobby for liberalisation and have cited the restriction on FDI as a factor limiting future
growth. Their options should multiply as food imports are liberalised and import duties

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come down. The government will also need to reform real-estate laws and restructure tax
regimes further if it is to attract international retailers

Wall-Mart of the US will continue its high-profile campaign to open up India's retail
sector to foreign companies. Tesco of the UK and Carrefour of France are also sizing up
the Indian market. Wal-Mart argues it would use local producers not only for its Indian
operations, but also for its global network as this could increase India's exports. As
domestic companies expand into the organised retail sector, the pressure on the
government to open the sector to foreign investment is likely to increase on competition
grounds. Some domestic companies, such as Reliance Industries, are confident that their
familiarity with the numerous business operating difficulties in India would give them a
distinct competitive advantage over foreign companies

FDI is not permitted in Retail sector except in-

1. Private labels
2. Hi-Tech items / items requiring specialized after sales service
3. Medical and diagnostic items
4. Items sourced from the Indian small sector (manufactured with technology
provided by the foreign collaborator)
5. For 2 year test marketing (simultaneous commencement of investment in
manufacturing facility required).

Why FDI in Retail-

 Improve competition
 Develop the market
 Greater level of exports due to increased sourcing by major players
 Sourcing by Wal-Mart from China improved multifold after FDI permitted
in China
 Similar increase in sourcing observed for Metro in India
 Provides access to global markets for Indian producers
 Investment in technology

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 Cold storage chains solve the perennial problem of wastage

 Greater investment in the food processing sector technology
 Better operations in production cycle and distribution
 Better lifestyle
 Greater level of wages paid by international players usually
 More product variety
 Newer product categories
 Economies of scale to help lower consumer price.

Contribution of Organized Retailing—

Organized Retail in India refers to the modern retail formats like supermarkets and
hypermarkets prevalent. Organized retailing is relatively new to India, although it has
begun to expand rapidly. As with other consumer-oriented goods and services, this sector
should benefit from rising wealth, industry deregulation and a greater openness to
international influences. Perhaps only 3% of retail sales in India are accounted for by
organized retailers. By 2010, however, the organized sector could account for as much as
20% of the total retail sector, based on current trends. At present, around 96% of the
more than 5m retail premises of all types in India are smaller than 50 sq meters. Yet this
is beginning to change. Shopping malls are becoming increasingly common in large
Indian cities, and developers have plans to add hundreds of new malls over the next three
years. Although not all of these plans will be realized—and many of the new malls will
be much smaller than their Western counterparts.
In most developed countries. This form of retail accounts for a painfully low 2 per cent of
the retail industry, but is growing at a healthy 35 per cent and is expected to cross the
INR 1000 billion mark by 2010.
Organized retail remained a dormant sector largely due to the lack of infrastructure for
large-scale retail, absence of product variety and a conservative Indian consumer. Today
the flood of products in the market coupled with a wealthier, more informed Indian
consumer have created the atmosphere for the entry of organized retail to tap into the
$320 billion Indian retail industry.

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A typical chart of expected growth of organized retail sector till 2015 in India-
YEAR
2004 Rs. % in total 2015(expected) % in total
Crore organized retail Rs.crore organized retail
Food, Grocery & General 2950 10 102546 42
Merchandise
Clothes, Textile & fashion Acc 10900 39 40605 16

Durables & Mobiles 3340 12 28891 12

Food Service 200 7 24351 10
Home Improvement 2500 8 16346 7
Jewellery & watches 1960 7 8770 3
Footwear 2500 9 6508 3
Books,Music,Toys & Gifts 800 3 3722 1
Others 1350 5 14692 6
Total 28,000 100 2,46,431 100

(Organized Retail Market in India)

Source: TSMG Analysis

Share of Organized Retail in total market (%organized)

