A

STUDY

ON

FACTOR AFFECTINGRETAIL PRICING STRATEGIES

ACKNOWLEDGEMENT

I would like to take this opportunity to thank various individuals, without the support of whom, this project would not have been successful. I express my sincere gratitude to my organization guide Mr.B.K. NADANI (M.D., UPSE) for giving me the opportunity to undergo the project in such an esteemed organization, I further thank him for rendering me his continuous support, encouragement and guidance while accomplishing this task and also for lending a patient ear when it came to solving my problem related to the project. The project would not have been possible without his valuable time and support. I would also like to thanks all the staff members of UPSE Ltd., Kanpur who always helped me. I also forward my deep regards to Mr.Sandeep Singh Chandel, HOD(Dr.VSIPS) . It is their valuable efforts, inspirations and suggestions, which has helped me to acquire a great deal of confidence and enrich this type of complicated knowledge. I am really thankful to all my faculty members as their constant support gave me encouragement to complete my report. I am also thankful to our parents, family members, seniors & friends for their support in completing my project. There has been a true support and help of many individuals I extend my gratitude to all of them for making this project successful. AMIT ASTHANA

TABLE OF CONTENT

INTRODUCTION OF TOPIC

INTRODUCTION OF RETAIL PRICING STRATEGIES:

Pricing of a product is vital for a retailer. It determines the profit and is one of the major marketing mix tools. Therefore retailers have to be very careful while choosing the pricing strategy to achieve profit goal. They need to design good pricing strategy for particular brands, categories, stores and markets. Before we determine which retail pricing strategy to use in setting the right price, we must know the costs associated with the products. Two key elements in factoring product cost are the cost of goods and operating expenses. The costs of goods include the price paid for the product, plus any shipping and handling expenses. The cost of operating expenses includes overhead, payroll, marketing and office supplies. To succeed in business, retailers need to assess their distribution channel and research on market potential to pay.

Pricing Strategies Pricing of products depends on the strategies of the retailers. To introduce a new product, the retailer can opt between running promotions and low pricing in the initial stage until the demand rises for the product in the market. To maintain a decent profit, the retailers can use 'Manufacturer Suggested Retail Price' (MSRP) and they can avoid price wars. Retailers considering a

"competitive pricing strategy" need to price competitively and provide outstanding customer service to stand above the competition.

Before pricing product, the retailers have to consider the location, exclusivity and/or unique customer service which would help to justify the higher prices. Some of the supermarkets are
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usually located in places where the upper class families reside. In such localities the retailer can charge higher prices to the products as the upper class families would buy products by brands even when the price is a little high. Therefore retailer has to know the consumer behavior.

Retailers would give a discount offers to the customers depending on type of customer targeted and type of item offered. Example: Retailer can offer a cash discount as reward to the customers who pay cash promptly or on time, quantity discount to large volumes buyer, seasonal discount to the customers who purchase as per season and charge less when the customer purchases a bundle or several related items together. Some of the retailers have assumption that they can win their competitors in the market by fixing a low price. However lowest pricing strategy does not allow retailers to attain profit in the long run. It is better for retailers to avoid the low pricing strategy and start with looking at the demand in the market by examining three factors: Competitor's Price: Retailers need to look at the competitor's pricing, cost, market price, discount offers and promotions to compete with their competitors. Ceiling Price: The retailer should not fix the price above ceiling price as the ceiling price is the highest price the market will bear. If the product price is above the ceiling price then customers will not be able to purchase such products.

Pricing decision:
Setting prices is a critical decision in implementing a retail strategy, because price is a critical component in customers' perceived value. In setting prices, retailers consider the price sensitivity of customers in their target market, the cost of the merchandise and services offered, competitive prices, and legal restrictions. Theoretically, retailers maximize their profits by setting prices on the basis of the price sensitivity of customers and the cost of merchandise. However, this approach does not consider the prices being charged by competitors. Another problem with
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attempting to set prices on the basis of customer price sensitivity is the implementation challenges associated with the large number of pricing decisions a retailer must make. Although some large retailers are using pricing optimization software to set prices, most retailers just mark up the item's cost to yield a profitable maintained margin. Then these cost-based initial prices might be adjusted according to the retail buyer's insights about customer price sensitivity and competitive pricing. Initial prices are adjusted over time using markdowns and for different market segments using variable pricing strategies. Retailers take markdowns to either dispose of merchandise or generate sales. Markdowns are part of the cost of doing business, and thus, buyers plan for them. Retailers use a variety of techniques to maximize profits by charging different prices to different customers. These techniques include setting different prices for individual customers, providing an offering that enables customers to self-select the price they are willing to pay, and setting different prices according to customer demographics. Retailers use two basic retail pricing strategies: everyday low pricing (EDLP) and high/low pricing. Each of these strategies has its advantages and disadvantages. The high/low strategy increases profits through price discrimination, creates excitement, and provides an opportunity to sell slow-moving merchandise. The EDLP approach assures customers of low prices, reduces advertising and operating expenses, reduces stockouts, and improves supply chain management. Additional challenges arise when pricing services, due to the need to match supply and demand and the difficulties customers have in determining service quality. Retailers use yield management techniques to match supply and demand for services. Finally, retailers use a variety of pricing techniques to stimulate sales, including price lining, leader pricing, and odd pricing. Retailing in India is gradually inching its way toward becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retail has entered India as seen in sprawling shopping centres, multi-storied malls and huge complexes offer shopping,
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entertainment and food all under one roof. The Indian retailing sector is at an inflexion point where the growth of organized retailing and growth in the consumption by the Indian population is going to take a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing workingwomen population and emerging opportunities in the services sector are going to be the key growth drivers of the organized retail sector in India. Retail Price Strategies Before detailing the development of pricing strategy, it is necessary to discuss the factors that affect price decision making. Consumers, govt., manufacturer and wholesaler and competitors each have an impact on the pricing strategy of retailer. The consumer and retailer pricing A retailer must understand the relationship between price and consumer purchases and perception's. Two economic principles explain this relationship the law of demand and the price elasticity of demand. The law of demand states that consumers purchase more units at low prices than at high prices. The price elasticity of demand relates to the sensitivity of the buyers to price changes in term of the quantities they will purchases, if relatively small changes in price have little impact on the number of unit purchased, demand is considered to be inelastic. Unitary elasticity occurs in the cases where changes in price directly offset changes in quantity. The importance of price varies by market segment, on the basis of a classic study; consumer can be divided into four categories, depending upon their shopping orientations. 1. Economic Primarily interested in shopping for values and extremely sensitive to price, quality and merchandise assortment.

2. Personalizing Shops where he or she is known, strong personnel attachment with store personnel and the store itself. 3. Ethical Willing to sacrifice lower prices and better assortment of goods in larger stores or chains to help the smaller stores stay in business. 4. Apathetic Shops only because he or she must want to finish as quickly as possible, and place emphasis on convenience.

The government and retail pricing

When examining the impact of government upon planning a pricing strategy, it must be remembered that three levels of govt. Exist central, state and local. Although many of the key laws are central, these laws are central, these laws apply only to interstate commerce. Therefore a retailer who operates exclusively with in the boundaries of one state may be restricted by central legislature. Legislation focuses on six major areas, horizontal price fixing, vertical price fixing, price determination, minimum price levels, unit pricing and price advertising. Manufacturers, wholesalers and other suppliers and retail pricing : Manufacturers, wholesalers and other suppliers have an impact on the retailers pricing strategy. In cases where suppliers are unknown or product are new, retailer seek price guarantee to ensure that inventory values and profits will be maintained. Price guarantee protect retailer against poise decision. For examples, a new manufacturer sell a retailer against poise decision. For examples, a new manufacturer sell a retailer radio's that have a final selling price of Rs. 800. The manufacturer pays him the difference. Should the retailer have to sell the radio at 25% ? The relative power of retailer and his supplier determines whether or not a guarantee is provided. There are often conflicts between manufacturer and retailers in the setting final prices. Manufacturer and retailer would each like to control the final selling price of merchandise. The
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manufacturer wants to achieve and retain a certain image and to allow all retailers, even those who are inefficient, to make profits; in contrast, the retailer would rather set prices based upon his or her store image, objective and so on.

Competition and retail pricing

The degree of control a firm has over prices depends upon the competitive environment in which it operates. In a market pricing situation, there is a lot of competition, and consumers can seek out the lowest price. Retailer price similarly to each other and have little control over price. Super market, fast-food retailers, and gas station are all in highly competitive industries and sell similar products or services. Therefore retailer in this area utilizes market pricing demand for a retailer in on of this area is enough so that a number of customers will switch to competitors if prices are raised. Under administered pricing, retailers attempt to Create store loyalties on the basis of a distinctive retailing mix. If strong differentiation is possible, the retailer can have control over the prices, it charges, this occurs because consumers considered image, assortment, personal service, and so on more important than price and will pay a high price of the products when shopping at status stores do not offer a good image, a good assortment, personal service and so on department stores, sloshing stores, and restaurants and retailer that are able to create distinctive offering and have some control over the prices.

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The key to the impact of the competitive environment on prices is the ability of retailers of differentiates itself from competitors. Week differentiations yields market pricing strong differentiation results in administered pricing. Because most price strategies can be easily copied in a short time, the reaction of competitors is predicable if the leading firm is successful. Accordingly a retailer may have to view price strategy from short run as well as long run. The purpose of the business is to maximize profits and therefore, pricing of products would have to be done carefully to ensure that the same can be achieved. Other pricing objectives could be to help achieve the targeted sales, to maintain or enhance market share or to meet or prevent competition.

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Prices could be set at a level that reflects the average industry price, with small adjustments made for unique features of the companys specific product(s). Firms that adopt this objective must work backwards from price and tailor cost to enable the desired margin to be delivered. It is interesting to note that the perception of price is different for a retailer and the consumer. For the retailer, it is a key element of the retail mix, while for the consumer, it is a measure of the value of the total bundle of satisfactions they are offered. It is also a measure of the alternatives foregone; either directly, competitive products or substitutes or indirectly i.e. alternative uses for the money to be spent and a measure for quality.

Elements of retail Price:

In order to arrive at the retail price, one needs to first consider the elements that go into the making of the price. The first element to be considered is the Cost of Goods, which s the cost of the merchandise and various there expenses, which are involved in the movement of the goods from the manufacturer to the actual store. These expenses may be Fixed or variable. Fixed costs: Fixed costs sometimes referred to as overhead, are expenses that dont vary according to production amounts such as rent or office space (and storage space if you store inventory), office equipment (telephones, faxes, computers etc) insurance, utilities etc. Variable costs: Variable costs are expenses that do vary with the amount of service provided or goods produced. They include cost such as hourly pay for a contractor on a specific project, raw material etc. Some available costs dont depend specifically on the number of product but are still variable such as advertising or promotion expenses. The cost of a product is the total of the fixed and variable expenses to manufacturer or offers your product or service. Price on the other hand is the selling price per unit customers pay or your product or service.

