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FINAL PROJECT REPORT ON “GROWTH OF RETAIL MARKETING IN INDIA”


GROWTH OF RETAIL MARKETING IN INDIA

CONTENTS

Introduction Executive Summary Research Methodology Impact of BRIC in Retailing Definition of Retailing Demographics and consumer behavior The Global Retail Industry - An Overview Retail Scene in India - Touching meteoric height Current Status of Retail Marketing in India Origin of Modern Retailing in India Different forms of retailing Key Strategic factors The current Scenario Merchandising in retail Importance of supply chain in retail Changing face of banking in retail Food retailing in India Challenges before organized retailing Future Perspective Change Accelerator Which Categories Will Grow 2

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Where is the growth going To Happen Which Format will grow Malls in India

Progressive retail properties in India Realistic scenario in mall development: -a fact-finding Retail as an Employment Generator Retail Sector in the East Significance of IT in organised Retail Recipe for Success An Emerging Middle-Class: Great prospects Challenges of Retail Vision 2010 Questioner Analysis Conclusion –How can it be done Appendix Bibliography

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Introduction With organized retail in India pegged at Rs 25,000 crore (Rs 250 billion) -- out of a total of Rs 800,000 crore and marketing companies are setting up shops to provide differentiated services to clients. Till now sales people were the link between the retailer and the producer. But sales personnel are busy selling a product and do not have a fair idea of what retailing is about. The focus is to prioritize retail. That is, not only to sell a product to a consumer but to get the consumer to interact with the product. Gone are the days when retailing meant mere availability of a product. With competition becoming stiffer companies are looking at 'experiential' marketing. Also the lack of proper metrics to measure marketing spends is a serious issue. In today's swiftly changing business environment, there is no option but to be in the know - to be constantly on the move, keeping tabs on the shifting trends in the market place and maneuvering your strategy to stay on top. The retail arena today is very different - the opportunities are incredible but exploiting them is extremely tough. Super smart shoppers know all the rules of the game. They can instantly sense a good buy and lap it up or sniff out a bad product and dismiss it. Their expectations are tough to meet but for retailers aiming to make a big sale, there is not much of a choice but to find ways to win customers over and keep them permanently happy. In an environment, which is still restrictive in many ways and lacks adequate infrastructure, this becomes a formidable task. So how are Indian retailers coping up and how long will it be before organized retail becomes the primary way of selling. This report also surveys the property market and reiterates the significance of IT in organized retail before presenting a payback analysis to reveal the financial aspects involved. India's attempt to go the international way in retailing has met with some success though not quite as expected. At about 2 per cent of the total retail market, we are still only HIM (2007-09) 4


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scraping the surface. Easy to see why. Only a few large industry houses have invested in this sector and even fewer have put in any significant sums of money in a business, which is capital intensive in nature. The fragmented make-up of the consuming market, complex geographical and cultural structure made more difficult by poor infrastructural linkages do not allow economies of scale immediately. But a tremendous opportunity exists in the Indian market and organized retail will prevail as in other parts of the world. It is only a matter of time before that happens and it is probably closer than we imagine. This is the right time to invest and continue investing in the business. Profits may come in only after five or even seven years, but that's the way this industry operates and unlike some of the other sectors, this is not a business where revenues are imaginary and profits illusory. The market exists, the consumer is out there spending that money somewhere - you just have to get him into your store. In this review the state of business and potential and more importantly, study the best practices being followed by various retailers in India. I also present in-depth analysis of practices in the food and apparel sectors supported by case studies and insights into the financial side of the business. The size of the industry is estimated at Rs 16,000 crore and is growing at the rate of about 18-20 per cent per annum. The two areas that have seen action in organized retail are apparel and food retailing with sales of Rs 5,000 crore and Rs 1,800 crore, respectively. Segments like consumer durables retailing and books and music have grown but not as anticipated.

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Executive Summary Retailing, considered a sunrise industry today after InfoTech, is the most happening industry with almost all the big players vying for a share of the coveted pie. Buoyed by a strong increase in private consumption (see graph), retailing is one industry that is waiting to explode.

Today however, organized retailing is less than 2 per cent of the retailing industry in India, that is, about Rs 5,000 crore.(see table) Therefore, there is no real retail revolution in India; the industry is still in the stages of infancy. Share of Organized Retail 1999 150 1.1 0.70%

Total Retail (US $ Bn) Organized Retail (US $ Bn) % Share of Organized Retail

6

2002 180 3.3 1.80%

2006 225 7 3.20%

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Organized retailing is bound to grow tremendously provided the right marketing strategies are adopted. Retail businesses have broken rank and seem poised to surge ahead with renewed vigor, optimism, confidence and capability. There is an incredible amount of activity in terms of creation of retail-oriented space across India. As per some estimates, there are over 200 retail mall projects under construction or under active planning stage spanning over 25 cities. This may translate into over 25 million sq. ft. of new retail space in the market within next 24 months. Huge retail formats, with high quality ambience and very courteous and ambivalent sales staff, are the regular features of retail formats in most Asian countries. However, in India except for a few big towns where modern retailing formats abound, these features are grossly missing. I expect organized retailing to slowly penetrate the second rung and smaller towns, which will catapult the growth rate for the sector. Even though the big retail chains are concentrating on the upper segment and selling products at higher prices like Crossroads, Akbarally's and Shopper's Stop, retail stores are sprouting that cater to the needs of middle class. With a huge middle class population, the retailers like RPG's Food world are tapping this market. The market is flooded with products branded and unbranded. The customers are in a dilemma as to pick which one. Simon Bell of AT Kearney says "There is a close relation between the growth of brands and the growth of the organized retailing. Companies selling branded products prefer to have big and organized retail outlets such as supermarkets where they can be differentiated from unbranded products" Though doubts have been cast on the future of Indian retailing it is our belief that the retail boom is yet to happen. While the industry is in the introduction stage in most geographies, it has just entered the growth region in the metro cities.

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Today, the right product mix, right sourcing strategy, and the right communications are the mantras for success. This paper begins by analyzing the retail formats in the present Indian scenario and proceeds to outline the key strategic factors in retailing. In the last part the paper shows the challenges facing retail and the recommendations for making organized retailing a success.

RESEARCH METHODOLOGY The research carried out is Exploratory in nature and sampling methods used are Convenience and Judgment sampling. INFORMATION SOURCES: PRIMARY SOURCE

Consumers

SECONDARY SOURCE

• • • •

www.hindubusinessline.com www.shoppersstop.com www.ksa.com www.thomasnet.com

DATA COLLECTION TOOLS: • Questionnaires • Personal Interviews • Magazines • Internet SAMPLE SIZE: 60 LOCATION

: SONIPAT/Delhi/NCR

LIMITATIONS: • • •

Time constraint was a limiting factor in the project. Since time available was only 8 weeks, elaborate study of each and every aspect of personal perspective has thwarted to divulge in totality the latent perceptions of the individuals. Personal bias of the consumer can’t be avoided. We were not able to interview people from the management of the malls. 8

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•

We were not able to collect information regarding the financial terms due to nondisclosure of the same as restricted by company policies.

IMPACT OF BRIC IN RETAIL INDUSTRY Modern Retail Business Will Create up to 2 million Jobs in Next 2 Years Our Bureau Bright future! Courtesy: The Hindu Consuming class with $100-4800 annual income around 75million households this year. Positive Govt attitude to open, privatize various sectors. Retail biz to create 2 million jobs in next 2years of which more than 50% to be women.