Retail Segment 2004 2005 2006 2007

Clothing,Textile,Fashion 13.6 15.8 18.9 22.7
Jewellery 2 2.3 2.8 3
Watches 39.6 43.5 45.6 48.9
Footwear 25 30.3 37.8 48.4
Health & beauty care 6 7.6 10.6 14.3
Pharmaceuticals 1.8 2.2 2.6 3.2
Consumer durables, home appliances 7.8 8.8 10.4 12.3
Mobile accessories 6.5 7 8 9.9
Furnishing,furniture-home & office 6.7 7.6 9.1 11
Food & grocery 0.5 0.6 0.8 1.1
Catering 5.7 5.8 6.9 8
Books, music & gifts 9.8 11.7 12.6 13.4
Entertainment 2.6 3.3 4.1 5.3
Total 3 3.6 4.6
Sources:
(The India retail story, Images F&R Research, India Retail Forum2008, business
World.)

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Current and future players in Organized Retail in India-

Organized retail in India is currently dominated by players that have been in the market
for at most two decades.
Pantaloon Retail is the market leader with its Wal-Mart-esque multipurpose low cost
stores as well as specialized clothing retail outlets. Shopper’s Stop operates multi-storey
malls in the major metros and is the equivalent of a Macy’s in the U.S. A number of other
individual brand retailers like Hadrian, Raymond’s and Titan also represent organized
retail in India. Today, a number of major business houses in India are launching massive
organized retail ventures like Reliance, Bharti (in a Joint-Venture with Wal-Mart) and
The Aditya Birla Group. These companies that control many of the other industries in
India have recognized the potential of organized retail.

They are leveraging their enormous cash reserves and decades of experience of doing
business in the Indian economy and reaching out to the Indian consumer to launch a
number of multi-store retail chains.
Organized retail represents a large untapped market in India that is likely to see
tremendous growth in the coming years. Meanwhile organized retail will continue to
displace many unorganized retailers who are no competition for the large – scale
corporation

Positives of Organized retailing-

 The organized retail system enhances efficiency in the value chain.
 The farmer gets a better price and grows a better quality of the product.
 The value chain is truncated as the intermediate layers are pruned and, in the
process, an organized infrastructure structure is created.
 The consumer buys from these outlets because he gets the right quality at a lower
price. Outlets such as Spinach, Big Bazaar, Reliance Retail and Subhiksha have
been delivering quality produce at lower prices.

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 There are vast investments being made, which open up multiple employment
opportunities of a different kind.
 The Government also gains substantially as all the taxes and duties are paid along
the way and there are no leakages.
 The smaller vegetable and fruits vendors could become employees of the
corporate retail chain.

Negatives of Organized retail--

The organized retail industry in India is faced with stiff competition from the
unorganized sector.

2. There is a shortage of quality real estate and infrastructure requirements in our country.

3. Opposition to Foreign Direct Investment from small traders affects retail industry.

4. Very high stamp duties on transfer of property affect the industry.

5. Shortage of retail space in central and downtown locations also hinders the growth of
retail industry.

Function of a typical Retail industries-

The organizational structure of a retail store will vary by the size and type of the
business. Most tasks involved with operating a retail business will be the same. However,
small or independent retail stores may combine many sectors together under one division,
while larger stores create various divisions for each particular function along with many
layers of management.

For example, the small specialty shop may have all of its employees under one category
called Store Operations. A large department store may have a complete staff consisting of

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a manager, assistant manager and sales associates for its Sporting Goods department,
Home and Garden, Bed and Bath, and each additional department.

In order to define the store's organization, start by specifying all tasks that need to be
performed. Then divide those responsibilities among various individuals or channels.
Group and classify each task into a job with a title and description. The final step is to
develop an organizational chart.

Retailing Structure

The following is a brief outline of some of the divisions in a retail organization.