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The price of a product may be seen as financial expression of the value of that product. For a consumer price is the monetary expression of the value to be enjoyed / benefits of purchasing product, as compared with other available items. For consumers the price of a product is the most obvious indicator of cost hence the need to get product pricing right. The profit to be earned from the merchandise must be planned before fixing the retail price. The profit figure arrived at can also be expressed as the markup percentage as: Retail Price = Cost + Mark Up or Cost = Retail Price Mark up and Mark up = Retail Price Cost The components of this formula can be expressed in rupee terms or as a percentage. The markup percentage can be expressed as a percentage of the retail price or as a percentage of the cost price. Thus, the following formulae would apply: Mark up Percent (Based on Retail Price) = Markup in Rupees / Retail Price And, Mark Up Per cent (Based on Cost)=Mark Up in Rupees / Cost

Retailing in the future:

Many environment changes will occur in the future, and these will have a impact on retailing. A far sighted retailer must study demographic, life style, consumerism, technological and institutional trends adapt the retail mix to these trends. Demographic trends are growth in the number of house holds (due to increase in one person house hold) suburban communities the number of working woman, and the number of higher income families. Life style changes will include different and expanding roles for woman and increased consumer sophistication and confidence. Some consumers will experience a poverty of time and will seek convenience in shopping. The other consumer will have greater amount of leisure time and will purchase more entertainment and recreation products.

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Consumerism (organized reaction to harmful business practices) will continues to grow in importance, consumer group and govt. Agencies will expand their actions and participation many retails have already implementer volunteer plans to aid consumers. The major technological changes will be concentrated in electronic banking (cashless transaction and nation credit cards) computerization (computerized checkout and electronic point of sale systems) Retail institutions changes will occur because of the evolutionary nature of the retail life cycle and rising costs. Retailers must be aware of the retailer life cycle and react according to the stages in shish they are operating (innovative, accelerated development, maturity and decline) four institutional type (the super store, risk minimization, rationalized retailing and positioned retailing) will become more prominent in the future. Retail pricing is affected by a variety of factors including cost of sources and competition. Most retailers follow a fixed mark-on pricing strategy; others follow a market accepted priced strategy. There are also retailers who regularly introduce lose-leaders to attract customers with the objective of generating store traffic.

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INDUSTRY ANALYSIS

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In todays dynamic and shaky business world, the retail industry is constantly upgrading itself. With an endless array of customer choices, fierce competitors, pervasive use of the internet, and a complex global economy, retailers need to focus on finding ways to sustain and grow their businesses. Traditional growth models that focused on rolling out more stores and adding more product lines, no longer enjoy the return on investment they once did. Successful retailers are those who are able to adapt and change to the environment and develop new ways of serving customers, respecting the dynamics of current trends and adapting accordingly. The retail industry in India is hailed as a sunrise sector, and is estimated to double in value from US$ 330 billion in 2007 to $640 billion by 2015. In fact, India has topped AT Kearney's annual Global Retail Development Index (GRDI) for the third year in a row as the most attractive market for retail investment. The bad news is, despite the fact that India has one of the largest number of retail outlets in the World, organized retail accounts for only 4% of the total market. This makes it especially difficult to apply sophisticated merchandising and sales tools, enhance consumer interaction and also, make very accurate analysis. That said, analysts believe the sector is likely to show significant growth of over 9 % p.a over the next 10 years and also see rapid development in organized retail formats, with the proportion likely to reach a more respectable 25% by 2018. Currently, India is the 5th largest retail market in the world. The market size in 2010 was estimated at US$ 353 bn (Source: IBEF) and is expected to reach US$ 543 bn by 2014. Retailing has played a major role the world over in increasing productivity across a wide range of consumer goods and services. In the developed countries, the organised retail industry accounts for almost 80% of the total retail trade. In contrast, in India organised retail trade accounts for merely 5% of the total retail trade. This highlights tremendous potential for retail sector growth in India.
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Consumption spending in India

Segment Food Fashion Leisure and entertainment Fashion accessories Consumer durables Health, beauty and pharma Furniture Telecom Books and Music Others % contribution 62.0 9.5 7.9 5.5 4.0 3.8 3.4 1.8 1.1 1.0

Source: Pantaloon Retail analyst report

The sector can be broadly divided into two segments: Value retailing, which is typically a low margin-high volume business (primarily food and groceries) and Lifestyle retailing, a high margin-low volume business (apparel, footwear, etc). The sector is further divided into various categories, depending on the types of products offered. Food dominates market consumption followed by fashion. The relatively low contribution of other categories indicates opportunity for organised retail growth in these segments, especially with India being one of the world's youngest markets. Historically, Indians have been conservative spenders, thus food forms a huge chunk of India's consumption needs. Transition from traditional retail to organised retailing is taking place due to changing consumer expectations, demographic mix, etc. With the revival in consumer spending, expansion plans of retailers are back in full swing. The convenience of shopping with multiplicity of choice under one roof (Shop- in Shop), and the increase of mall culture etc. are factors appreciated by the new generation. These are expected to be the growth drivers of organised retailing in India over the long run.

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Barriers to entry
Reforms by India in opening up its economy have greatly improved trade prospects, but major barriers still exist such as regulatory issues, supply chain complexities, inefficient infrastructure, and automatic approval not being allowed for foreign investment in retail. But, some of these are set to change with FDI in multi-brand retail set for approval. Bargaining power of suppliers The bargaining power of suppliers varies depending upon the target segment, the format followed, and products on offer. The unorganized sector has a dominant position, still contributing 95% of the total retail market. There are few players who have a slight edge over others on account of being established players and enjoying brand distinction. Since it is a capital intensive industry, access to capital also plays an important part for expansion in the space. Bargaining power of customers High due to wide availability of choice. With FDI coming in, this will increase further. Competition High. Competition is characterized by many factors, including assortment, products, price, quality, service, location, reputation, credit and availability of retail space etc. New entrants (business houses and international players) are expected to further intensify the competition and so would the foreign players' entry. Financial Year '11 Retail sector was in news throughout the year. The ongoing attempt to bring in foreign direct investment in retail continued and the proposal is through significant hurdles. It is now in the final stages and may see the light of the day soon. In the budgetary speech, the Finance

Minister announced that the optional levy of excise duty on garment manufacturers would now be compulsory. Protests were staged all across the country against this measure. The retailers increased the prices of their goods in a phased manner. At first, to offset the rising prices of cotton and secondly to deal with the newly imposed excise duty.

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Retailing companies are back to their expansion plans. But this time around, the focus is on Tier II and Tier III cities and towns. Most of the retailers opened up new stores in places like Pune, Indore, Kochi, etc in their wake to tap the unsaturated potential in these markets. Retail industry has been on a growth trajectory over the past few years. With the economy back on track, retailers are executing their expansion plans. The industry is expected to grow at a rate of 12% per annum for the next 5 years. The industry is eagerly awaiting the approval of the FDI in multi brand retail. This, the players feel will help them in funding their operations and expansion plans. The expertise brought in by the foreign retailers will also improve the way the Indian retailers operate. It is expected to bring in more efficiency in the supply chain functions of retailers. Retail is mainly a volume game, (especially value retailing). Going forward, with the competition intensifying and the costs scaling up, the players who are able to cater to the needs of the consumers and grow volumes by ensuring footfalls, while being able to reduce costs, withstand downturns, and face competition will have a competitive advantage.

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In todays dynamic and shaky business world, the retail industry is constantly upgrading itself. With an endless array of customer choices, fierce competitors, pervasive use of the internet, and a complex global economy, retailers need to focus on finding ways to sustain and grow their businesses. Traditional growth models that focused on rolling out more stores and adding more product lines, no longer enjoy the return on investment they once did. Successful retailers are those who are able to adapt and change to the environment and develop new ways of serving customers, respecting the dynamics of current trends and adapting accordingly. The retail industry in India is hailed as a sunrise sector, and is estimated to double in value from US$ 330 billion in 2007 to $640 billion by 2015. In fact, India has topped AT Kearney's annual Global Retail Development Index (GRDI) for the third year in a row as the most attractive market for retail investment. The bad news is, despite the fact that India has one of the largest number of retail outlets in the World, organized retail accounts for only 4% of the total market. This makes it especially difficult to apply sophisticated merchandising and sales tools, enhance consumer interaction and also, make very accurate analysis. That said, analysts believe the sector is likely to show significant growth of over 9 % p.a over the next 10 years and also see rapid development in organized retail formats, with the proportion likely to reach a more respectable 25% by 2018. All businesses that sell goods and services to consumers fall under the umbrella of retailing, but there are several directions we can take from here. For starters, there are department stores, discount stores, specialty stores and even seasonal retailers. Each of these might have their own little quirks; however, for the most part the analysis overlaps to all areas of retailing. This section of the industry handbook will try to focus more on general retailers and department stores. (For background reading, see Analyzing Retail Stocks.) Over the past couple decades, there have been sweeping changes in the general retailing business. What was once strictly a made-to-order market for clothing has changed to a ready-towear market. Flipping through a catalog, picking the color, size and type of clothing a person wanted to purchase and then waiting to have it sewn and shipped was standard practice. At the turn of the century some retailers would have a storefront where people could browse. Meanwhile, new pieces were being sewn or customized in the back rooms.
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In some parts of the world, the retail business is dominated by smaller family-run or regionallytargeted stores, but this market is increasingly being taken over by billion-dollar multinational conglomerates like Wal-Mart and Sears. The larger retailers have managed to set up huge supply/distribution chains, inventory management systems, financing pacts and wide scale marketing plans. Without getting into specific product categories within the retailing industry, the overall segments can be divided into two categories: Hard - These types of goods include appliances, electronics, furniture, sporting goods, etc. Sometimes referred to as "hardline retailers." Soft - This category includes clothing, apparel, and other fabrics. Each retailer tries to differentiate itself from the competition, but the strategy that the company uses to sell its products is the most important factor. Here are some different types of retailers: Department Stores - Very large stores offering a huge assortment of goods and services. Discounters - These also tend to offer a wide array of products and services, but they compete mainly on price. Demographic - These are retailers that aim at one particular segment. High-end retailers focusing on wealthy individuals would be a good example. Each of these has its own distinct advantages, but it's important to know how these advantages play out. For example, during tough economic times, the discount retailers tend to outperform the others. The opposite is true when the economy is thriving. The more successful retailers attempt to combine the characteristics of more than one type of retailer to differentiate themselves from the competition. Key Ratios/Terms Same Store Sales: Used when analyzing individual retailers. It compares sales in stores that have been open for a year or more. This allows investors to compare what proportion of new sales have come from sales growth compared to the opening of new stores. This is important because
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although new stores are good, there eventually comes a saturation point at which future sales growth comes at the expense of losses at other locations. Same store sales are also commonly referred to as "comps." Analyst Insight As we mentioned earlier, the store type and the strategy that retailers use plays a big role in how well the company performs. The first thing to take a look at is what segment of the retail industry the company is situated in. Is the company a discounter? Department store? Specialty retailer? The retail category to which the company belongs also helps determine the following details about the company: Competitors The number and size of direct competitors is important. Ideally, you want the company to have as little competition as possible, but this rarely happens. Determine who the direct competitors are and how they are all positioned in the market. A smaller regional discount store might find it tough to compete with new Wal-mart stores opening up every month. Take a look at the big picture, find out what differentiates the company from its competitors. Do they have better prices, service, or offer higher quality goods than their competition? Grocery stores might find it hard to differentiate themselves from competitors: after all, an apple is an apple. Higher-end retailers, however, may have an easier time as they try to compete on service or quality. Size of the Market Determining the overall size of the market gives us an indication of the potential for the market. If you had the choice between a company with a 25% share of a $10 million market or a 25% share of a $1 billion market, which one would you chose? Other Factors - Some analysts even go as far as evaluating the retail strategy that the companies use. For example, does the company have a fresh look? Are their stores clean, bright and fun to shop in? Swedish retailer IKEA has done an excellent job of designing their stores for visual appeal, and quite possibly it has equated to very strong sales.