MR GIBSON G. Vedamani, CEO, Retailers Association of India, at the BL Club inaugural function at Jansons School of Business, Coimbatore. — S. Siva Saravanan. Coimbatore, Oct. 13

Growing consumerism and availability of manpower are powering the growth of organized retail business in India and no marketer can afford to ignore India's growth potential, according to Mr. Gibson G. Vedamani, Chief Executive Officer, Retailers Association of India, and Mumbai. Inaugurating the Business Line Club at Jansons School of Business (JSB) at Karumathampatti near Coimbatore, he said as per Goldman Sachs BRIC's report, India would be among the top five economies in the world by 2050 along with China and Brazil. Demographic profile 9

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The total number of consuming class with an annual income level of between $1,000 and $4,800 would be around 75 million households by 2006 compared to 29 million households a decade ago. The demographic profile of India is also a great marketing asset. While, as per 2004 data, people in the 0-14 year’s age group constituted 31.7 per cent of the population, the 15-64 years age group forms 63.5 per cent and the people above 65 years constitute the balance. This is a constituency that no marketer can ignore. He also noted the positive attitude of the Government that has been keen to open various sectors and privatize some such as telecom, aviation and insurance. Mr. Vedamani said the modern retail business would be creating up to two million jobs in the next two years. The benefit of this growth is that it would create employment at the local level and a significant percentage of them would be first time taxpayers in the country. An important feature of this employment boom would be that more than 50 per cent of these employees would be women. He estimated that nearly 40 million sq ft retail space would be created over the next five years by existing retailers and the massive investment in infrastructure development would have a cascading impact. Allied activities such as warehousing and distribution would provide growth opportunities and supply-chain development would take place in secondary cities. The country's technological prowess could also help it become the backbone and back-end management of global retail supply chain. Prof M. Ravichandran, Director, JSB, and Mr. D. Rajkumar, Senior Regional ManagerCirculation, The Hindu, Coimbatore, were among those present. BRIC Report: Many Ifs and Buts Qualify Forecast Veena Venugopal Mumbai, Jan. 20 THE BRIC report is now constantly quoted as a validation of India's emerging economic prowess. The Goldman Sachs report on Brazil, Russia, India and China (BRIC) states that India will be the third largest economy, after the US and China by 2050. The study assumes strong and stable macro economic policies, stable political institutions, and high levels of education and openness as the fundamentals to the model used. The report states, "There is a good chance that our projections are not met, either through bad policy or bad luck." Ms Roopa Purushothaman, co-author of the BRIC report, while presenting the same here, raised concerns over the levels of secondary education in India. This is an important variable in the model and in comparison to others in the report, it is an area where India stands weak Unless there is a marked improvement in the quality and reach of secondary education, the predictions of the report are unlikely to be valid.

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Also important to note in the report, is the validity of application of the model in Asian economies. On applying the model to various economies as they stood in 1960 and comparing the current levels of these economies as against what the model would have projected, none of the Asian economies have shown parity. The actual GDPs are higher than that projected in Hong Kong and Korea and much lower in countries such as India. The report categorically states that while India will be among the three largest economies of the world, its per capita income will still be low. In fact, this phenomenon is expected to be true for all BRIC economies, except Russia. Individuals in Brazil, China and India will continue to be poorer on an average than those in the G6 economies. Despite these spoilers, why are Indians excited about the report? In a country-wise conclusion, the report states, "While growth in the G6, Brazil, Russia and China is expected to slowdown significantly over the next 50 years, India's growth rate remains above five per cent throughout the period. With the only population out of the BRIC that continues to grow throughout the next 50 years, India has the potential to raise its $ income per capita in 2050 to 35 times current levels. Still, India's income per capita will be significantly lower than any of the countries we look at." Strength and stability of macro economic policies and political institutions over a 50-year period are not assumptions that can be shrugged away as a definite possibility. With changes in Government, there will be changes in macro economic policies and openness to global trade. Whether these changes will lead to favorable trade and macro economic conditions is a moot point. In the event that all the assumptions of the model fall into place for India, the report does help in validating optimistic assumptions about the country's growth trajectory. Whether the excitement the report generated among business and political circles is because it is added fodder to the "India is shining" propaganda is worth a thought. Ms Purushothaman, shocked at the attention the report has generated in India, calls the timing "co-incidental." Definition of retailing Retailing is all the activities involved in selling goods and services directly to final consumers for their personal, non-business use. Although most retailing is done in retail stores, in recent years non-store retailing -selling by mail, telephone (telemarketing), door-to-door contact, vending machines, and numerous electronic means -- has grown tremendously. Store retailing: retail stores come in a variety of shapes and sizes, and new retail types keep emerging. They can be classified by one or more of several characteristics: 11

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Retailers can be classified by one or more of several characteristics: Amount of service  Product line  Relative prices  Control of outlets  Type of store cluster

Amount of service: different products require different amounts of service, and customer service preferences vary: (1) Self-service retailers increased rapidly in the US during the Great Depression in the 1930's. Customers were willing to perform their own "locate-compare-select" process to save money. Today, self-service is the basis of all discount operations, and typically is used by sellers of convenience goods (such as supermarkets) and nationally branded, fast moving shopping goods (such as catalog showrooms). (2) Limited service retailers, such as Sears and J C Penney, provide more sales assistance because they carry more shopping goods about which consumers need information. Their increased operating costs result in higher prices. (3) Full service retailers, such as specialty stores and first-class department stores, have salespeople to assist customers in every phase of the shopping process. Full service stores usually carry more specialty goods for which customers like to be waited on. They provide more liberal return policies, various credit plans, free delivery, home servicing, and extras such as lounges and restaurants. Product line: retailers can also be classified by the depth and breadth of their product assortments: (1) Specialty stores carry a narrow product line with a deep assortment within that line. Examples include stores selling sporting goods, books, furniture, electronics, flowers, or toys. Today, specialty stores are flourishing, due to the increasing use of market segmentation, market targeting, and product specialization. 12

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(2) A department store carries a wide variety of product lines. Each line is operated as a separate department managed by specialist buyers and merchandisers. Department Stores, are large retail stores with a fashion orientation that sell many types of merchandise organized in separate departments. Found in virtually every major city in the world, most department stores today are part of larger retail organizations that operate a flagship (or main) store, as well as branch stores in shopping centers and malls. The biggest single segment of their business is apparel and accessories, accounting on average for more than two-thirds of sales. Most department stores also offer a range of customer services such as personal shopping assistance, fashion shows, and charge accounts. The organization of a modern department store is complex because of the large number of goods and services provided. Typically, the operation of a store is conducted through four principal divisions:(a) The merchandising division, responsible for the planning, buying, and direct selling of merchandise; (b) The publicity division, which handles advertising, display, public relations, and other sales promotion functions; (c) The control division, which deals with credit, accounting, and other financial matters; (d) And the store management division, which covers personnel, service, store security, maintenance, and operational duties. Within these four divisions are many subdivisions. The heads, or managers, of the four principal divisions report to the general management of the store. Many variations of this organization plan exist; (3) Supermarkets are large, low-cost, low-margin, high-volume, self-service stores that carry a wide variety of food, laundry, and household products. Most US supermarket stores are owned by large chains such as Safeway, Kroger, Publix, Winn-Dixie, Jewel, and Tops. Chains account for almost 70% of all supermarket sales. Supermarkets departmentalized self-service stores that are the predominant type of retail outlet for food products. An average supermarket handles thousands of edible items including meat, fresh fruits and vegetables, dairy products, canned groceries, bakery items, delicatessen, HIM (2007-09) 13


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and frozen foods. Some also carry items such as seafood and liquor. Nonedibles found in supermarkets include household cleaners, paper products, health and beauty aids, and housewares. The markets are located in shopping centers, neighborhood areas, business and centers, and along highways. (4) Convenience stores are small stores that carry a limited line of high-turnover convenience goods. These stores located near residential areas and remain open long hours, seven days a week. Convenience stores must charge high prices to make up for higher operating costs and lower sales volume, but they satisfy an important consumer need. (5) Superstores, combination stores, and hypermarkets are all larger than the conventional supermarket. Many leading chains are moving toward superstores because their wider assortment allows prices to be 5-6% higher than conventional supermarkets'. Combination stores are combined food and drug stores.