Owner/CEO or President

Store Operations: Management, Cashier, Sales, Receiving, Loss Prevention

Marketing: Visual Displays, Public Relations, Promotions

Merchandising: Planning, Buying, Inventory Control

Human Relations: Personnel, Training

Finance: Accounting, Credit

Technology: Information Technology.

As the store grows and the retail business evolves, the dynamics of the organization's
structure will change too. Therefore it is paramount to redesign the store's organizational
chart to support the decision-making, collaboration and leadership capabilities that are
essential during and after a growth period.

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Factors affecting profitability of a retail organization-

The factors which are mainly affecting the Profitability of a Retail Organization are as
follows-

• Top line factor

• Cost cutting Majority
• Loss Prevention
• Physical Inventory

Top line factor---The Top Line factors includes---

Location & Visibility- The organization should be located in the centre of the city &
it should be visible easily, so that an unknown person can easily reach to the
organization.

Catch point area.—

The organization should be located in the area where the population should be more
as required for establishment of the organization.

Customer Preferences-
The organization should be located according to the preferences of the customers. For
example in a College area the organization should keep goods like CARD’S, CD’S,
MOBILE VOUCHERS, STATIONIERS, etc instead of vegetables.
Store Layout-

Store layout is an important factor in every organized retail sector. The layout
should be made in such a way that each and every product should located in a

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systematic manner and the customer can get the product easily without any wastage
of time.

Price Affordability—

Price afford ability means different kind of product should be available in different
price, so that each and every category of customers can afford the product according
to there budget.

Quality assurance—
Quality is the main thing which should be maintained by the organization by
providing better quality goods in a reasonable price to the customers for maintaining
there goodwill in the market.

Product mix—
Product mix means keeping variety of same quality of product to satisfy different
categories of customers and also keeping product segment wise to satisfy different
ages of customers. For example a store should keep multiple brands of product for
different variety of customers.

Promos and Discount—

Promos an discount are the main factors in the organization. Customers are mainly
attracts towards all the promo offer and discount offer in the organization and on that
particular time period they purchase there products.

Cost cutting majority

Cost cutting majority includes certain factors such as- Cost Factor, Reasonable
Rent, and Optimum Utilization of Manpower. Minimization of Dump and Shrinkage etc.

Cost Factor- Cost Factors means saving of the energy when ever is possible.

Reasonable rent-The rent of the store should be reasonable. It should not be more.

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Optimum Utilization of Manpower- The Man power in the organization should

be used in an optimum way and there should not be any wastage of manpower.

Minimization of Dump and Shrinkage—The Dump and Shrinkage are the most
cost cutting factor in each and every organization. It should control to maximize the
profit of the organization.

Loss Prevention-
Retail Loss prevention (in some retailers known as Asset Protection) is a form of private
investigation into larceny or theft. The focus of such investigations generally includes
shoplifting, package pilferage, embezzlement, credit fraud, and check fraud. "Loss
prevention" or "LP" is used to describe a number of methods used to reduce the amount
of all losses and shrinkage often related to retail trade.

Types of Loss Prevention Investigations---

Camera systems-

CCTV is an abbreviation for Closed Circuit Television. CCTV camera systems are
common to almost all loss prevention departments. The obvious benefits of CCTV
camera is that the investigator can gain a better view of a suspect, record incidents, and
not reveal themselves to shoplifting suspects.

Electronic Article Surveillance---

Electronic article surveillance (EAS) is a deterrence system used by retailers to deter
shoplifting. EAS involves the use of electronic security towers and electronic security
tags. Hard tags or Sticker tags are placed on items throughout the store manually or are
applied when merchandise is made and are disabled at check-out by either removing the
hard tag using a detacher or by scanning label tags over a magnetic label deactivator. If

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the tag is not disabled it will activate the alarm pedestals, which are generally located at
the exit of a retail store.

Point of Sale---
Point of sale monitor linked to the CCTV camera system. This system has assisted
investigators in closing employee embezzlement cases pertaining to merchandise passing,
merchandise voiding, and discount fraud.