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Overview of Indian Retail Sector:

Retail Sector is the most booming sector in the Indian economy. Some of the biggest players of the world are going to enter the industry soon. It is on the threshold of bringing the next big revolution after the IT sector. Although organized retail market is not so strong as of now, it is expected to grow manifolds by the year 2010. The sector contributes 10% of the GDP, and is estimated to show 20% annual growth rate by the end of the decade as against the current growth rate of 8.5%. A CRISIL report says that the Indian retail market is the most fragmented in the world and that only 2% of the entire retailing business is in the organized sector. This suggests that the potential for growth is immense. There are about 300 new malls, 1500 supermarkets and 325 departmental stores currently being built in the cities across India. Estimates and predictions for retail sector:

At present, the industry is estimated to be at more than US$ 400 billion by a study of McKinsey.

The Economist Intelligence Unit (EIU) estimates the retail market in India will increase to US$608.9 billion in 2009 from US$394 billion in 2005.

KPMG Report says that the organized retail would grow at a higher rate than the GDP in the next five years.

The retail sector would generate employment for more than 2.5 million people by the year 2010, predicts an analysis by Ma Foi Management Consultants Ltd.

Some of the players present in the industry: Archies, Bata India Ltd, Big Bazaar, Crossword, Ebony Retail Holdings Ltd., Fabmall, Food Bazaar, Globus Stores Pvt. Ltd., Health and Glow, Liberty Shoes Ltd., MTR Foods Ltd., Music World Entertainment Ltd., Pantaloon Retail India Ltd., Shoppers Stop, Style SPA Furniture Ltd, Subhiksha, Titan Industries, Lifestyle, etc. New entrants entering the market soon will be Reliance Retail Ltd, Wal-Mart Stores, Carrefour, Tesco, Boots Group, etc.
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Evolution of the Sector

Weekly Markets, Village and Rural Melas Source of entertainment Rural and historic reach

Convenience stores, Mom-and-pop / Kirana shops Neighborhood stores/convenience Traditional and pervasive reach

PDS outlets, Khadi stores, Cooperatives Government supported Availability/low costs/distribution

Exclusive Brand outlets, Hypermarkets and Supermarkets, Department stores and Shopping malls.
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 Shopping experience/ efficiency Modern formats/ international Modern Format retailers Supermarkets Hypermarkets Department Stores Specialty Chains Company Owned Company Operated

Traditional Format Retailers Kiranas: Traditional Mom and Pop Stores Kiosks Street Markets Exclusive /Multiple Brand Outlets

Traditional Vis a Vis Modern Format Retailers

The retail boom will face a strong competition from the 12 million mom-and-pop stores. These are easily accessible and provide services like free home delivery and goods at credit, which is not possible with hypermarkets and supermarkets. Buying from Malls, Supermarkets and Department stores like Subhiksha, Marks & Spencers, etc. provide a different environment where one can pick and choose from a variety of products. Owing to the entry of such big players, the small shopkeepers fear losing their business. Reliance Retail Ltd. has been inviting such people to join in its Dairy business as franchisees.

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MAJOR PLAYER IN RETAIL SECTOR:

1. Pantaloon Retail: It is headquartered in Mumbai with 450 stores across the country employing more than 18,000 people. It can boast of launching the first hypermarket Big Bazaar in India in 2001. An all-India retail space of 5 million sq. ft. which is expected to reach 30 mn by 2010. It is not only the largest retailer in India with a turnover of over Rs. 20 billion but is present across most retail segments - Food & grocery (Big bazaar, Food bazaar), Home solutions (Hometown, furniture bazaar, collection-i), consumer electronics (e-zone), shoes (shoe factory), Books: music & gifts (Depot), Health & Beauty care services (Star, Sitara and Health village in the pipeline), e-tailing (Futurbazaar.com), entertainment (Bowling co.) One of their recent innovations include e-commerce hybrid format of small shops , the area for these stores will be 150 sq. ft. fitted with 40 digital screens. Customers will be encouraged to browse through the entire range of products on digital screen. They will be able to place the order, the delivery of which will be arranged by the shop to their homes within a few hours. 2. K Raheja Group They forayed into retail with Shoppers Stop, Indias first departmental store in 2001. It is the only retailer from India to become a member of the prestigious Intercontinental Group of Departmental Stores (IGDS). They have signed a 50:50 joint venture with the Nuance Group for Airport Retailing. Shoppers Stop has 7, 52, 00 sq ft of retail space with a turnover of Rs 6.75 billion. The first Hypercity opened in Mumbai in 2006 with an area of 1, 20,000 sq. ft. clocking gross sales of Rs. 1 bn in its first year. Crossword brand of book stores, Homes stop a store for home solutions, Mothercare a concept stocking merchandise related to childcare are also owned by them. Recently, Rahejas have signed an MoU with the Home Retail Group of UK to enter into a franchise arrangement for the Argos formats of catalogue & internet retailing.

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The group has announced plans to establish a network of 55 hypermarkets across India with sales expected to cross the US$100 million mark by 2010. 3. Tata group: Established in 1998, Trent - one of the subsidiaries of Tata Group - operates Westside, a lifestyle retail chain and Star India Bazaar - a hypermarket with a large assortment of products at the lowest prices. In 2005, it acquired Landmark, India's largest book and music retailer. Trent has more than 4 lakh sq. ft. space across the country. Westside registered a turnover of Rs 3.58 mn in 2006. Tatas has also formed a subsidiary named Infiniti retail which consists of Croma, a consumer electronics chain. It is a 15000-17000 sq. ft. format with 8 stores as of September 2007. Another subsidiary, Titan Industries, owns brands like Titan, the watch of India has 200 exclusive outlets the country and Tanishq, the jewellery brand, has 87 exclusive outlets. Their combined turnover is Rs 6.55 billion. Trent plans to open 27 more stores across its retail formats adding 1.5 mn sq ft of space in the next 12 DLF malls. 4. RPG group: One of the first entrants into organised food & grocery retail with Foodworld stores in 1996 and then formed an alliance with Dairy farm International and launched health & glow (pharmacy & beauty care) outlets. Now the alliance has dissolved and RPG has Spencers Hyper, Super, Daily and Express formats and Music World stores across the country. RPG has 6 lakh sq. ft. of retail space and has registered a turnover of Rs 4.5 billion in 2006. It is planning to venture into books retail, with the launch of its own bookstores Books and Beyond by the end of 2007. An IPO is also in the offering, with expansion to 450+ MusicWorld, 50+ Spencer's hyper outlets covering 4 million sq. ft. by 2010.

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5. Landmark group: It was launched in 1998 in India. Lifestyle is spread across six cities, covering 4.6 lakh sq. ft. with a turnover of Rs 3.5 billion in 2005. A new division named Lifestyle International has emerged for their international brands business comprising Bossino, Kappa and Springfield in their portfolio. Their retail mix includes Home solutions (Home centre), fashion (lifestyle, landmark International), value retailing (max retail), hypermarkets & supermarkets (Max), kids entertainment (Funcity). They plan to invest Rs. 300 crores in the next two years to expand on Max chain, and Rs 100 crores on Citymax 3 star hotel chain. They have already instituted a separate company christened Citymax Hotels (India). 6. Piramal Group In September 1999, Piramal Enterprises announced their arrival into retail with the launch of three retail concepts: India's first true shopping mall of international standards, called Crossroads; a lifestyle department store named Piramyd Megastore; and a family entertainment centre known as Jammin. Piramyd Megastore and Jammin were anchor tenants for Crossroads (recently sold to Pantaloon for Rs 4 billion). In 2001, the group entered the business of food & grocery retail with the launch of TruMart supermarkets in Pune. They have around 18 TruMart stores covering 1.90 lakh sq. ft. registering a turnover of Rs 37.6 mn in 2005. Piraymd Megatsores contributes more than 70 % to their retail mix with a turnover of Rs 112.8 mn. They plan to open 150 stores covering 75 mn sq ft of retail space in the next 5 years. 7. Subhiksha Subhiksha is a Chennai-based, decade old, no frills, food, grocery, pharma and telecom, discount retail chain. ICICI Venture Capital holds 24% in the equity capital of Subhiksha. It has more than 500 stores across the country covering a retail space of more than 1 million sq ft with a
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registered turnover of Rs 3.34 bn in 2006. It has a planned investment of Rs.300 crores to ramp up its operations to 1200 stores by 2008. New but potential BIG players 8. Bharti-Walmart Their plans include US$ 7 bn investment in creating retail network in the country including 100 hypermarkets and several hundred small stores. They have signed a 50:50 percent joint venture agreement with Walmart. Wal-Mart will do the cash & carry while Bharti will do the front-end. 9. Reliance Indias most ambitious retail plans are by reliance, with investments to the tune of Rs. 30,000 cr ($ 6.67 bn) to set up multiple formats with expected sales of Rs 90,000 crores ($20 bn) by 200910. There are already more than 300 Reliance Fresh stores and the first Reliance Mart Hypermart has opened in Ahmedabad. The next ones are slated to open at Jamnagar, followed by marts in Delhi / NCR, Hyderabad, Vijayawada, Pune and Ludhiana. 10. AV Birla Group They have a strong presence in apparel retailing through Madura garments which is subsidiary of Aditya Birla Nuvo Ltd. They own brands like Louis Phillipe, Van Heusen, Allen Solly, Peter England, Trouser town. In other segments of retail, AV Birla Group has announced investment plans of Rs 8000 - 9000 crores in the first 3 years till 2010.

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International Retailers in India

Major retail players like Walmart, Tommy Hilfiger, Carrefour, Marks & Spencer, Nike, etc. are going to foray into the booming retail industry in India. Indian fashion industry would see the advent of fashion brand DKNY through a franchisee agreement with S. Kumar's. In the food & beverages sector, McDonald's is going to penetrate the markets through 100 new outlets across the country. Encouraged by the huge success of Pizza Hut, McDonald's, and Dominos, another organization known as Starbucks has expressed its interest in opening up outlets in India through franchising. There are various kinds of restrictions on FDI in the Indian retail sector, but organizations can enter the industry through Strategic License agreements, Franchising and Cash and carry wholesale trading. The recent initiatives taken by the government to open up the sector for foreign players have lured many companies to enter the industry. Big players like Reliance Retail, Walmart-Bharti combination, Tesco, AV Birla group and Future group are all gearing up for huge investments and aggressive business strategies. The government is considering the introduction of multi brand specialty formats like consumer electronics, building, sports goods and construction and stationery. The government has allowed 51 percent foreign direct investment (FDI) in single brand retail outlets. Reliance Retail has announced its plan to open 5000 stores over the next 5 years. Many companies like Lee Cooper, Starbucks and Walmart have put forward their FDI proposals to the government. At present, the 12 million mom-and-pop and Kirana stores dominating the retail landscape suffer from certain limitations, such as small size of operations, low cost format and pervasive use of tax evasion techniques. They also suffer from capital shortage, labour and real estate problems. Some experts believe that the influx of major retail chains would wipe out millions of these shops. This might leave a lot of people jobless. Legal, political, infrastructural, cultural and educational constraints would have to be considered if the sector truly desires to achieve the kind of future it has planned for itself.