Examples are A&P's Family

Marts and Wal-Mart's Supercenters. Hypermarkets combine discount, supermarket, and warehouse retailing, and operate like a warehouse -- products in wire baskets are stacked high on metal racks, and forklifts move through aisles during selling hours to restock shelves. They usually give discounts to customers who carry their own heavy appliances and furniture out of the store. Relative prices: retailers can also be classified by the prices they charge. Most retailers charge regular prices and offer normal quality goods and customer service. Some offer higher quality goods and service at higher prices. Retailers that feature low prices include: (1) Discount stores sell standard merchandise at lower prices by accepting lower margins and selling higher volume. Occasional discounts or specials does not make a store a discount store. A true discount store regularly sells its merchandise at lower prices, offering mostly national brands, not inferior goods. In recent years, facing intense competition from other discounters and department stores, many discount retailers have "traded up" by improving their decor, adding new lines and services, and opening suburban branches.

This, of course, has led to higher costs and

prices. With the discounters trading up, off-price retailers have moved in to fill the low14

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price, high-volume gap. They obtain a changing and unstable collection of higher-quality merchandise, often leftover

goods, overruns, and irregulars at reduced prices from manufacturers or other retailers. The three main types of off-price retailers are factory outlets, independents, and warehouse clubs. Control of outlets: about 80% of all retail stores are independents, accounting for 2/3 of retail sales. Other forms of ownership include the corporate chain, the voluntary chain and retailer cooperative, the franchise organization, and the merchandising conglomerate. The chain store is one of the most important retail developments of this century. Corporate chains appear in all types of retailing, but they are strongest in department, variety, food, drug, shoe, and women's clothing stores. The size of corporate chains allows them to buy in large quantities at lower prices, and chains gain promotional economies because their advertising costs are spread out over many stores and over a large sales volume. Chain stores, are two or more retail stores dealing in the same general kind of merchandise and operated by the same firm. The outlet is also known as a multiunit and is generally operated by an employee-manager rather than an individual owner. The manager of a chain store, unlike the independent retailer, does not make policy decisions and is responsible to the individual or company that owns the store. Chain stores deal mainly in general merchandise, food, drugs, and shoes; many variety and discount stores are chains The great success of corporate chains caused many independents to band together under contractual associations. The voluntary chain is a wholesaler-sponsored group of independent retailers that engages in-group buying and common merchandising. The retailer cooperative is a group of independent retailers that set up a jointly- owned central wholesale operations and conduct joint merchandising and promotion efforts. A franchise is a contractual association between a manufacturer, wholesaler, or service organization (the franchiser) and independent businesspeople (the franchisees) who buy the right to own and operate one or more units in the 15

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franchise system. Franchising has been prominent in fast-food companies, motels, gas stations, video stores, auto rentals, hair cutting salons, real estate, and dozen of other goods and services. The compensation received by the franchiser may include an initial fee, a royalty on sales, lease fees for equipment, and a share of the profits. Merchandising conglomerates are corporations that combine several different retailing forms under central ownership and share some distribution and management functions. Examples include Dayton-Hudson and JCPenney. Type of store cluster: Most stores today cluster together to increase their customer pulling power and to give consumers the convenience of one-stop shopping: Central business districts were the main form of retail cluster until the 1950's. Every large city and town had a central business district with banks, department stores, specialty stores, and movie theatres. When people began to move to the suburbs, however, these central business districts (with their traffic, parking, and crime problems) began to lose business.

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A shopping center is a group of retail businesses planned, developed, owned, and managed as a unit.

All shopping centers combined account for about 1/3 of all retail

sales.

Non-Store Retailing: although most goods and services are sold through stores, nonstore retailing has been growing much faster than store retailing. Traditional store retailers are facing increasing sales competition from catalogs, direct mail, telephone, home TV shopping shows, on-line computer shopping services, home and office parties, and other direct retailing approaches. Non-store retailing includes direct marketing, direct selling, and automatic vending: Direct Marketing vehicles are used to obtain immediate orders directly from targeted consumers. Although direct marketing initially consisted mostly of direct mail and mailorder catalogs, it has taken on several additional forms, including telemarketing, direct radio and TV, and on-line computer shopping. Its growing use in consumer marketing is largely a response to the "demassification" of mass markets, which has resulted in an increasing number of fragmented market segments with highly individualized needs. Trends that have increased the use of direct marketing include:(1) number of women in the workforce; (2) higher costs of driving, including traffic congestion and parking problems; (3) shortage of retail help; (4) longer checkout lines; (5) toll-free telephone numbers; (6) availability of credit through proliferation of credit cards; (7) growth of computer power & communication technology; and (8) increasing time pressures on consumers. Direct Selling, or door-to-door retailing, started centuries ago with roving peddlers. Today, it has grown into a huge industry, with more than 600 companies selling their

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products door-to-door, office-to-office, or at home-sales parties. Although some direct selling companies are thriving, door-to-door selling has a somewhat uncertain future. Trends working against this form of selling include:(1) increase in single-person and working-couple households decreases the chances of finding someone at home; (2) home-party companies are having difficulty finding non-working women who want to sell product part-time; (3) increases in crimes against individuals has made consumers reluctant to invite strangers into their homes; and (4) recent advances in interactive direct-marketing technology mean that the door-to-door salesperson may be replaced by the telephone, the television, and the home computer. Automatic Vending is not new. In 215 B.C., Egyptians could buy sacrificial water from coin-operated dispensers. But this method of selling soared after World War II. There are now about 4.5 million vending machines in the US -- one for every 55 people. Vending machines are found everywhere; compared to store retailing, vending machines offer consumers greater convenience 24 hours a day, and have replaced many services formally requiring a human interface. For example, when was the last time you went to the bank and actually talked with a "live person?� The expensive equipment and labour required to stock and service vending machines makes this a costly channel of distribution, and prices of vended goods are often 15-20% higher than those in retail stores. So, the adage "there's no free lunch" still holds -we have to pay for the convenience that vending machines provide. The Wheel of Retailing concept states that new types of retailers usually begin as lowmargin, low-price, low-status operations, but later evolve into higher-priced, higherservice operations, eventually becoming like the conventional retailers they replaced.

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Demographics and Consumer Behavior Courtesy: KSA Analysis India is estimated to have a population of 1.04 billion as of 2003. Population growth is expected to stabilize at approximately one and a half percent in the next few years. In recent years, there has been a trend in the movement of population from rural areas to urban areas, largely as a result of increased employment opportunities in the cities as well as a preference of the younger generation to move away from agriculture.

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The percentage of population moving to Class I towns, which are basically large cities with a population of over 1 million, has seen significant growth in recent years. As a result of this trend, the percentage of population living in urban areas, has seen dramatic growth in the past two decades. One of the important demographic trends in recent times is the change in the age profile of the population. The percentage of the population in the 15 to 59 year age group, which is largely the country’s workforce, is expected to increase in coming years.

POPULATION UP BY TOWN CLASS Total Population: 846 million

POPULATION- BREAK URBAN & RURAL Population: 217million

Census '91. Only one fourth of India's population is urban. Source Census '91 Top 8 metros constitute more than one fourth of India’s population

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The Global Retail Industry-An Overview Retail has played a major role world over in increasing productivity across a wide range of consumer goods and services .The impact can be best seen in countries like U.S.A., U.K., Mexico, Thailand and more recently China. Economies of countries like Singapore, Malaysia, Hong Kong, Sri Lanka and Dubai are also heavily assisted by the retail sector. Retail is the second-largest industry in the United States both in number of establishments and number of employees. It is also one of the largest worldwide. The retail industry employs more than 22 million Americans and generates more than $3 trillion in retail sale annually. Retailing is a U.S. $7 trillion sector. Wal-Mart is the world’s largest retailer. Already the world’s largest employer with over 1million associates, Wal-Mart displaced oil giant Exxon Mobil as the world’s largest company when it posted $219 billion in sales for fiscal 2001. Wal-Mart has become the most successful retail brand in the world due its ability to leverage size, market clout, and efficiency to create market dominance. Wal-Mart heads Fortune magazine list of top 500 companies in the world. Forbes Annual List of Billionaires has the largest number (45/497) from the retail business. GLOBAL RETAIL 1999

2002

2006

Total Retail (US$ Billion)

150

180

225

Organized Retail (US$Billion

1.1

3.3

7

% Share of Organized retail

0.7

1.8

3.2

(Source: CSO, MGI Study) Top Retailers Worldwide Rank 1 2 3 4 5

Retailer

Home Country

Wal-Mart Stores, Inc. Carrefour Group The Kroger Co. The Home Depot, Inc. Metro 21