Audits and reporting—

It has certain types such as- Exception reports, Electronic journals, Cash office audits,
etc.

Exception reports—

Exception reports are compiled on an annual basis into a report. Usually the reports are
received monthly or bi-weekly. They include information on cash audit over’s and shorts,
no-sales, flagged returns, employees ringing themselves up, fake employee numbers used
to avoid commission docking, excessive markdowns and/or discounts, and merchandise
voids. Exception reports have dramatically reduced the amount of time an investigator
needs to detect a possible sign of employee embezzlement.

Electronic journals—

Almost every large retail institution has some form of electronic journal which records all
its transactions. Information such as credit card numbers, gift card numbers, refunds, and
merchandise voids is gathered at the point-of-sale. These journals can then be used to
view and print facsimiles of receipts or checks.

Cash office audits—

A cash office audit is usually counts up the cash from transactions at the retailer's
registers. A shortage occurs when the amount contained in the register does not match
what the cash audit says it should have. Shortages are used to begin and close cash

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embezzlement cases that are investigated by loss prevention departments. Cash office
audits used a particular register during the day. This information is used by loss
prevention investigators to narrow the field of suspected employees.

Physical Inventory---
Physical inventory is a process where a business physically counts its entire inventory. A
physical inventory may be mandated by financial accounting rules or the tax regulations
to place an accurate value on the inventory, or the business may need to count inventory
so component parts or raw materials can be restocked. Businesses may use several
different tactics to minimize the disruption caused by physical inventory.

How Physical Inventory is conducted in a Retail sector-

Most retailers are required by tax and/or accounting rules to provide an accurate on-hand
value of the merchandise in its store. Although the retail store may be using a perpetual
inventory system or other software to keep track of all items, it may still be required to
physically count all inventory.

Process to conduct a Physical Inventory.----

 Replenish shelves with merchandise from the stockroom. Try to clear as much
inventory from the backroom as possible. Be sure there is no merchandise under
cash wraps, in the office or any other location.

 If an inventory service has been hired to do the physical inventory, follow the
guide they provide and prepare the store according to their instructions.

 If the physical inventory is being conducted by store employees, meet with staff
to explain the inventory counting process.

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 Assign each employee a location and provide pre-numbered inventory count

sheets detailing the inventory with item name, price and inventory level.

 Those conducting the inventory should count each item on their sheet and only
record the exact quantities.

 When the physical inventory count is completed, compare the physical count to
the perpetual inventory record.

 Discrepancies should be further investigated and resolved. A recount may be

required by a different counting team for any major discrepancy.

 At the end of the inventory process, adjust the perpetual inventory record for each
line item to reflect the quantity and value of the physical inventory.

Role of Inventory control in Organized Retailing—

Inventory control---
The process of managing the timing and the quantities of goods to be ordered and
stocked, so that demands can be met satisfactorily and economically is known as
inventory control.

Perpetual inventory---

Keeping book inventory continuously in agreement with stock on hand within specified
time periods is known as Perpetual Inventory. In some cases, book inventory and stock
on hand may be reconciled as often as after each transaction, while in some systems these
two numbers may be reconciled less often. This process is useful in keeping track of
actual availability of goods and determining what the correct time to reorder from
suppliers might be. Sometimes this process is also called continuous inventory.

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Dump & Shrinkage--

Dump---

To release or throw down in a large mass is known as dump.

The selling of a product in one market at an unusually low price while selling the same
product at a significantly higher price in another market is known as dump.
For example, a firm may sell a product in its home market at a price covering all costs
and then sell the product in a foreign market at a significantly lower price covering only
variable costs.

Shrinkage—

Shrinkage is the loss of products between point of manufacture or purchase from supplier
and point of sale. The term shrink relates to the difference in the amount of margin or
profit a retailer can obtain.