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PRICING STRATEGY OF WALL*MART:

In August 2007, Walmart announced an agreement with Bharti Enterprises to establish a joint venture, Bharti Walmart Private Limited, for wholesale cash-and-carry and back-end supply chain management operations in India. Our first BestPrice Modern Wholesale opened in May 2009. The president and CEO of Walmart India is Raj Jain. Sam Walton said it bestIf we work together, well lower the cost of living for everyonewell give the world an opportunity to see what its like to save and have a better life.

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Walmart Cheer
Sam Walton, our founder, leads the Walmart cheer

Give me a W! Give me an A! Give me an L! Give me a squiggly! Give me an M! Give me an A! Give me an R! Give me a T!

What's that spell? Wal-Mart! Whose Walmart is it? It's my Wal-Mart! Who's number one? The customer! Always!
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By successfully adopting a cost leadership strategy over the decades, Wal-Mart has emerged as the largest company (in terms of revenues) in the world.

The case examines in-depth the key elements of the cost leadership strategy followed by WalMart. It discusses how the cost leadership strategy generated above-average returns for the company and acted as a defense against competition in the industry. Finally, the case discusses the plans and challenges faced by Wal-Mart in early 2004.

Walmart will be using a new slogan: "Low Prices. Every Day. On Everything." After being badly affected by a wrong product-cuts decision, Wal-Mart Stores Inc. is replenishing its shelves with 8,500 additional items including powerful snow blowers. The retailer took these items off its stores 2 years ago along with ice-fishing gears and other goods. Yet each winter, Minneapolis residents have to clear driveways and sidewalks of 50 inches of snow. The decision was part of Wal-Marts 2008 move to remove non-top selling items and promote deep discounts goods with higher demand. But shoppers, after not finding some of these items at Wal-Mart stores opted to go to competitors hence the failure of the decision. So the retailer is back to founder Sam Waltons approach: push all-time low prices on a wider variety of goods. Sanford Bernstein analyst Colin McGranahan said, losing a customer is terrible and getting them back is the hardest thing. Its an important step in remerchandising strategy, but how significant an impact this has on Wal-Marts traffic remains a question, he added. Duncan Mac Naughton,

34

chief merchandising officer for Wal-Marts U.S. discount stores first key effort is to make sure that if the customer wants it, the store has it. Investors have to see that Wal-Mart can bring customers back after sales have fallen for 7 straight quarters. It is contrary to most growth that follows after a recession when shoppers throng stores for low-priced goods. Wal-Mart shares closed at $52.82 (28 cents up) on the New York Stock Exchange on Monday. The retailers strategy is to put 11% more items in an average store and increase display with tags that say Its back! for returning goods or signs that read Low Prices. Every day. On everything. and Coupons? We gladly accept them. Mac Naughton said this strategy may be used periodically on promotional prices. The new price focus and assortment will help assess spending habits of customers who deal with higher costs. About 60% of Americans have made adjustments to manage high gasoline prices while higher food costs was the adjustment reason of another 48% said American Institute of Certified Public Accountants survey. Mac Naughton said in this situation, customers will find confidence in knowing theyre getting the best prices with the best assortments. Wal-Marts remerchandising move begins Monday. The new promotional line, Low Prices. Every Day. On Everything. adds to the Save money. Live better. line the retailer has used for some time now.

Wal-Mart's Aggressive Pricing

On July 2, 1962, Samuel Moore Walton (Walton), a merchant with over 15 years of experience in retailing, set up his first discount store in Rogers, a small town in the state of Arkansas, US. The store offered a wide variety of branded merchandise at a competitive price. During the initial years, Walton focused on establishing new stores in small towns, with an average population of 5,000. These towns were largely neglected by leading retailers like Sears Roebuck & Company, K-Mart and Woolco, which concentrated more on larger towns and big cities. In his efforts to attract people from the rural areas to his stores, Walton introduced the concept of every day low prices (EDLP).
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EDLP promised Wal-Mart's customers a wide variety of high quality, branded and unbranded products at the lowest possible price, offering better value for their money. Wal-Mart's advertisement describing EDLP said, "Because you work hard for every dollar, you deserve the lowest price we can offer every time you make a purchase. You deserve our Every Day Low Price.

PRICING STRATEGY OF PANTALOONS:

Pantaloon Retail (India) Limited, is a large Indian retailer, part of the Future Group, and operates in multiple retail formats in both, value and lifestyle, segments of the Indian consumer market. Headquartered in Mumbai, the company has over 1,000 stores across 71 cities in India and employs over 30,000 people, and as of 2010, it was the country's largest listed retailer by market capitalization and revenue. the company separated its discount store business, which includes the Big Bazaar hypermarket and the Food Bazaar supermarket businesses, into Future Value Retail Ltd., its wholly owned subsidiary, so that the company may be listed independently. The companys brands include Pantaloons, a chain of fashion outlets, Big Bazaar, a hypermarket chain, and Food Bazaar, a supermarket chain. Some of the company's other regional brands include Depot, Shoe Factory, Brand Factory, Blue Sky, aLL, Top 10 and Star and Sitara.

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A subsidiary company, Home Solutions Retail (India) Limited, operates Home Town, a largeformat home solutions store, Collection i, selling home furniture products and E-Zone focussed on catering to the consumer electronics segment. As Indias leading retailer, Pantaloon Retail inspires trust through innovative offerings, quality products and affordable prices that help customers achieve a better quality of life every day. We serve customers in 85 cities and 60 rural locations across the country through over 15 million square feet of retail space. Pantaloon Retail is the flagship company of Future Group, Indias retail pioneer catering to the entire Indian consumption space. Through multiple retail formats, we connect a diverse and passionate community of Indian buyers, sellers and businesses. The collective impact on business is staggering: Around 220 million customers walk into our stores each year and choose products and services supplied by over 30,000 small, medium and large entrepreneurs and manufacturers from across India. This number is set to grow. We operate multiple retail formats in both the value and lifestyle segments of the Indian consumer market including:

Pantaloons - A chain of fashion outlets.

Big Bazaar - A uniquely Indian hypermarket chain.

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HomeTown - One-stop destination for every need of the aspirational Indian home-owner.

Food Bazaar - A supermarket chain that blends the look and feel of Indian bazaars with modern retail aspects like choice, convenience and quality.

Central - a chain of seamless destination malls.

Ezone - eZone brings to you the latest in electronics at the lowest prices.

Our other formats include Brand Factory, Ethnicity, Planet Sports, and more. As modern retail drives fresh demand and consumption in new categories, our strategy is based on a deep understanding of Indian consumers the products they want, and making these products available in every city in every store format. We are in line with our broad objective of being a catalyst in Indias consumption-led growth and being a positive agent of change in the communities we serve.
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Lines of Business
The company is present across several lines of business which have various formats (stores) Plywood, The Dollar Store (JV)

Fashion - Pantaloons, Central, aLL, Brand Factory, Blue Sky, Top 10, Fashion Station, Big Bazaar, Lee Cooper (JV)

General Merchandise - Big Bazaar, Shoe Factory, Navras, Electronics Bazaar, Furniture Bazaar, KB'S FAIR PRICE, Food Rite

Electronics - eZone, Electronic Bazzaar, STAPLES (JV) Home Improvement - Home Town Furniture - Collection i, Furniture Bazaar, Home Bazaar E-tailing (online shopping) - www.futurebazaar.com Books and music - Depot Leisure and entertainment - Bowling Co., F123, TGIF (Thank God it's Friday!) Wellness - Star & Sitara, Tulsi Telecom and IT - Gen M, M Bazaar, M-Port, ConvergeM, Future Axiom, T 24, One Mobile (in alliance with TATA Teleservices)

Consumer durables - Koryo, Sensei, IPAQ Service - E Care, H Care , Design & Service Malls - Central (Bangalore, Hyderabad, Pune, Mumbai,Kochi, Vadodara, Gurgaon, Indore, Ahmedabad, Thane)

Investment and savings - Insurance: ULIP, Pension, Endowment, etc. Company Timeline

1987 Company incorporated as Manz Wear Private Limited, launch of Pantaloons trouser, Indias first formal trouser brand

1992 An initial public offer (IPO) was made in the month of May. 1997 Pantaloons, Indias family store, launched in Kolkata. 2001 Big Bazaar, Is se sasta aur accha kahi nahin, Indias first hypermarket chain, launched.
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2002 Food Bazaar, the supermarket chain, is launched. 2007 Future Group crosses the $1 billion turnover mark. Type Industry Founded Headquarters Area served Key people Revenue Employees Parent Public Retail India Mumbai India Kishore Biyani, (MD & CEO) 60.190 billion 14,000 Future Group

RECENT TRENDS

Retailing in India is witnessing a huge revamping exercise as can be seen in the graph India is rated the fifth most attractive emerging retail market: a potential goldmine. Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3 percent or US$ 6.4 billion

As per a report by KPMG the annual growth of department stores is estimated at 24% Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney.

Multiple drivers leading to a consumption boom:

o o o o

Favorable demographics Growth in income Increasing population of women Raising aspirations: Value added goods sales

Food and apparel retailing key drivers of growth Organized retailing in India has been largely an urban Phenomenon with affluent classes and growing number of double-income households.

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More successful in cities in the south and west of India. Reasons range from differences in consumer buying behavior to cost of real estate and taxation laws.

Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market across most categories of consumption
o

ITC is experimenting with retailing through its e-Choupal and Choupal Sagar rural hypermarkets.

HUL is using its Project Shakti initiative women self-help groups to explore the rural market.

Mahamaza is leveraging technology and network marketing concepts to act as an aggregator and serve the rural markets.

IT is a tool that has been used by retailers ranging from Amazon.com to eBay to radically change buying behavior across the globe.

RETAIL SALES IN INDIA

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SWOT Analysis OF INDIAN RETAIL SECTOR:

A SWOT analysis of the Indian organized retail industry is presented below: Strength: 1. Retailing is a technology-intensive" industry. It is technology that will help the organized retailers to score over the unorganized retailers. Successful organized retailers today work closely with their vendors to predict consumer demand, shorten lead times, reduce inventory holding and ultimately save cost. Example: Wal-Mart pioneered the concept of building competitive advantage through distribution & information systems in the retailing industry. They introduced two innovative logistics techniques cross-docking and EDI (electronic data interchange).

2. On an average a super market stocks up to 5000 SKU's against a few hundreds stocked with an average unorganized retailer. Weakness 1. Less Conversion level : Despite high footfalls, the conversion ratio has been very low in the retail outlets in a mall as compared to the standalone counter parts. It is seen that actual conversions of footfall into sales for a mall outlet is approximately 20-25%. On the other hand, a high street store of retail chain has an average conversion of about 50-60%. As a result, a stand-alone store has a ROI (return on investment) of 25-30%; in contrast the retail majors are experiencing a ROI of 8-10%. 2. Customer Loyalty: Retail chains are yet to settle down with the proper merchandise mix for the mall outlets. Since the stand-alone outlets were established long time back, so they have stabilized in terms of footfalls & merchandise mix and thus have a higher customer loyalty base.