U.S.A. France U.S.A. U.S.A. Germany HIM (2007-09)


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(Source: STORES / Deloitte Touche Tomahatsu)

Retail Scene in India - Touching Meteoric Height As the corporates – the Piramals, the Tatas, the Rahejas, ITC, S.Kumar’s, RPG Enterprises, and mega retailers- Crosswords, Shopper’s Stop, and Pantaloons race to develop the retailing sector, retail as an industry in India is coming alive. Retail sales in India amounted to about Rs.7400 billion in 2002, expanded at an average annual rate of 7% during 1999-2002. With the upturn in economic growth during 2003, retail sales are also expected to expand at a higher pace of nearly 10%. Across the country, retail sales in real terms are predicted to rise more rapidly than consumer expenditure during 2003-08. The forecast growth in real retail sales during 2003- 2008 is 8.3% per year, compared with 7.1% for consumer expenditure. Modernization of the Indian retail sector will be reflected in rapid growth in sales of supermarkets, departmental stores and hyper marts. Sales from these large-format stores are to expand at growth rates ranging from 24% to 49% per year during 2003-2008, according to a latest report by Euro monitor International, a leading provider of global consumer-market intelligence. A.T.Kearney Inc. places India 6th on a global retail development index. The country has the highest per capita outlets in the world - 5.5 outlets per 1000 population. Around 7% of the population in India is engaged in retailing, as compared to 20% in the USA.

In a developing country like India, a large chunk of consumer expenditure is on basic necessities, especially food-related items. Hence, it is not surprising that food, beverages and tobacco accounted for as much as 71% of retail sales in 2002. The share of food related items had, however, declined over the review period, down from 73% in 1999. This is not unexpected, because with income growth, Indians, like consumers elsewhere, have started spending more on non-food items compared with food products. Sales through supermarkets and department stores are small compared with overall retail sales. Nevertheless, their sales have grown much more rapidly, at almost a triple rate (about 22

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30% per year during the review period). This high acceleration in sales through modern retail formats is expected to continue during the next few years, with the rapid growth in numbers of such outlets due to consumer demand and business potential. The factors responsible for the development of the retail sector in India can be broadly summarized as follows: Rising incomes and improvements in infrastructure are enlarging consumer markets and accelerating the convergence of consumer tastes.  Looking at income classification, the National Council of Applied Economic Research (NCAER) classified approximately 50% of the Indian population as low income in 1994-95; this is expected to decline to 17.8% by 2006-07.  Liberalization of the Indian economy which has led to the opening up of the market for consumer goods has helped the MNC brands like Kellogg’s, Unilever, Nestle, etc. to make significant inroads into the vast consumer market by offering a wide range of choices to the Indian consumers.  Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc. The Internet revolution is making the Indian consumer more accessible to the growing influences of domestic and foreign retail chains. Reach of satellite T.V. channels is helping in creating awareness about global products for local markets. About 47% of India’s population is under the age of 20; and this will increase to 55% by 2015. This young population, which is technology-savvy, watch more than 50 TV satellite channels, and display the highest propensity to spend, will immensely contribute to the growth of the retail sector in the country. As India continues to get strongly integrated with the world economy riding the waves of globalization, the retail sector is bound to take big leaps in the years to come.

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The Indian retail sector is estimated to have a market size of about $ 180 billion; but the organized sector represents only 2% share of this market. Most of the organized retailing in the country has just started recently, and has been concentrated mainly in the metro cities. India is the last large Asian economy to liberalize its retail sector. In Thailand, more than 40% of all consumer goods are sold through the super markets and departmental stores. A similar phenomenon has swept through all other Asian countries. Organized retailing in India has a huge scope because of the vast market and the growing consciousness of the Consumer about product quality and services. A study conducted by Fitch, expects the organized retail industry to continue to grow rapidly, especially through increased levels of penetration in larger towns and metros and also as it begins to spread to smaller cities and B class towns. Fuelling this growth is the growth in development of the retail-specific properties and malls. According to the estimates available with Fitch, close to 25mn sq. ft. of retail space is being developed and will be available for occupation over the next 36-48 months. Fitch expects organized retail to capture 15%-20% market share by 2010.

A McKinsey report on India says organized retailing would increase the efficiency and productivity of entire gamut of economic activities, and would help in achieving higher GDP growth. At 6%, the share of employment of retail in India is low, even when compared to Brazil (14%), and Poland (12%). Current Status of Retail Marketing in India Winds of Change Sweeping Through Retail Industry. What is it that has made the Piraml’s, the Tata’s, the Raheja’s, ITC and scores of others take a plunge into mega retailing? Why is market research, space management, ERP, promotions etc now a necessary tool in this industry? Retail Economics in India.

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Traditionally retailing has not been a structurally organized industry in India. Organized retail network was seen only in fabrics, with large mills building their own exclusive stores e.g. Raymond’s, Bombay Dyeing etc. Currently there are about 5130000 retail outlets selling about Rs4790bn worth of products. Retail universe in India comprises large, medium general stores, chemists and pan-bidi (apart from accessories stores). Of these –thanks to unemployment, the number of pan-bidi outlets are steadily rising. On account of the fragmented nature of Indian retail industry the inhabitants to stores ratio in India is about 150:1, i.e. there is a store catering to every 150 people. This ratio varies from country to country. In china the ratio is similar to that of India where as incase of more developed countries the ratio would be higher. For instance in Europe the inhabitant to stores ratio is 2000:1.As markets mature, consumer expectations rise it would be a necessity for small retailers to come together and form innovative and strong supply chain that will cut through distribution and increase margins.

Turnaround Times In last couple of years this industry has made responsive move from its hopeful stages. Organized retailing started picking up in Southern India. Availability of land at prime locations coupled with cheaper real estate prices (compared to Mumbai & Delhi) made it possible to have multi stored shopping complexes here. It took two years of recession to get this concept of shopping to major cities like Mumbai & Delhi. Recession brought property prices down in these cities. It was during this period of industry slump that big business houses took notice of the potential in retailing. A classic example being- Lakme Ltd. The company after selling off its cosmetic division to HLL, made an aggressive foray into retailing. Its retail chain branded’Westside’ already comprises 4 stores- one each in Bangalore, Hyderabad, Chennai and Mumbai. A cash hoard of Rs107bn will enable Lakme to roll out stores aggressively.

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Consumerism Cycle Consumer cycle starts with Industry Dictating the market. Eventually with time the distributor gains control over the market. At this stage distributor becomes an important link between manufacturer and customer. When markets start developing further expanding its horizons, suddenly retailers turn out to be vital point in this supply chain. In India we are entering into this third stage where retailers control the market. With shopping attitudes of people changing, Indian markets today desires for value added products and services with good ambience and brands, which only a retailer can provide. Whereas developed countries have reached the final stage where customer dictates. US, UK and other developed markets have now reached a stage wherein consumers are willing to save on price by going to discount stores where ambience and services are low and goods are unbranded.