Stock-keeping unit----
A stock-keeping unit or SKU is a unique identifier for each distinct product and service
that can be purchased. Usage of the SKU system is rooted in data management, enabling
the merchant to systematically track their inventory, such as in warehouses and retail
outlets, and are often assigned and serialized at the merchant level. Each SKU is attached
to an item, variant, product line, bundle, service, fee, or attachment.

SKUs are not always associated with actual physical items, but are more appropriately
billable entities. Extended warranties, delivery fees, and installation fees are not physical,
but have SKUs because they are billable. All merchants using the SKU method will have
their own approach to assigning the SKU System based on regional or national corporate
data storage and retrieval strategies. SKU tracking varies from other product tracking
methods which are controlled by a wider body of regulations stemming from
manufacturers or possibly third-party regulations.

Successful inventory management systems assign a unique SKU for each product and
also for its variants, such as different versions or models of product or different bundled

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packages including a number of related products. This allows merchants to track, for
instance, whether blue shirts are selling better than green shirts.

Retail shrinkage
Retail shrinkage is the difference in the value of stock as per the books and the actual
stock available in the shop. A survey in 118 retail chains in the US states that the country
has lost $31 billion and retailers lost 1.7 percent of their total annual sales due to retail
shrinkage last year.

Reasons of Shrinkage-

The causes of retail shrinkage are mainly employee theft, shoplifting, administrative
errors and vendor fraud.

Employee Theft:

Also known as internal shrinkage, this is caused by the employees of the store such as
pilfering merchandise, cash, provisions etc. Employee theft and embezzlement of
accounts cause almost half of the total retail shrinkage. Cashier caused shrinkage occurs
in ways of wrong recording of transactions, forging receipts, misuse of the register or

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computer etc and accounts for almost 61 percent of the total employee caused shrinkage.
95 percent of businesses experience employee theft and 75 percent of theft goes
unnoticed. This problem is a hard nut to crack due to lack of visibility of the transaction.
CCTV monitoring, good store surveillance and maintaining good relations with employee
will help to restrict this practice.

Shoplifting:

Otherwise called commercial burglary, this is one of the most common crimes. In slang
language it is expressed as five-finger discount in Australia and US, and jacking, chaving,
and nicking in UK. Studies show that one out of twelve customers might be a shoplifter.
Professional shoplifters are called boosters. Shoplifters require privacy. Things should be
arranged in such a way so as to avoid blind spots in the store and thus avoid internal loss.
Mall and expensive items should be kept behind the counter or locked in a display case.
CCTV (Closed Circuit TV) filming all areas of the store is the most successful way to
prevent shoplifting. Installation of physical obstacles such as alarm at the store exits, and
closing the back exit of the shop would also prove beneficial.

Administrative Errors:

Administrative and paperwork errors such as mark up and mark down of the prices cause
around 15 percent of the retail shrinkage.

Ways to stop shrinkage -------

1. Create a loss prevention culture. A culture of loss prevention starts at the top and

unites all departments. The loss prevention team should work to educate the business at

all levels and foster a commitment to continuous improvement.

2. Centralize the loss prevention function. Only a centralized view can spot multiple
store and regional problems.

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3. Deploy trained investigators. Today's loss prevention experts need to feel

comfortable analyzing data and have an understanding of the way your business works on
a day-to-day basis.

4. Prioritize investigations. No loss prevention department has unlimited resources. It's

important to focus them on the targets that will yield the greatest return. A rigorous
analysis of EPOS data can help pick your targets better.

5. Measure-That which gets measured gets managed. Develop key metrics and keep a
close eye on them over time.

6. Look beyond the physical. An over-reliance on CCTV and store security guards
could be signaling a costly "blind spot" regarding internal loss.

7. Start with the low-hanging fruit. Refunds, discounts, and credit card abuse are huge
sources of loss. Pick one and start there-your effort will more than pay for itself.