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Opportunity

1. The Indian middle class is already 30 Crore & is projected to grow to over 60 Crore by 2010 making India one of the largest consumer markets of the world. The IMAGES-KSA projections indicate that by 2015, India will have over 55 Crore people under the age of 20 - reflecting the enormous opportunities possible in the kids and teens retailing segment. 2. Organized retail is only 3% of the total retailing market in India. It is estimated to grow at the rate of 25-30% p.a. and reach INR 1,00,000 Crore by 2010. 3. Percolating down : In India it has been found out that the top 6 cities contribute for 66% of total organized retailing. While the metros have already been exploited, the focus has now been shifted towards the tier-II cities. The 'retail boom', 85% of which has so far been concentrated in the metros is beginning to percolate down to these smaller cities and towns. The contribution of these tier-II cities to total organized retailing sales is expected to grow to 20-25%.

4. Rural Retailing: India's huge rural population has caught the eye of the retailers looking for new areas of growth. ITC launched India's first rural mall "Chaupal Saga" offering a diverse range of products from FMCG to electronic goods to automobiles, attempting to provide farmers a one-stop destination for all their needs." Hariyali Bazar" is started by DCM Sriram group which provides farm related inputs & services. The Godrej group has launched the concept of 'agri-stores' named "Adhaar" which offers agricultural products such as fertilizers & animal feed along with the required knowledge for effective use of the same to the farmers. Pepsi on the other hand is experimenting with the farmers of Punjab for growing the right quality of tomato for its tomato purees & pastes.

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Threat

1. If the unorganized retailers are put together, they are parallel to a large supermarket with no or little overheads, high degree of flexibility in merchandise, display, prices and turnover.

2. Shopping Culture: Shopping culture has not developed in India as yet. Even now malls are just a place to hang around with family and friends and largely confined to window-shopping.

Conclusion To conclude, it can be said that though the global retail industry has reached its maturity, the Indian retail industry is still at its infancy. But with the huge potentiality existing in the Indian market, it is expected to grow in leaps and bounds in the near future. Instead of comparing the total global retail industry with the Indian retail industry, lets compare Wal-Mart alone with the Indian retail industry & put forward few interesting facts: Retail Sales of Wal-Mart for the year 2003 was US $ 25,632.9 Crore; higher than the size of Indian retail industry. The size of any Wal-Mart store is much higher than the size of any existing shopping mall in India. Wal-Mart has over 4,800 stores, which is unparallel to any of the India's large format store. New stores opened annually by Wal-Mart are about 420, much higher than all organized Indian retailers put together. The sales per hour of $2.2 Crore are incomparable to any retailer in the world.

Wal-Mart has around 30,000 suppliers throughout the world and more than 600,000 SKU's on its web site, a number that cannot be compared. Daily customers are about 1.57 Crore (almost equivalent to Mumbai's entire population).

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Time between each Barbie Sale at Wal-Mart is just two seconds (same rate at which babies are produced in India!) Overall, it can be said that " Retail Industry" in India will emerge as one of the best 5 Business sectors in this decade. Specialty Store: Narrow product line with deep assortment, viz apparel stores, book stores etc. A clothing store would be a single line store, men's clothing store would be limited line store & men's custom-shirt store would be a super specialty store. Example: The limited, The Body Shop. Departmental Store: Several product lines-typically clothing, household goods, home furnishings- with each line operated as a separate department managed by specialist buyers or merchandisers. Example: Sears, Bloomingdale's. Supermarkets: Relatively large, low-cost, low-margin, high volume, self-service operation designed to serve total needs for food, laundry & household maintenance products. Example: Kroger, Safeway. Convenience Stores: Relatively small store located near residential area, open long hours, seven days a week and carrying a limited line of high-turnover convenience products at slightly higher prices. Example: 7-Eleven, Circle K. Discount Store: Standard merchandise sold at lower prices with lower margins and higher volumes. True discount stores regularly sell merchandise at lower prices and offer mostly national brands. Example: Wal-Mart, Kmart. Off-price retailer: Merchandise bought at less than regular wholesale prices & sold at less than retail; often-leftover goods, overruns and irregulars obtained at reduced prices from manufacturers or other retailers.

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Factory outlets are owned and operated by manufacturers and normally carry the manufacturer's surplus, discontinued or irregular goods. Example: Mikasa(dinnerware), Dexter (shoes) Independent off-price retailers are owned & run by entrepreneurs or by divisions of larger retail corporations. Example: T.J.Maxx, Filene's Basement. Superstore: Averages 35,000 square feet of selling space traditionally aimed at meeting consumers' total needs for routinely purchased food and non food items. Usually offer services such as laundry, dry cleaning, shoe repair, check cashing & bill paying. A new group called "category killers" carries a deep assortment in a particular category & a knowledgeable staff. Example: Borders books & Music, IKEA. Combination stores are a diversification of the supermarket store into the growing drug-andprescription field. Combination food & drug stores average 55,000 square feet of selling space. Example: Jewel & Osco stores. Hypermarkets range between 80,000 and 220,000 square feet and combine supermarket, discount & warehouse retailing principles. Product assortment goes beyond routinely purchased goods & includes furniture, large & small appliances, clothing items and many other items. Bulk display & minimum handling by store personnel with discounts offered to customers who are willing to carry heavy appliances and furniture out of the store. Hypermarkets originated in France.

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Finance and governance:

For the fiscal year ending January 31, 2011, Wal-Mart reported a net income of $15.4 billion on $422 billion of revenue with a 24.7% gross profit margin. The corporation's international operations accounted for $109.2 billion, or 26.1%, of total sales.It is the world's 18th largest public corporation, according to the Forbes Global 2000 list, and the largest public corporation when ranked by revenue. Wal-Mart is governed by a fifteen-member Board of Directors, which is elected annually by shareholders. Robson Walton, the eldest son of founder Sam Walton, serves as Chairman of the Board. Michael T. Duke serves as Chief Executive Officer (CEO), and Lee Scott, formerly CEO, serves as Chairman of the Executive Committee of the Board. Other members of the board include Ada lvarez, Jim Breyer, M. Michele Burns, James Cash, Roger Corbett, Douglas Daft, David Glass, Gregory B. Penner, Allen Questrom, Arne M. Sorenson, Jim Walton, Christopher J. Williams, and Linda S. Wolf.] Sam Walton died in 1992. After Walton's death, Don Soderquist, Chief Operating Officer and Senior Vice Chairman, became known as the "Keeper of the Culture." Notable former members of the board include Hillary Clinton (19851992) and Tom Coughlin (20032004), the latter having served as Vice Chairman. Clinton left the board before the 1992 U.S. Presidential Election, and Coughlin left in December 2005 after pleading guilty to wire fraud and tax evasion for stealing hundreds of thousands of dollars from Wal-Mart. On August 11, 2006, he was sentenced to 27 months of home confinement, five years of probation, and ordered to pay US$411,000 in restitution.

Evolution of the Indian Retail Sector:

The origins of retailing in India can be traced back to the emergence of Kirana stores and momand-pop stores. These stores used to cater to the local people. Eventually the government suport the rural retail and many indigenous franchise stores came up with the help of Khadi & Village Industries Commission. The economy began to open up in the 1980s resulting in the change of retailing. The first few companies to come up with retail chains were in textile sector, for
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example, Bombay Dyeing, S Kumar's, Raymonds, etc. Later Titan launched retail showrooms in the organized retail sector. With the passage of time new entrants moved on from manufacturing to pure retailing. Retail outlets such as Foodworld in FMCG, Planet M and Musicworld in Music, Crossword in books entered the market before 1995. Shopping malls emerged in the urban areas giving a world-class experience to the customers. Eventually hypermarkets and supermarkets emerged.

Phases in the evolution of retail sector

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Weekly Markets, Village and Rural Melas

Convenience stores, Mom-and-pop / Kirana shops

and pervasive reach PDS outlets, Khadi stores, Cooperatives

Exclusive brand outlets, hypermarkets and supermarkets, department stores and shopping malls

Modern formats/ international

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Percentage of Organised Retail across the world

Indian economy is one of the fastest growing in the world. Its GDP growth rate is 9.2% with a GDP of rupees 177000 crore, which is the fourth largest in the world. India, the 12th largest economy in the world possesses a foreign exchange reserve of USD.177.00 billion. The country is fast adapting to industrialization, the speed of which is measured as the second fastest in the world. The major industries of India are automobiles, cement, chemicals, consumer electronics, food processing, machinery, mining, petroleum, pharmaceuticals, steel, transportation equipment, and textiles. In the post liberalization era the country has capitalized on its vast pool of educated, English speaking manpower to become a major power in outsourcing, Information Technology, financial and biomedical technology research, banking & insurance, and real estate development.

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Indian Industry Automobile Sector Aviation Sector Banking Sector Biotechnology Sector BPO Sector Consumer Durables Sector FMCG Sector Hospitality Sector IT-ITeS Sector KPO Sector Media and Entertainment Sector Mining & Minerals Sector Pharmaceutical Sector Retail Sector Telecom Sector

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Porter's 5 Forces Analysis

Threat of New Entrants. One trend that started over a decade ago has been a decreasing number of independent retailers. Walk through any mall and you'll notice that a majority of them are chain stores. While the barriers to start up a store are not impossible to overcome, the ability to establish favorable supply contracts, leases and be competitive is becoming virtually impossible. Their vertical structure and centralized buying gives chain stores a competitive advantage over independent retailers. Power of Suppliers. Historically, retailers have tried to exploit relationships with suppliers. A great example was in the 1970s, when Sears sought to dominate the household appliance market. Sears set very high standards for quality; suppliers that didn't meet these standards were dropped from the Sears line. You could also liken this to the strict control that Wal-Mart places on its suppliers. A contract with a large retailer such as Wal-Mart can make or break a small supplier. In the retail industry, suppliers tend to have very little power. Power of Buyers. Individually, customers have very little bargaining power with retail stores. It is very difficult to bargain with the clerk at Safeway for a better price on grapes. But as a whole, if customers demand high-quality products at bargain prices, it helps keep retailers honest. Availability of Substitutes. The tendency in retail is not to specialize in one good or service, but to deal in a wide range of products and services. This means that what one store offers you will likely find at another store. Retailers offering products that are unique have a distinct or absolute advantage over their competitors. Competitive Rivalry. Retailers always face stiff competition. The slow market growth for the retail market means that firms must fight each other for market share. More recently, they have tried to reduce the cutthroat pricing competition by offering frequent flier points, memberships and other special services to try and gain the customer's loyalty.

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Growth Potential
The key growth areas include the urban, luxury segment on one end of the spectrum and serving the rural sector on the other. In addition, government policy encouraging FDI in the segment has resulted in a plethora of international retailers keen on entering the market; American retail giant Wal-Mart has tied-up with Bharti Enterprises and global coffee giant Starbucks' has tied up with PVR Limited. In addition, Carrefour, Boots and others are also expected to come in. With so much action, it is natural that there is a huge scope for employment opportunities, and experts estimate that the sector will generate employment for ~ 2.5 million people in 2010. The top retail companies in India include the Raheja Group, Reliance Retail, Tata Trent, Future Group, RPG Retail, and Ebony Retail Holdings.