It’s a vicious cycle, but for the new aspect - Omnipresent net. Though it would be sometime before e-commerce gears up in India. But all the same a merger of Internet, catalogues, telephone and television is inevitable. What Makes it Attractive Today the number of smaller retailers ($500pa) has shot up from 40% in 1990 to 54% in 1996, whereas the number of large stores (turnover of $3000pa) increased from 2.8% to 6.5%. Thus though large retailers are growing the smaller outlets are growing even faster. However changing shopping attitudes of an average customer will make future growth increasingly difficult for unorganized retail sector. Currently in India, organized retailing accounts for 6% of the industry turnover, comprising value-added foods (Rs770bn), music & entertainment (Rs40bn), colour cosmetics (Rs12bn) etc. By 2005 organized retailing will account for 20% the total retailing industry turnover (Rs8300bn). Big business houses today are in a position to provide Indian masses with shopping satisfaction, entertainment, quality product, polite salesperson, product information and 26

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discounts. Though margins currently are low due to high property cost and poor infrastructure. This is the only business where one buys in credit and sells for cash. Further the number of households earning more than Rs150000 per annum amounts to 30mn today and is expected to grow to 80mn by 2007.Additionally financial institutions are encouraging such ventures. ICICI has recently sanctioned term loans to Vivek & co, a mega-retailer, in Chennai to meet their expansion plans. Very shortly the market will also witness IPO’s for some of these Retail Ventures. Proven success In early 90’s, K. Raheja Group started a mega Apparels stores in Mumbai- ‘Shoppers Stop’. Initially, the group was averse to start outlets at South Mumbai for various reasons like low walk-ins, space constraints, narrowed target audience etc. However the success of Crossroads, an ardent rival, has prompted them to start one at South Mumbai in near future. The group has more of such stores, one each at Bangalore, Hyderabad and Jaipur. Within seven years of operations it has a yearly turnover of Rs1.30bn. The group has plans of opening about 20 mega apparel stores in next 2 years. For this the company plans to sell 25.1% stake for Rs559mn to Singapore based investor Warburg Pincus. The success story of Shoppers Stop has convinced other business houses to take a leap. Origin of Modern Retailing in India Retailing, which is one of the largest sectors in the global economy, is going through a transition phase in India. However the Indian retail sector is still in a nascent stage. Organized retailing still contributes to only about 2% of the total retailing in the country. Now a question that would arise is what constitutes Organized Retailing. Mr. Raghu Pillai, the Managing Director of Food World, which is one of the leading organized food retailing chain in India says that, “Organized Retailing presupposes a retailers’ ability to manage or more importantly influence a set of supply chain variables in a commercially viable and sustainable way”. Efficient management of the supply chain to ensure the profitability of the entire chain, large outlets with modern ambiance and facilities, a wide 27

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product profile, self service facilities etc are generally the features of a modern retail store. Organized retailing aims at providing an ideal shopping experience for the consumer based on the advantages of large-scale purchases, consumer preference analysis, excellent ambience and choice of merchandise. However, there are no single formats, designs, facilities or product portfolios that can be identified as the success formula and as a general rule differentiation between chains is necessary to increase viability. For a long time, the corner grocery store was the only choice available to the consumer, especially in the urban areas. This is slowly giving way to international formats of retailing. The traditional food and grocery segment has seen the emergence of supermarkets/ Grocery chains. The Indian food retail market is still in stage-1, which represents the ‘First Steps’ in the Stages of Maturity of Modern Retail Food Market. The stages of this progression and the position of the other major countries are given below:

Stages of Maturity of Modern Food Retail Markets Largely in the post independence period, Indian retailing has been unorganized, to the most part untouched by corporate business principles. When the economy started to be opened in the 1980s the situation began to change slowly. Emergence of retail chains was 28

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at first witnessed in the textiles sector, with companies like Bombay Dyeing, Raymond, S. Kumar‘s and Grasim, opening their own outlets. Titan then successfully created a retailing concept, by establishing its series of elegant showrooms. The later half of the nineties has been a witness to a fresh wave of entrants in the retailing business. The new chains have not been restricted to textiles and garment sellers but there have been entrants from various fields of commerce. FoodWorld and Subhiksha in food and Fast-Moving Consumer Goods; Musicworld and Musiccafe in music; Viveks and Vijay sales in the consumer durables etc were the beginners. Now the number of players and the variety of formats and product categories reflect variety. Different Forms of Retailing Popular Formats  Hyper marts  Large supermarkets, typically (3,500 - 5,000 sq. ft)  Mini supermarkets, typically (1,000 - 2,000 sq. ft)  Convenience store, typically (7,50 - 1,000 sq. ft)  Discount/shopping list grocer  Traditional retailers trying to reinvent by introducing self-service formats as well as Value-added services such as credit free home delivery etc. The Indian retail sector can be broadly classified into:a) FOOD RETAILERS There are large number and variety of retailers in the food-retailing sector. Traditional types of retailers, who operate small single-outlet businesses mainly using family labour, dominate this sector .In comparison, super markets account for a small proportion of food sales in India. However the growth rate of super market sales has being significant in recent years because greater numbers of higher income Indians prefer to shop at super markets due to higher standards of hygiene and attractive ambience. b) HEALTH & BEAUTY PRODUCTS With growth in income levels, Indians have started spending more on health and beauty products. Here also small, single-outlet retailers dominate the market. However in recent 29

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years, a few retail chains specializing in these products have come into the market. Although these retail chains account for only a small share of the total market, their business is expected to grow significantly in the future due to the growing quality consciousness of buyers for these products.

c) CLOTHING & FOOTWEAR Numerous clothing and footwear shops in shopping centers and markets operate all over India. Traditional outlets stock a limited range of cheap and popular items; in contrast, modern clothing and footwear stores have modern products and attractive displays to lure customers. However, with rapid urbanization, and changing patterns of consumer tastes and preferences, it is unlikely that the traditional outlets will survive the test of time. . d) HOME FURNITURE & HOUSEHOLD GOODS Small retailers again dominate this sector. Despite the large size of this market, very few large and modern retailers have established specialized stores for these products. However there is considerable potential for the entry or expansion of specialized retail chains in the country. e) DURABLE GOODS The Indian durable goods sector has seen the entry of a large number of foreign companies during the post liberalization period. A greater variety of consumer electronic items and household appliances became available to the Indian customer. Intense competition among companies to sell their brands provided a strong impetus to the growth for retailers doing business in this sector. f) LEISURE & PERSONAL GOODS Increasing household incomes due to better economic opportunities have encouraged consumer expenditure on leisure and personal goods in the country. There are specialized retailers for each category of products (books, music products, etc.) in this sector. Another prominent feature of this sector is popularity of franchising agreements between established manufacturers and retailers. 30

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Each of the retail stars has identified and settled into a feasible and sustainable business model of its own:-

 Shoppers' Stop - department store format  Westside - emulated the Marks & Spencer model of 100 per cent private label, very good value for money merchandise for the entire family  Giant and Big Bazaar - hypermarket/cash & carry store  Food World and Nilgiris – supermarket format  Pantaloons and The Home Store - speciality retailing  Tanishq has very successfully pioneered a very high quality organized retail business in fine jewellery

Structure of the retailing industry according to ownership patterns:-

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 An unaffiliated or independent retailer  A chain retailer or corporate retail chain  A franchise system  A Leased Department (LD)  Vertical Marketing System (VMS)  Consumer Co-operatives A new entrant in the retail environment is the 'discounter' format. It is also is known as cashand- carry or hypermarket. These formats usually work on bulk buying and bulk selling. Shopping experience in terms of ambience or the service is not the mainstay here. RPG group has set up the first 'discounter' in Hyderabad called the Giant. Now Pantaloon is following suit. Two categories of customers visit these retail outlets. 1. The small retailer. For example, a customer of Giant could be a dhabawala who needs to buy edible oil in bulk. 2. The regular consumer who spends on big volumes (large pack sizes) because

of a

price advantage per unit. Key Strategic factors The changes in the nation’s social structure like, improvement of the Indian economy, consumerism, urbanization, profusion of brands have been the main causal factor for the development of these modern formats. Indian food buying behavior is gradually changing in response to the changing social structure .The increasing number of nuclear families, double income households and working women, greater work pressure and increased commuting time have put the consumers under constant time pressure. The other equally important factors in the changing Indian landscape are the increasing influence of children, gradual acceptance of frozen, semi-processed and processed foods by the Indian consumer, the growing influence of television in decision making and improvement in

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literacy rates. As the modern housewife starts shopping for herself she appreciates and welcomes: a pleasant shopping environment;  convenience of one-stop shopping with wider product portfolio at a single location;  Speed and efficiency in processing.  more information;  better quality and hygiene; and  Discount too if possible. The improved income and the increased purchasing power of a larger section of the Indian population makes the opening of outlets, which provide the whole bunch of these improved services a viable opportunity. The key to success is identifying a superior value-promise and who is in a better position to do it than retailers? Retailers are the closest to the point of purchase and have access to a wealth of information on consumer shopping behaviour. Retailers have some unique advantages for managing brands such as continuous and actionable dialogue with consumers, control over brand presentation at point-of-sale, control over shopping environment, display location/adjacencies, and signage. And they have used this advantage with tremendous success. As seen, the role of the intermediary is being diminished gradually, which has obvious implication of backlash of the trade channel upwards towards the suppliers. This is more severe in countries such as India, where the channel economics in favour of the middlemen is still strong enough given the fragmentation of the retail sector. Therefore when FoodWorld, the largest grocer in India has a “direct supply” contract with over 20% of its key suppliers, it gives rise to conflict of interest with the distribution infrastructure that suppliers have painstakingly built over the years. Thus companies like HLL have evolved a distinct distribution channel altogether (called “Modern Trade”) to service the needs of such large grocers. Even the mom and pop stores (known as kirana

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Shops) are affected due to this “unfair” back-end advantage extended by the supplier to its leading accounts (the emerging supermarket chains). The strategies adopted by the retailer to compete with branded goods are illustrated by the following diagram. Branding the store and following a private label strategy is the key strategy which helps the retailer to compete with branded products.