8. Don't ignore deterrence. A fraud deterred is profit saved-and it will be measurable

over time. Let cashiers and managers know how fraud and error leaves tracks that can
now be detected. But remember, around 30 percent or more of your staff can change each
year so you can never stop monitoring and educating.

9. Use your data. An effective data mining solution can highlight the problems early and
support rapid investigations and resolutions.

10 measure the right things. Simply counting the number of assets each year is no way
to improve your loss prevention. You need to calculate detection rates, total loss values,
and recovery values to make sure you're going in the right direction.

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Reliance Industries Limited-

Reliance Industries limited is India's largest private sector conglomerate and second

largest in the world, with an annual turnover of US$ 35.9 billion and profit of US$ 4.85

billion for the fiscal year ending in March 2008 making it one of India's private sector
[1]
Fortune Global 500 companies, being ranked at 206th position (2008). It was founded

by the Indian industrialist Dhirubhai Ambani in 1966. Ambani has been a pioneer in

introducing financial instruments like fully convertible debentures to the Indian stock

markets. Ambani was one of the first entrepreneurs to draw retail investors to the stock

markets. Critics allege that the rise of Reliance Industries to the top slot in terms of

market capitalization is largely due to Dhirubhai's ability to manipulate the levers of a

controlled economy to his advantage. Though the company's oil-related operations form

the core of its business, it has diversified its operations in recent years. After severe

differences between the founder's two sons, Mukesh Ambani and Anil Ambani, the group

was divided between them in 2006. In September 2008, Reliance Industries was the only

Indian firm featured in the Forbes's list of "world's 100 most respected companies.

Reliance Industries Limited has a wide range of products from petroleum products,
petrochemicals, to garments (under the brand name of Vimal),

Reliance Retail has entered into the fresh foods market as Reliance Fresh and launched a
new chain called Delight Reliance Retail.

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Reliance Retail-
With a vision to generate inclusive growth and prosperity for farmers, vendor partners,
small shopkeepers and consumers, Reliance Retail Limited (RRL), a subsidiary of RIL,
was set up to lead Reliance Group’s foray into organized retail.

With a 27% share of world GDP, retail is a significant contributor to overall economic
activity across the world. Of this, organized retailing contributes between 20% to 55% in
various developing markets. The Indian retail industry is pegged at $ 300 billion and
growing at over 13% per year. Of this, presently, organized retailing is about 5%. This is
expected to grow to 10% by 2011. RRL has embarked upon an implementation plan to
build state-of-the-art retail infrastructure in India, which includes a multi-format store
strategy of opening neighborhood convenience stores, hypermarkets, and specialty and
wholesale stores across India.

RRL launched its first store in November 2006 through its convenience store format
‘Reliance Fresh’. Since then RRL has rapidly grown to operate 590 stores across 13
states at the end of FY 2007-08. RRL launched its first ‘Reliance Digital’ store in April
2007 and its first and India’s largest hypermarket ‘Reliance Mart’ in Ahmadabad in
August 2007.

This year, RRL has also launched its first few specialty stores for apparel (Reliance
Trends), footwear (Reliance Footprints)jewelers (Reliance Jewels), books, music and
other lifestyle products (Reliance Timeout), auto accessories and service format
(Reliance AutoZone) and also an initiative in the health and wellness business through
‘Reliance Wellness’. In each of these store formats, RRL is offering a unique set of
products and services at a value price point that has not been available so far to the Indian
consumer. Overall, RRL is well positioned to rapidly expand its existing network of 590
stores which operate in 57 cities.

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Reliance Retail Orissa- RELIANCE

RETAIL
The Organizational structure of Reliance Retail Orissa-
INDIA
NHQ
(MUMBAI)

(MUMBAI)

RELIANCE
RETAIL
ORISSA

BHUBANESWAR CUTTACK

RELIANCE
RELIANCE RELIANCE RELIANCE
FRESH DELIGHT FRESH
DELIGHT
(8) (6) (6) (4)

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