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STATEMENT OF PROBLEME

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The problem facing the Indian organized retail sector are various and these are stopping the Indian retail industry from reaching its full potential. The behavior pattern of the Indian consumer have undergone a major change. This have happened for the Indian consumer is earning more now, western influences, women working force is increasing, desire for luxury items and better quality. He now wants to eat, shop, and get entertained under the same roof. All these have lead the Indian organized retail sector to give more in order to satisfy the Indian customer. The biggest challenge facing the Indian organized retail sector is the lack of retail space. With real estate prices escalating due to increase in demand from the Indian organized retail sector, it is posing a challenge to its growth. With Indian retailers having to shell out more for retail space it is effecting there overall profitability in retail. Trained manpower shortage is a challenge facing the organized retail sector in India. The Indian retailers have difficultly in finding trained person and also have to pay more in order to retain them. This again brings down the Indian retailers profit levels. The Indian government have allowed 51% foreign direct investment (FDI) in the India retail sector to one brand shops only. This have made the entry of global retail giants to organized retail sector in India difficult. This is a challenge being faced by the Indian organized retail sector. But the global retail giants like Tesco, Wal-Mart, and Metro AG are entering the organized retail sector in India indirectly through franchisee agreement and cash and carry wholesale trading. Many Indian companies are also entering the Indian organized retail sector
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like Reliance Industries Limited, Pantaloons, and Bharti Telecoms. But they are facing stiff competition from these global retail giants. As a result discounting is becoming an accepted practice. This too bring down the profit of the Indian retailers. All these are posing as challenges facing the Indian organized retail sector. The challenges facing the Indian organized retail sector are there but it will have to be dealt with and only then this sector can prosper.

Retail problems:
INTRODUCTION: India has 12 million retail outlets. The retail sector is the second largest source of employment and the job market is hugely receptive to retailing expertise as more and more B-schools are now focusing on the sector and large retailers are setting up retail academies. It is estimated to create 50,000 jobs a year in the next five years.

MARKET SIZE: The retail market in India is estimated at Rs.5,88,000 crore. Of this the unorganized market is worth Rs.5,83,000 crore and the organized market is Rs.5,000 crore.
OPPORTUNITY: Over 8% of India's population is engaged in retailing. According to ASSOCHAM, the total retail market is expected to grow by 20% annually and is one of the fastest growing sectors in India.

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PROBLEMS:

1. 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

affects

the

industry.

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

6. Presence of strong Pro-tenancy laws makes it difficult to evict tenants and this is posing problems.

7. Land-use conversion is time consuming and becoming complex.

8. For settling property disputes, it consumes lot of time.

9. Rigid building laws makes procurement of retail space difficult.

10. Non residents are not allowed to own property except they are of Indian origin.

11. Prohibition of Foreign investment in real estate business.

12. Customs duties are levied on import of goods in India.

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The industry is facing a shortage of middle management level professionals. Major retailers are hiring aggressively from the similar and smaller organizations by offering better packages. They are creating various levels of management and hiring on a spree. Some of the areas such as technology, supply chain, distribution, logistics, marketing, product development and research are becoming very critical for the success of the organizations. All of these would lead to the recruitment of highly professional people who specialize in these fields. There is also a trend for hiring hotel management graduates, though now many retail schools are coming up, and Pantaloon has set up links with major business schools from where it would be selecting the right candidates. The sector is likely to produce 2 million jobs in the coming 3 years. There also exists a possibility that the retail sector would become a poaching ground once a number of domestic and international players enter the industry. Supply Chain Management The retail scenario is characterized by logistical challenges, constant changes in consumer preferences and evolution of new retail formats. All this increases the challenges faced by the industry. Various strategies are to be implemented to improve core business processes, such as logistics, innovation, transparency, distribution and inventory, management of point sale (POS) data. Retail majors are under serious pressure to improve their supply chain systems and distribution channels and reach the levels of quality and service desired by the consumers.

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Frauds in Retail It is one of the primary challenges the companies would have to face. Frauds, including vendor frauds, thefts, shoplifting and inaccuracy in supervision and administration are the challenges that are difficult to handle. This is so even after the use of security techniques, such as CCTVs and POS systems. As the size of the sector would increase, this would increase the number of thefts, frauds and discrepancies in the system. Challenges with Infrastructure and Logistics The lack of proper infrastructure and distribution channels in the country results in inefficient processes. This is a major hindrance for retailers as a non-efficient distribution channel is very difficult to handle and can result in huge losses. Infrastructure does not have a strong base in India. Urbanization and globalization are compelling companies to develop infrastructure facilities. Transportation, including railway systems, has to be more efficient. Highways have to meet global standards. Airport capacities and power supply have to be enhanced. Warehouse facilities and timely distribution are other areas of challenge. To fully utilize India's potential in retail sector, these major obstacles have to be removed.

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CHALLENGES & OPPORTUNITIES

Retailing has seen such a transformation over the past decade that its very definition has undergone a sea change. No longer can a manufacturer rely on sales to take place by ensuring mere availability of his product. Today, retailing is about so much more than mere merchandising. It about casting customers in a story, reflecting their desires and aspirations, and forging long-lasting relationships. As the Indian consumer evolves they expects more and more at each and every time when they steps into a store. Retail today has changed from selling a product or a service to selling a hope, an aspiration and above all an experience that a consumer would like to repeat. For manufacturers and service providers the emerging opportunities in urban markets seem to lie in capturing and delivering better value to the customers through retail. For instance, in Chennai CavinKare,LimeLite, Marico, Kaya Skin Clinic and Apollo Hospital Apollo Pharmacies are
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examples, to name a few, where manufacturers/service providers combine their own manufactured products and services with those of others to generate value hitherto unknown. The last mile connect seems to be increasingly lively and experiential. Also, manufacturers and service providers face an exploding rural market yet only marginally tapped due to difficulties in rural retailing. Only innovative concepts and models may survive the test of time and investments. However, manufacturers and service providers will also increasingly face a host of specialist retailers, who are characterized by use of modern management techniques, backed with seemingly unlimited financial resources. Organized retail appears inevitable. Retailing in India is currently estimated to be a US$ 200 billion industry, of which organized retailing makes up a paltry 3 percent or US$ 6.4 billion. By 2010, organized retail is projected to reach US$ 23 billion. For retail industry in India, things have never looked better and brighter. Challenges to the manufacturers and service providers would abound when market power shifts to organized retail. Challenges facing Indian retail industry

The tax structure in India favors small retail business Lack of adequate infrastructure facilities High cost of real estate Dissimilarity in consumer groups Restrictions in Foreign Direct Investment Shortage of retail study options Shortage of trained manpower Low retail management skill

The Future The retail industry in India is currently growing at a great pace and is expected to go up to US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%. As the country has got a high growth rates, the consumer spending has also gone up and is also expected to go up further in the future. In the last four year, the consumer spending
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in India climbed up to 75%. As a result, the India retail industry is expected to grow further in the future days. By the year 2013, the organized sector is also expected to grow at a CAGR of 40%.

India retail industry is progressing well and for this to continue retailers as well as the Indian government will have to make a combined effort.

Challenges facing the Indian Organized Retail sector:

The challenges facing the Indian organized retail sector are various and these are stopping the Indian retail industry from reaching its full potential. The behavior pattern of the Indian consumer have undergone a major change. This have happened for the Indian consumer is earning more now, western influences, women working force is increasing, desire for luxury items and better quality. He now wants to eat, shop, and get entertained under the same roof. All these have lead the Indian organized retail sector to give more in order to satisfy the Indian customer. The biggest challenge facing the Indian organized retail sector is the lack of retail space. With real estate prices escalating due to increase in demand from the Indian organized retail sector, it is posing a challenge to its growth. With Indian retailers having to shell out more for retail space it is effecting there overall profitability in retail. Trained manpower shortage is a challenge facing the organized retail sector in India. The Indian retailers have difficultly in finding trained person and also have to pay more in order to retain them. This again brings down the Indian retailers profit levels.

The Indian government have allowed 51% foreign direct investment (FDI) in the India retail sector to one brand shops only. This have made the entry of global retail giants to organized retail sector in India difficult. This is a challenge being faced by the Indian organized retail sector. But the global retail giants like Tesco, Wal-Mart, and Metro AG are entering the organized retail sector in India indirectly through franchisee agreement and cash and carry wholesale trading. Many Indian companies are also entering the Indian organized retail sector like Reliance Industries Limited, Pantaloons, and Bharti Telecoms. But they are facing stiff competition from these global retail giants. As a result discounting is becoming an accepted
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practice. This too bring down the profit of the Indian retailers. All these are posing as challenges facing the Indian organized retail sector. The challenges facing the Indian organized retail sector are there but it will have to be dealt with and only then this sector can prosper.

RETAIL IN INDIA - A CHALLENGE

The retail industry in India is growing at a significant pace. However, there are several problems faced by the industry. The major challenges for the organized sector include:

Taxation laws that favor small retailers. Different structure of sales tax in different states. Multi-point octroi collection. Lack of trained workforce. Problems of supply chain and logistics. High cost of real estate. Limited land available at prime locations.

According to analysts, for this industry to thrive, Indian retailers need to emulate worldwide retail practices such as accuracy in financial reporting, increased levels of corporate governance and greater accountability among employees. Retailers need to use the latest techniques to enhance the consumer's shopping experience.

As the contemporary retail sector in India is reflected in sprawling shopping centers, multiplexmalls and huge complexes offer shopping, entertainment and food all under one roof, the concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. This has also contributed to large-scale investments in the real estate sector with major national and global players investing in developing the infrastructure and construction of the retailing business. The trends that are driving the growth of the retail sector in India are

Low share of organized retailing Falling real estate prices

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Increase in disposable income and customer aspiration Increase in expenditure for luxury items (CHART)

Another credible factor in the prospects of the retail sector in India is the increase in the young working population. In India, hefty pay packets, nuclear families in urban areas, along with increasing working-women population and emerging opportunities in the services sector. These key factors have been the growth drivers of the organized retail sector in India which now boast of retailing almost all the preferences of life - Apparel & Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home & Office Products, Travel and Leisure and many more. With this the retail sector in India is witnessing rejuvenation as traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores.

The retailing configuration in India is fast developing as shopping malls are increasingly becoming familiar in large cities. When it comes to development of retail space specially the malls, the Tier II cities are no longer behind in the race. If development plans till 2007 is studied it shows the projection of 220 shopping malls, with 139 malls in metros and the remaining 81 in the Tier II cities. The government of states like Delhi and National Capital Region (NCR) are very upbeat about permitting the use of land for commercial development thus increasing the availability of land for retail space; thus making NCR render to 50% of the malls in India.

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Pricing Issues in International Marketing:

Price can best be defined in ratio terms, giving the equation Price = Resource Given up / Goods Received This implies that there are several ways that the price can be changed:

"Sticker" price changesthe most obvious way to change the price is the price tag you get the same thing, but for a different (usually larger) amount of money.