The current Scenario The change in the social formats has led to the development of modern retail outlets, mainly in the southern parts of the country. Chennai, Bangalore and Hyderabad are developing as the hub of organised retail in India. The culture is spreading to the otherparts of the country too, with the western and northern parts of the country too providing good opportunities currently. Different players are trying out different formats. A successful fully Indian or ‘swadeshi’ model in Indian retailing is yet to be developed. The models, which are highly successful in certain areas of the country, are able to achieve only moderate success in certain other areas. 34

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Retail Realities:  Unorganized market: Rs. 583,000 crores  Organized market: Rs.5,000 crores  5X growth in organised retailing between 2000-2005  Over 4,000 new modern retail outlets in the last 3 years  Over 5,000,000 sq. ft. of mall space under development  The top 3 modern retailers control over 750,000 sq. ft. of retail space  Over 400,000 shoppers walk through their doors every week  Growth in organized retail on par with expectations and projections of the last5 Years: on course to touch Rs. 35,000 crores (US$ 7 Billion) or more by 2005-06 Major players:

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Major players with yearly turnover

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Key Categories:

Source: KSA Technopack

Merchandising in retail

The modern consumer is posing a challenging task for Indian retail. More aware, more confident and much more demanding, today's consumer wants the best product at the best price. And that's not all. The manner in which the product is presented to him has to be perfect too. Retailers have, therefore, been busy trying to keep pace with all these requirements at the same time striving to remain profitable. A tough job indeed. Not surprisingly, most of them are paying serious attention to their products and focusing on the various aspects of merchandise and supply chain management to give customers what they desire - good quality at an affordable price. However, there are plenty of areas that will need the express attention of the retailers if they want to derive the most out of their systems and processes on merchandising and sourcing practices of large retailers in India. 37

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What does a carmaker have to do to succeed in his business? The most important thing obviously is to make good cars - cars that customers want to buy. This holds true for any business really. Companies spend enormous amounts of time, money and effort in understanding the consumer to ensure that their offering is just right - the right product attributes at the right price and targeting the right need with the right message. Similarly, if you are a retailer, the first thing you want to get right is your

merchandise. All

other aspects like ambience and customer service are definitely important but are still secondary to the kind of merchandise offered. The decisions involved here can be quite complex. A retail chain not only deals with thousands of customers, it also offers a wide variety of SKUs, often more than the product range of even the largest companies. So matching products to customer needs is not an easy task at the best of times for a retailer and certainly the most important for long-term survival.

In an ideal world, a retailer would have the right quantity of the right merchandise in the right place at the right time, while meeting the company's financial goals. In the lexicon of retail, this process is termed merchandise management. There are many variables and decision points involving goods within a retailing operation .This is where the importance of two tools of management – ď ś Merchandise management and ď ś Supply chain management comes into play. Simply put,

merchandise management is the act of managing the product(s) whereas supply chain

management is the act of managing the suppliers of the product(s). Importantly, both these tools help the retailer to earn profits, which keeps his business running.

Merchandise Management There are two key flows here. One is the goods flow, wherein the merchandise goods move from the manufacturer to the retail store and from there to the consumer. There are normally a few aggregation and distribution points in between. Goods can also flow backward if rejected. The other is the information flow. These are interlinked. The goods flow occurs because of purchases made from the retailer by the customer on the one

hand, and orders placed on the manufacturer by the retailer on the other. Movement of goods creates information in the form of changes in stocks and payment. 38

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So what is the retailer's priority in this current and counter-current of merchandise and information? As in any other business, a retailer aims to satisfy the consumer and to maximise financial gains at the same time. Two key elements of this are supply chain management, which deals with the sourcing and flow of goods; and merchandise management, which is the actual managing of goods. Managing goods implies decisions like what to sell, how much, when, of what type and so on. Both these areas of business optimisation encompass many activities and functions. In traditional business terms, merchandise management includes roles of planning, purchase, sales and marketing. Logistics includes transportation and warehousing. While traditionally, these two areas have been treated separately, in the 1990s, boundaries between these have increasingly blurred as retail organisations have tried to generate end-to-end efficiencies. In fact, in most retail organisations, the supply chain and merchandise teams have blended to bring out the best results. Let us look at the chief areas within these two functions. The Merchandising Function Merchandising is, perhaps, the most important function for any retail organisation, as it decides what finally goes on the shelf of the store. It starts with the planning function and ends with the review function. There are several questions that the retailer needs to answer while undertaking merchandise planning:  Which planning procedure do I need to adopt - how do I organise my merchandise to facilitate planning?  What pricing strategy to adopt?  Which brands to stock - do I need to go in for private label or should I stock external labels?  How do I know whether my planning has been successful or not?

 How do I dispose off slow moving goods?

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The robustness of the retailer's merchandising process is dependent on how well he can determine each of the above parameters. We take a brief look at each of these aspects.

Importance of Supply chain in retail The modern retailing in India is booming and India can position itself as a lead player in Asia, if the retail sector here attains the competitive strengths by responding to the Changing Markets. Spelling out the strategy for efficient management of Supply Chain, by 2010 the supply chain must be highly focused and differentiated. "In today's highly competitive environment, as companies are under intense pressure to reduce costs, expand into new markets and develop new products, every manufacturer's supply chain is expanding and becoming increasingly complex. However, complexity is not the enemy to the supply chain — effectively managing complexity can be a manufacturer's greatest asset," Experts from the retail business affirmed that the current retail boom in India can only sustain its momentum if supply chain Management is given the top priority by the retail players. The supply chain has a key role to play in the expansion and profitability of many companies, but it has rarely been adapted to meet the new demands placed upon it. The critical differentiating factors that synchronize across the entire global supply chain are Collaborating with customers, rather than only with suppliers. Also, Undertaking customer profiling, customer loyalty and customer segmentation initiatives and increasing performance through managing products and introducing new products are vital in the changed scenario. In India the retail sector is the second largest employer after agriculture and is highly fragmented. It predominantly consists of small independent, owner managed shops. There are some 12 million retail outlets in India. Interestingly A. T Kearney Global Retail Development Index 2004 places India as the second amongst the emerging markets in the world. Studies indicate that organized retail will grow from a 2% of the total retail

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industry to a significant 20% by the end of the decade the retail sector currently growing at a rate of 8.5%. It has been seen internationally that development of modern retail formats is directly linked to the level of development of local economies. In India this is beginning to happen, but has a long way to go. There are certain bottlenecks in the supply chain in Indian retail segment that fragment the whole market are structure of organization, Infrastructure lacuna and absence of effective use of Information Technology. These core issues are currently impeding the growth of retail sector in India from reaching at par with the world-class operations. The Indian retail sector potential is too vast to be ignored for long. The major challenges for retail sector in India are manifold. To meet these growing challenges the Terms and definitions related to trading such as retailing, wholesaling, direct selling, multilevel marketing etc should be aligned, with internationally accepted norms.