Change quantity. Often, consumers respond unfavorably to an increased sticker price, and changes in quantity are sometimes noticed lesse.g., in the 1970s, the wholesale cost of chocolate increased dramatically, and candy manufacturers responded by making smaller candy bars. Note that, for cash flow reasons, consumers in less affluent countries may need to buy smaller packages at any one time (e.g., forking out the money for a large tube of toothpaste is no big deal for most American families, but it introduces a greater strain on the budget of a family closer to the subsistence level).

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Change quality. Another way candy manufacturers have effectively increased prices is through a reduction in quality. In a candy bar, the "gooey" stuff is much cheaper than chocolate. It is frequently tempting for foreign licensees of a major brand name to use inferior ingredients.

Change terms. In the old days, most software manufacturers provided free support for their programsit used to be possible to call the WordPerfect Corporation on an 800 number to get free help. Nowadays, you either have to call a 900 number or have a credit card handy to get help from many software makers. Another way to change terms is to do away with favorable financing terms.

Reference Prices. Consumers often develop internal reference prices, or expectations about what something should cost, based mostly on their experience. Most drivers with long commutes develop a good feeling of what gasoline should cost, and can tell a bargain or a ripoff. Reference prices are more likely to be more precise for frequently purchased and highly visible products. Therefore, retailers very often promote soft drinks, since consumers tend to have a good idea of prices and these products are quite visible. The trick, then, is to be more expensive on products where price expectations are muddier. Marketers often try to influence people's price perceptions through the use of external reference pricesindicators given to the consumer as to how much something should cost. Examples include:

Manufacturer's Suggested Retail Price (MSRP). This is often pure fiction. The suggested retail prices in certain categories are deliberately set so high that even full service retailers can sell at a "discount." Thus, although the consumer may contrast the offering price against the MSRP, this latter figure is quite misleading.

"SALE! Now $2.99; Regular Price $5.00." For this strategy to be used legally in most countries, the claim must be true (consistency of enforcement in some countries is, of course, another matter). However, certain products are put on sale so frequently that the "regular" price is meaningless. In the early 1990s, Sears was reported to sell some 55% of its merchandise on sale.

"WAS $10.00, now $6.99."

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"Sold elsewhere for $150.00; our price: $99.99."

Reference prices have significant international implications. While marketers may choose to introduce a product at a low price in order to induce trial, which is useful in a new market where the penetration of a product is low, this may have serious repercussions as consumers may develop a low reference price and may thus resist paying higher prices in the future. Selected International Pricing Issues. In some cultures, particularly where retail stores are smaller and the buyer has the opportunity to interact with the owner, bargaining may be more common, and it may thus be more difficult for the manufacturer to influence retail level pricing. Two phenomena may occur when products are sold in disparate markets. When a product is exported, price escalation, whereby the product dramatically increases in price in the export market, is likely to take place. This usually occurs because a longer distribution chain is necessary and because smaller quantities sold through this route will usually not allow for economies of scale. "Gray" markets occur when products are diverted from one market in which they are cheaper to another one where prices are highere.g., Luis Vuitton bags were significantly more expensive in Japan than in France, since the profit maximizing price in Japan was higher and thus bags would be bought in France and shipped to Japan for resale. The manufacturer therefore imposed quantity limits on buyers. Since these quantity limits were circumvented by enterprising exchange students who were recruited to buy their quota on a daily basis, prices eventually had to be lowered in Japan to make the practice of diversion unattractive. Where the local government imposes price controls, a firm may find the market profitable to enter nevertheless since revenues from the new market only have to cover marginal costs. However, products may then be attractive to divert to countries without such controls. Transfer pricing involves what one subsidiary will charge another for products or components supplied for use in another country. Firms will often try to charge high prices to subsidiaries in countries with high taxes so that the income earned there will be minimized.

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Antitrust laws are relevant in pricing decisions, and anti-dumping regulations are especially noteworthy. In general, it is illegal to sell a product below your cost of production, which may make a penetration pricing entry strategy infeasible. Japan has actively lobbied the World Trade Organization (WTO) to relax its regulations, which generally require firms to price no lower than their average fully absorbed cost (which incorporates both variable and fixed costs). Alternatives to "hard" currency deals. Buyers in some countries do not have ready access to convertible currency, and governments will often try limit firms ability to spend money abroad. Thus, some firms have been forced into non-cash deals. In barter, the seller takes payment in some product produced in the buying countrye.g., Lockheed (back when it was an independent
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firm) took Spanish wine in return for aircraft, and sellers to Eastern Europe have taken their payment in ham. An offset contract is somewhat more flexible in that the buyer can get paid but instead has to buy, or cause others to buy, products for a certain value within a specified period of time.

Psychological issues: Most pricing research has been done on North Americans, and this raises serious problems of generalizability. Americans are used to sales, for example, while consumers in countries where goods are more scarce may attribute a sale to low quality rather than a desire to gain market share. There is some evidence that perceived price quality relationships are quite high in Britain and Japan (thus, discount stores have had difficulty there), while in developing countries, there is less trust in the market. Cultural differences may influence the extent of effort put into evaluating deals (potentially impacting the effectiveness of odd-even pricing and promotion signaling). The fact that consumers in some economies are usually paid weekly, as opposed to biweekly or monthly, may influence the effectiveness of framing attempts"a dollar a day" is a much bigger chunk from a weekly than a monthly paycheck.

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REVIEW OF LITRECTURE

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According to FICCI in its report Organised retail: Unfinished agenda & the challenges ahead, retail sector is projected to have a turnover of $430 billion by 2010 with organised retail sector having a $90 billion share. Even after the restrictions placed on investment in Indian retail market, there has been a phenomenal rise in the number of large multinationals entering Indian market under both single brand wholesale and 'cash and carry' model. As per Global Emerging Markets Survey (GEMS) India is considered particularly attractive because of the size of its market compared to low presence of international retailers. Retail sector being the second largest sector of the Indian economy after agriculture, has significant growth prospect. Vital measures were expected to be taken for further liberalisation of the sector to meet the demands of international investors and benefits to Indian economy. Liberalisation has always been treated with caution by Indian government. It has evolved with time through constant reforms. Allowing international investors to enter Indian retail business was another step in this direction. Companies relied on franchise route before retail sector was opened to international investors. Press Note 3 (2006) which liberalised single-brand retail by FDI up to 51 per cent gave tremendous boost to the sector. 100 per cent FDI in cash and carry wholesale trading has led to supermarkets and cash-and-carry becoming the fastest growing segments in retail. Liberalisation of FDI in multi brand retail is still awaited. Before the decade of eighties, India with hundreds of towns and cities was a nation striving for development. The evolution was being witnessed at various levels and the people of the nation were learning to play different roles as businessmen and consumers. The foundation for a strong economy were being laid, youth were beckoning new awareness in all spheres. And this brought in an opportunity for retail industry to flourish. First in the metros and major cities later to impact sub urban and rural market as well. Retailing in India at this stage was completely unorganized and it thrived as separate entities operated by small and medium entrepreneurs in their own territories. There was lack of international exposure and only a few Indian companies explored the retail platform on a larger scale. From overseas only companies like Levi's, Pepe, Marks and Spencer etc. had entered targeting upper middle and rich classes of Indians. However as more than 50 % population was formed by lower and lower middle class people, the market was not completely captured. This was later realized by brands like Big Bazaar and Pantaloons who made their products and
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services accessible to all classes of people and today the success of these brands proves the potential of Indian retail market. A great shift that ushered in the Indian Retail Revolution was the eruption of Malls across all regional markets. Now at its peak, the mall culture actually brought in the organized format for Retailing in India which was absent earlier. Though malls were also initially planned for the higher strata, they successfully adapted to cater to the larger population of India. And it no wonder, today Malls are changing the way common Indians have their shopping experience. However there is still great scope for enhancing Indian mall culture as other than ambience and branding many other aspects of Retail Service remains to be developed on international standards. To your surprise there was not a single mall in India a decade before and just a few years ago only a handful of them were striving, today there are more than 50 malls across different cities and 2 years from now around 500 malls are predicted to come up.

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It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200 billion. India retail industry is one of the fastest growing industries with revenue expected in 2007 to amount US$ 320 billion and is increasing at a rate of 5% yearly. A further increase of 7-8% is expected in the industry of retail in India by growth in consumerism in urban areas, rising incomes, and a steep rise in rural consumption. It has further been predicted that the retailing industry in India will amount to US$ 21.5 billion by 2010 from the current size of US$ 7.5 billion. According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India retail industry is the most promising emerging market for investment. In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic Product) of the country. In 2009, it rose to 12%. It is also expected to reach 22% by 2010. According to a report by Northbride Capita, the India retail industry is expected to grow to US$ 700 billion by 2010. By the same time, the organized sector will be 20% of the total market share. It can be mentioned here that, the share of organized sector in 2007 was 7.5% of the total retail market. The Indian retail industry has grown at a Compounded Annual Growth Rate (CAGR) of 13.3% for the period FY06-10. The growth in the Indian economy since the last decade and the change in consumption pattern of the Indian populace in terms of higher proportion of middle class population, greater proportion of working women etc can unarguably be linked to the growth of the Indian retailing industry. Of all the segments in retail, the contribution of food & grocery remained the highest at 58% of the total retail sales during FY10, with the clothing & footwear segment remaining the second largest contributor occupying 10% of the total retail pie during the same period. However in terms of growth figures, the entertainment, books & sports goods equipment segment outperformed the other retail segments registering a CAGR of 22.5% during the period FY06-10. In spite of the growth, the industry remains largely fragmented with the organized retailing still at a nascent stage. In case of overall retailing revenues, the food & grocery segment accounted for the highest share at 58% of the total retailing pie aggregating Rs.11.49 lakh crore during FY10. In the organised retailing, the food & grocery segment stood as the second largest contributor with revenues aggregating Rs.24,273 crore during the same period. However, the
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organised retail penetration of other segments such as clothing & footwear, entertainment & books and furniture & furnishing surpassed that of the food & grocery segment. The Indian retail industry has witnessed rampant growth over the last decade. However, during the economic recession since the latter half of FY09, the retailers especially in the organised segment suffered a set-back in the form of declining revenues and halt in their capex plans. The unemployment situation, further aggravating the fear of job losses during the recession, resulted in muted consumer spending with the consumers choosing to spend on necessities rather than discretionary items; the industry thus witnessed decline in footfalls, conversion rate, which was especially apparent in the decline of same store sales. The slowdown in consumer spending led to the inventory being stacked up resulting in a low inventory turnaround ratio, registering a decline to 4.3 times during FY09 from 4.8 times during FY08. Before the onset of recession, the large scale expansion plans of the Indian retailers warranted an increase in inventory and greater store operating expenses in the form of rentals and staff expenses thus increasing the working capital requirement. However with the economic recession in effect, the retailers were faced with a liquidity crunch owing to difficulties in raising funds both from the equity as well as debt markets. Additionally, the funds raised during the economic boom attracted higher interest rates thereby affecting the retailers ability to service the interest as well as principal repayments during the downturn. The total interest outgo of the retailers as tracked by CARE Research registered a y-o-y growth of 78.6% during FY09.