Changing face of banking in retail With a jump in the Indian economy from a manufacturing sector, that never really took off, to a nascent service sector, Banking as a whole is undergoing a change. A larger option for the consumer is getting translated into a larger demand for financial products and customisation of services is fast becoming the norm than a competitive advantage. With the Retail banking sector expected to grow at a rate of 30% players are focusing more and more on the Retail and are waking up to the potential of this sector of banking. At the same time, the banking sector as a whole is seeing structural changes in regulatory frameworks and securitisation and stringent NPA norms expected to be in place by 2004 means the faster one adapts to these changing dynamics, the faster is one expected to gain the advantage. In this I try to study the reasons behind the euphemism regarding the Retail-focus of the Indian banks and try to assess how much of it is worth the attention that it is attracting.

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Potential for Retail in India: The Indian players are bullish on the Retail business and this is not totally unfounded. There are two main reasons behind this:Firstly, it is now undeniable that the face of the Indian consumer is changing. This is reflected in a change in the urban household income pattern. The direct fallout of such a change will be the consumption patterns and hence the banking habits of Indians, which will now be skewed towards Retail products. At the same time, India compares pretty poorly with the other economies of the world that are now becoming comparable in terms of spending patterns with the opening up of our economy. For instance, while the total outstanding Retail loans in Taiwan is around 41% of GDP, the figure in India stands at less than 5%. The comparison with the West is even more staggering. Another comparison that is natural when comparing Retail sectors is the use of credit cards. Here also, the potential lies in the fact that of all the consumer expenditure in India in 2001, less than 1% was through plastic, the corresponding US figure standing at 18%. But how competitive are the players The fact that the statistics reveal a huge potential also brings with it a threat that is true for any sector of a country that is opening up. Just how competitive are our banks? Is the threat of getting drubbed by foreign competition real? To analyze this, one needs to get into the shoes of the foreign banks. In other words, how do they see us? Are we good takeover targets? Going by international standards, a large portion of the Indian population is simply not “bankable� – taking profitability into consideration. On the other hand, the financial services market is highly over-leveraged in India. Competition is fierce, particularly from local private banks such as HDFC and ICICI, in the business of home, car and consumer loans. There, precisely lie the pitfalls of such explosive growth. All banks are targeting the fluffiest segment i.e. the upwardly mobile urban salaried class. Although the players are spreading their operations into segments like self- employed and the semi-urban rich,

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it is an open secret that the big city Indian yuppies form the most profitable segment. Over-dependence on this segment is bound to bring in inflexibility in the business. What about the foreign giants The foreign banks have identified this problem but there are certain systematic risks involved in operating in the Retail market for them. These include regulatory restrictions that prevent them from expanding their branch network. So these banks often take the Direct Selling Agent (DSA) route whereby low-end jobs like sourcing or transaction processing are outsourced to small regional layers. So now on, when you see a loan mela or a road show showcasing the retail bouquet of an elite MNC giant, you know that a significant commission earned out of any such booking gets ploughed back to our own economy. Perhaps, one of the biggest impediments in foreign players leveraging the Indian markets is the absence of positive credit bureaus. In the west the risk profile can be easily mapped to things like SSNs and this information can be publicly traded. PAN is a step in this direction but lot more work need to be done. What has been a positive step towards this is a negative file sharing started by a consortium of 11 banks. However, as a McKinsey study points out actual write-offs on NPAs show a strong negative correlation with sharing of positive information. On top of this, the spend-now-pay-later “credit culture” in India is just not picking up. A swift legal procedure against consumers creating bad debt is virtually non-existent. Finally, the vast geographical and cultural diversity of the country makes credit policy formulation a tough job and it simply cannot be dictated from a Wall Street or a Singapore boardroom! All these add up to the unattractiveness of the Indian retail market to the foreign players. So over the past few years, in spite of the entry of MNCs in many industries, Retail Banking has seen a flurry of panicky exits. Fewer than 40 remain in India and their share of total bank assets currently 7.2% is falling. Those that remain might be thought to be likely buyers of Indian banks. Yet Citibank, HSBC and Standard Chartered—all in India for more than a century, and with relatively large retail networks—seem to have no pressing need to acquire a local bank. Established foreign banks have preferred to take over customers or businesses from other foreign banks that want to leave. Thus HSBC, in HIM (2007-09) 43


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recent years, has acquired customers from France's BNP, Germany's Deutsche Bank and Japan's Bank of Tokyo-Mitsubishi. ABN Amro took over Bank of America's retail business. So all for the keeping then This will perhaps be the most wrongful inference that can be drawn from the above. One just cannot afford to look inwards and repeat the mistakes that were the side effects of the Nationalization of the Banking System. A growing market can never be an alibi for lack of innovation. Indian banks have shown little or no interest in innovative tailor-made products. They have often tried to copy process designs that have been tested, albeit successfully, in the West. Each economic culture has its own traits and one who successfully adapts those to the business is the eventual winner. A case in point is the successful implementation of micro-credit networks in Bangladesh. Positioning a bank as a tech-savvy financial vendor in a country where Internet penetration is an abysmal 1.65% can only add to the over-leveraging as pointed out earlier. The focus of the sector should remain in macroeconomic wealth creation and not increasing the per capita indebtedness that will do little but add to the NPA burden. Retail Banking in India has to be developed in the Indian way, notwithstanding the long queues in front of the teller counters in the Public sector banks!

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Food retailing in India

In a country where there are grocery shops at every street corner and a vegetable & fruit vendor near each bus stop, how can organised retail of food become feasible? To counter the unbeatable advantages of convenience of a hop, skip and a jump access and home delivery, organised retailers seem to have just one option - offer attractive prices to the consumer. A successful retailer's winning edge will therefore come from sourcing - how best it can leverage its scale to drive merchandise costs down, increase stock turns and get better credit terms from its vendors. There are obvious and hidden areas where costs can pruned and the benefits of this lower cost of retailing can be passed on to customers as lower prices, which in turn should fuel demand. One way of trimming costs is if the pressure points in the long, often unnecessary, supply chain for produce and staples can be identified and suitably dealt with. This is easier said than done. The food supply chain in India is full of inefficiencies - a result of inadequate infrastructure, too many middlemen, complicated laws and an indifferent attitude. In this chapter, we take a look at some of these issues. Digest this. India is one of the largest producers of milk, fruits and vegetables in the world. Yet, the organised food retail business in the country is among the least developed. The irony is not so difficult to comprehend if one looks at the Indian food chain. From the farm to the store, the links are too many and full of problems. ď ś A large chunk of fresh fruits and vegetables is lost due to lack of post-harvest handling, storage and processing facilities. ď ś Tonnes of grains are wasted due to improper handling and storage, pest infestation and poor logistics management. ď ś Intermediaries or 'middlemen' gobble up a large portion of the earnings which should go to the farmer. 46

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ď ś Not only that, these middlemen cause delays which in a business of perishable goods can be lethal. The result is a chain stuffed with inefficiencies. For organised retail of food to be successful, it is important to get rid of these inadequacies so that costs are pruned and, more important, the benefits of the gains are passed on to the consumer. India has seen rapid developments in several areas, most notably in incomes, demographic shifts to younger populations and reach and exposure to media and different cultures. Indians shell out up to 53 per cent of their incomes on food. Food consumption has been rising at an average annual rate of about 10 per cent in nominal terms. However, the retailing of food and staples has remained largely unchanged. Over 90 per cent of all produce is sold via the wet markets with organised business accounting for just 2 per cent of food and staples retailing. Although the organised players, which emerged in the late 1990s, have established themselves quite firmly in the local markets, they have yet to make an impact on a national level.

Subhiksha is large in Chennai and has just started working its way through Tamil Nadu

whereas Margin Free operates in Kerala. FoodWorld has been the more adventurous of the three - having ventured into more than one state - but is concentrated in the south.

While most observers have accepted the role of large format organised retail in clothing and lifestyle markets, there are still some lingering doubts on how organised retail will perform in the foods and grocery segment in India. The underlying issue is - can organised retail in food and grocery compete with the

'mom-and-pop' stores, which offer the

unbeatable advantages of convenience of access - you are sure to find one less than half a km from your house - and home delivery.