Even though, post recession, the industry is witnessing a gradual turnaround, it is met by a few stumbling blocks that constitute the challenges ahead for the Indian retail industry viz. higher store rentals as compared to retailers globally, taxation & other policy regulations, inefficiencies in supply chain management and higher rate of shrinkage. In spite of the said challenges, the authors expect the Indian retail industry to grow on the backdrop of expectant rise in the countrys Gross Domestic Product (GDP) during the period FY11-FY13. The rise in income level of the Indian populace, in turn, is expected to fuel the domestic consumption ultimately resulting in higher revenues for the Indian retailers. Importantly, the authors expect the penetration of organised retail in the total retail pie to increase by FY13 owing to the expanding reach of the retailers to tier-II & III cities accompanied
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by higher consumer spend on discretionary items. Also, in an attempt to increase margins, the authors expect the retailers would restore to adapting measures such as increasing the share of private labels in the total store sales, reducing store level operating expenses etc. The report on the Indian retail industry provides a comprehensive overview of all the above mentioned parameters with detailed forecasts. The global economic recession and the corresponding decline in retail sales volumes since the latter half of FY09 adversely affected the prospects of the Indian retail industry. The growth in the Indian retail story witnessed in the form of huge capex plans, growing footfalls etc during the pre-recession period made way for adherence to austerity measures by the retailers such as store closures/re-location of stores, employee layoffs and the curbing of other operating expenses during the period spanning the economic recession. However, the gradual revival in the global economy and the improving unemployment situation since H2FY10 has correspondingly led to the revival in the confidence of the Indian consumers, ultimately resulting in greater footfalls, higher conversion and growth in same-store sales (SSS) as compared to a year ago. The authors report on The Indian Retail Industry seeks to answer queries such as: Indias expected Private Final Consumption Expenditure (PFCE), the expected size of Indian retail & organised retail industry. To what extent would the penetration of organised retail increase from the current level? What are the challenges the industry is likely to face in the foreseeable future?

With Indian retail data spanning from FY05-10 garnered through a well-established network of primary and secondary sources and the authors outlook on the industry for the period FY11FY13 on retail sales, organised retail penetration etc, the report is indispensable for any company in the retail industry, banks/Financial Institutions (FIs), policy makers, research & academic organizations, other international and national agencies etc. Additionally, the four quarterly updates from the date of subscription accompanying the said report would form a potent tool for the subscribers to keep abreast of the happenings in the industry.

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Organised Retail is predicted to capture 15 20% market share by 2010. Though it is one of the least developed sectors, the Retail industry accounts for 10% of the GDP. India is the hottest Retail destination. It was ranked as the most attractive retail destination among 30 emerging markets by the Annual Global Retail Development Index (GRDI) for two years consecutively.

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The organized retail industry in India had not evolved till the early 1990s. Until then, the industry was dominated by the un-organized sector. It was a sellers market, with a limited number of brands, and little choice available to customers. Lack of trained manpower, tax laws and government regulations all discouraged the growth of organized retailing in India during that period. Lack of consumer awareness and restrictions over entry of foreign players into the sector also contributed to the delay in the growth of organized retailing. Foundation for organized retail in India was laid by Kishore Biyani of Pantaloon Retails India Limited (PRIL). Following Pantaloon's successful venture a host of Indian business giants such as Reliance, Bharti, Birla and others are now entering into retail sector.

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A number of factors are driving India's retail market. These include: increase in the young working population, hefty pay-packets, nuclear families in urban areas, increasing workingwomen population, increase in disposable income and customer aspiration, increase in expenditure for luxury items, and low share of organized retailing. India's retail boom is manifested in sprawling shopping centers, multiplex- malls and huge complexes that offer shopping, entertainment and food all under one roof. But there is a flip side to the boom in the retail sector. It is feared that the entry of global business giants into organized retail would make redundant the neighbourhood kiryana stores resulting in dislocation in traditional economic structure. Also, the growth path for organized retail in India is not hurdle free. The taxation system still favours small retail business. With the intrinsic complexities of retailing such as rapid price changes, constant threat of product obsolescence and low margins there is always a threat that the venture may turn out to be a loss making one.

A perfect business model for retail is still in evolutionary stage. Procurement is very vital cog in the retail wheel. The retailer has to fight issues like fragmented sourcing, unpredictable availability, unsorted food provisions and daily fluctuating prices as against consumer expectations of round-the-year steady prices, sorted and cleaned food and fresh stock at all times.

Trained human resource for retail is another big challenge. The talent base is limited and with the entry of big giants there is a cat fight among them to retain this talent. This has resulted in big salary hikes at the level of upper and middle management and thereby eroding the profit margin of the business. All the companies have laid out ambitious expansion plans for themselves and they may be hampered due lack of requisite skilled manpower. But retail offers tremendous for the growth of Indian economy. If all the above challenges are tackled prudently there is a great potential that retail may offer employment opportunities to millions living in small town and cities and in the process distributing the benefits of economic boom and resulting in equitable growth. The growth factors in Indian organized sector are various but it is mainly due to the fact that India's economy is booming.
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Also, the rise in the working population which is young, pay- packets which are hefty, more nuclear families in urban areas, rise in the number of women working, more disposable income and customer aspiration, western influences and growth in expenditure for luxury items. All these are the factors for the growth in Indian organized retail sector.

In fact, India retail industry is the fastest growing industry in India and it accounts for 10% of the country's GDP. In 2006, the retail industry in India amounted to US$ 200 billion and out of this, the organized retail sector in India amounted to US$ 6.4 billion. By 2010, the Indian organized retail sector is expected to rise to US$ 23 billion. In 2003, the Indian organized retailing sector accounted for more than 4.5 million sq. ft of space absorption by malls.

Many Indian companies have entered the retail industry in India and this is also a factor in the growth of Indian organized retail sector. Reliance Industries Limited is planning to invest US$ 6 billion in the organized retail sector in India by opening 1500 supermarkets and 1000 hypermarkets. Bharti Telecoms is planning a joint venture worth 750 million with Tesco a global retail giant. Pantaloons is planning to invest US$ 1 billion in order to increase its retail space to 30 million square feet. Such huge investments is also a factor in the growth of the organized retail sector in India. Global retail giants are also entering the retail industry in India and this is also one of the factors in the growth of the organized retail sector in India. The global retail giants who are entering the organized retail sector in India are: Wal- Mart Tesco Carrefour SA Metro AG The India Retail Report 2007 aptly documented 'Opportunity India Retail'; published by the IMAGES Group and released by Mr. Kamal Nath, Hon'ble Commerce & Industry minister,
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Govt. of India in January 2007, the research volume set benchmark figures on Indian retail, while sizing up the entire market with its key segments, scope and performance of key players across categories and formats. Under the aegis of India Retail Forum (IRF), for the first time, the entire retail industry and some of the worlds top global research & consulting firms came together for a detailed study of the Indian retail industry. The book, which became a best seller across all titles of books in major book chains, also carried detailed analytical articles by 40 thought leaders from the industry and the government. While the hard copies became must-haves for every CEO connected with Indian retail, the CD version with navigation facility, tables, graphs, pictures of hundreds of stores and shopping centres emerged as the most user-friendly tool for top level executives for use in corporate PPTs. Copies of the book were ordered from possibly every corner of the world -- reflecting IMAGES' capability of spreading the India retail story across the globe. The past eighteen months have seen plenty of action in Indian retail; it is the right time to update the retail world with the new edition of India Retail Report. Supported by Confederation of Indian Industry (CII), Shopping Centres Association of India (SCAI) and Retailers Association of India (RAI), the India Retail Forum saw the release of this most sought after report in the presence world retail captains, corporate majors and policy makers of India and the entire retail fraternity. This year, many more organisations including National Council for Applied Economic Research (NCAER), Indian Council of Research in International Economic Relations (ICRIER), and International Food Policy Research Institute (IFPRI) have contributed well researched chapters. 550 hardbound pages of extensively researched content, the new edition, presents the India retail story in all its colours. Quantifying consumer spending and modern retail share in all consumption categories -- from food to fashion; telecom to automobiles; consumer durables to health & wellness, entertainment & leisure -- India Retail Report 2009 is an ultimate guide to the business of retail in India. Chapters pertaining to the investment climate, retail profitability and legal issues have been especially put together by industry experts -- to enable potential investors in taking informed decisions.
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As per the India Retail Report the Indian retail market stood at Rs.1,330,000 crore in 2007 with an annual estimated growth of about 10.8 per cent. Of this, the share of organised retail in 2007 was estimated to be only 5.9 per cent, which was Rs.78,300 crore. Nevertheless, this modern retail segment grew at the rate of 42.4 per cent in 2007, and is expected to maintain a faster growth rate over the next three years, especially in view of the fact that major global players and Indian corporate houses are seen entering the fray in a big way. Even at the going rate, organised retail is expected to touch Rs.2,30,000 cr (at constant prices) by 2010, constituting roughly 13 per cent of the total retail market. Quotes: The India Retail Report 2009 is a well researched and professionally presented document that brings forth several opportunities that could benefit the Indian consumers. I look forward to the Indian retail sector continuing on its developmental growth path and spreading its benefit to all. Kamal Nath, Indias minister for Commerce & Industry. "Many countries specially in south east Asia like Malaysia, Indonesia and Thailand have put in place regulations with a view to balance the conflicts of interests between modern retail and the traditional retailers and suppliers to modern retail. We hope to achieve the best interests of the Indian business through sustained efforts in this direction to make Indian retail truly competitive with global standards." Ajay Shankar, secretary, DIPP, Ministry of Commerce & Industry. "Retailers must play a wider role in society.The traditional retailer was in many countries, an active part of the social structure of the neighbourhood. More than just a source of products or services, he was a companion, friend, advisor, source of news etc. Most modern formats do not permit such personalised interaction. However, it is important that we recognise and play our role in maintaining our neighbourhoods, preserving the environment, assisting in municipal planning and development, and playing multiple roles as good citizens. Its not just good social behavior, its good business too!."

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Amitabh Taneja, Chairman, IMAGES Group and chief convenor, IRF. For retail to be modernized and contribute significantly to the consumption economy of the country, we have to involve the government and the society at large as stakeholders in the business. Unlike the IT boom in the eighties which happened without government intervention, retail development has to be an integral part of the state and central governments India strategy. B S Nagesh, Chairman, Retailers Association of India and MD, Shoppers Stop Limited. The need of the hour is to sensitize all our stakeholders to the transformation that modern retail can bring in to our country. We need to develop a collaborative platform among retailers and other stakeholders that facilitates further growth of the sector. And as retailers, we need to focus on how to bring about market innovations that spur consumption and create an inclusive model that brings more consumers into the fold of modern retail.
Kishore Biyani, Chairman, CII Committee on Retail and Founder & CEO, Future Group.

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OBJECTIVE OF STUDY

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This research project focuses on the some important factor affecting retail pricing, those are as follows: 1. To describe the role of pricing in retail industry and to show the pricing decision must be made in the integrated and adopted manner. 2. To focus how retailers generates and integrated price plan. 3. To control over retail pricing. 4. To focus on the area where retailers opt for low retail pricing strategy. 5. The tactics used by the retailers to influence consumer purchaser. 6. What aspects are to be considered by the retailers while pricing merchandise. 7. The retailer inter-relate its price policy with the target market ,the retail image. 8. To examine the impact of consumer, government, manufacturer, wholeseller and other supplier on pricing decision. 9. To present the framework for developing a retail pricing strategy. 10. To ensure the flexibility of market.

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RESEARCH METHODOLOGY

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