Subhiksha, for example, works on a formula of one store every 1.5 km (although it started off with one store every 2 km). So these stores expect the customer to travel a bit or plan their shopping in advance. What will make the customer do that?

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Organized retail essentially can look to offer one or more of the following - better range of merchandise, better ambience or lower prices working on economies of scale. Of these, the last is what the large chains have focused on since it is something that a one-store operation cannot match. Subhiksha started off as a discounter - even its stores are designed to keep overheads low. FoodWorld and Nilgiris seem to be treading a middle path - some amount of discounting combined with some effort at ambience.

Looking at the trends in the last 2-3 years, discounting appears to be the direction where food retail seems to be heading and we believe that a successful national chain will be a discounter. While a discounter needs to keep store overheads low, its winning edge comes from sourcing - how best it can leverage its scale to drive merchandise costs down, increase stock turns and get better credit terms from its vendors. There are obvious and hidden areas where costs can pruned and the benefits of this lower cost of retailing can be passed on to customers as lower prices, which in turn should fuel demand. One way of trimming costs is if the pressure points in the long, often unnecessary, supply chain for produce and staples can be identified and suitably dealt with. This chapter takes a look at some of these issues.

Challenges before organized retailing Retailing as an industry in India has still a long way to go. To become a truly flourishing industry, retailing needs to cross the following hurdles: Automatic approval is not allowed for foreign investment in retail.  Regulations restricting real estate purchases, and cumbersome local laws.  Taxation, which favours small retail businesses.  Absence of developed supply chain and integrated IT management.  Lack of trained work force.  Low skill level for retailing management.

 Intrinsic complexity of retailing – rapid price changes, constant threat of product  Obsolescence and low margins 48

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The retailers in India have to learn both the art and science of retailing by closely following how retailers in other parts of the world are organizing, managing, and coping up with new challenges in an ever-changing marketplace. Indian retailers must use innovative retail formats to enhance shopping experience, and try to understand the regional variations in consumer attitudes to retailing. Retail marketing efforts have to improve in the country –  advertising, promotions, and campaigns to attract customers;  building loyalty by identifying regular shoppers and offering benefits to them;  efficiently managing high-value customers;  and monitoring customer needs constantly, are some of the aspects which Indian retailers need to focus upon on a more pro-active basis. Despite the presence of the basic ingredients required for growth of the retail industry in India, it still faces substantial hurdles that will retard and inhibit its growth in the future. One of the key impediments is the lack of FDI status. This has largely limited capital investments in supply chain infrastructure, which is a key for development and growth of food retailing and has also constrained access to world-class retail practices. Multiplicity and complexity of taxes, lack of proper infrastructure and relatively high cost of real estate are the other impediments to the growth of retailing. While the industry and the government are trying to remove many of these hurdles, some of the roadblocks will remain and will continue to affect the smooth growth of this industry. Fitch believes that while the market share of organised retail will grow and become significant in the next decade, this growth would, however, not be at the same rapid pace as in other emerging markets. Organised retailing in India is gaining wider acceptance. The development of the organised retail sector, during the last decade, has begun to change the face of retailing, especially, in the major metros of the country. Experiences in the developed and developing countries prove that performance of organised retail is strongly linked to the performance of the economy as a whole. This is mainly on account of the reach and 49

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penetration of this business and its scientific approach in dealing with customers and their needs. In spite of the positive prospects of this industry, Indian retailing faces some major hurdles, which have stymied its growth. Early signs of organized retail were visible even in the 1970s when Nilgiris (food), Viveks (consumer durables) and Nallis (sarees) started their operations. However, as a result of the roadblocks, the industry remained in a rudimentary stage. While these retailers gave the necessary ambience to customers, little effort was made to introduce world-class customer care practices and improve operating efficiencies. Moreover, most of these modern developments were restricted to south India, which is still regarded as a ‘Mecca of Indian Retail’. Government restrictions on FDI Organised retailing in India is yet to get an industry status. The consequence is quite obvious. 100% Foreign Direct Investment (FDI) is not permitted in retailing in India. Ownership of retail chains is allowed only to the extent of 49%. The Food World chain is one such venture, with an ownership pattern of 51:49 between RPG and Dairy Farm International, Hong Kong. Foreign players can enter the wholesale sector, in the cash and carry format. The Metro chain has recently entered the country as a ‘cash and carry’ outlet. A branch has been opened in Bangalore and a second would be opened very soon in the same city. The fear that the small-scale retailers will be displaced is delaying the FDI approvals. On the other hand, without the FDI, the sector is deprived of access to foreign technologies that is imperative for faster growth. The Government has allowed FDI in direct marketing, but has reservations about extending it to the retail sector. Retailing is a ‘technology intensive’ industry. Under the liberalized regime of the WTO the ‘Protected nature’ of an industry may do more harm than good. In the short-run the Government may succeed in protecting the domestic industry, but in the long run we would be loosing too many opportunities and technological innovations. This in addition would also block any attempt by the domestic industry to become competitive internationally. 50

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Lack of a uniform tax The country requires a uniform tax system for the organized retailing. The lack of this stands as an obstruction to the setting up of a truly national chain. The present chains, in spite of claiming to be national chains are restricted to certain regions of the country. Players are confined to state barriers. Since retailing is essentially a business of supplying commodities to locations far from production units, a differential tax system in different states is surely turning to be a hindrance to faster development of this Industry. A central tax system becomes more imperative in a country like India where, the regional disparity in production of commodities is high. Lack of adequate infrastructure Players are forced to set up their own infrastructure, as there are few independent logistics solution providers. Entrepreneurs to invest in infrastructure development for different stages of the supply chain are also limited. Dominance of the unorganized sector The unorganized sector has dominance over the organized sector in India, especially because of the low investment needs. In India, organized retailing is only 2% of total retailing of worth US$ 180 billion. This is playing at multiple levels. For instance, the reason for low number of discount stores in India is an effect of the dominance of the unorganised sector. The manufacturers’ have high bargaining power in the pricing of products as a result of this small scale of operation of retailers. The lobbying by the unorganised sector is also the main reason for the Government of India’s restrictions on 100% FDI in retailing in the country.

Low operational size

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The number of retail outlets in India is more than the number of outlets in most of the other countries, small size retail outlets dominate the Indian scene. 96% of the outlets are lesser than 500 sq ft. The retail chains of India are also smaller than those in the developed countries. For instance, the superstore food chain, Food World is having only 52 outlets whereas ‘Carrefour- Promodes’ has 8800 stores in 26 countries. The volume of sales in Indian retailing is very low, which is only $180 billion. Even the largest players have a turn over of only US $ 140 million, which is very small by the global standards. India with second largest population in the World and a fast growing economy has huge untapped potential of organized retailing, which is not given its due weightage by the government. Labour employment problems Organized retailing is a 24 X 7 active business. However, this is much restricted currently in India because of the labour rules and regulation. The sector is unable to employ retail staff on contract basis. This makes it difficult to efficiently manage employee schedules especially for 365-day operations. The industry has to take special clearance for extended working hours and even seven days working from the Labour department. However, in the recent budget government has relaxed norms on employment of contract labour, which is expected to benefit the industry. Government Initiatives for Improvement of the Sector Apart from allowing FDI into the industry, Government should consider providing incentives and amending labour laws etc. Shortage and high cost of real estate, tenancy legislation and high property tax etc. are the another areas to be concentrated by the Government. Government should relax such laws and make available property at reasonable prices. Government should introduce a Single Window System at the local Government level to clear the multiple number of licenses and complex regulations. Government should also introduce uniform taxation all over the country to relax the laws that are restricting the inter-state flow of goods. 52

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Future Perspective We should see fundamental shifts in the way Indians shop in the very near future. The Year 2008 could well be a landmark year for organised Indian retailing. According to a recent study done by ETIG the organized retail industry is expected to grow by 30 per cent in the next five years and is expected to touch Rs. 45,000 crore. Thus, the growth potential for the organised retailer is enormous. In the next 2-3 years, India will finally see operations of a number of very serious international players - notwithstanding the current restrictions on FDI in retail. Metro from Germany is a very successful and resourceful retailer and their cash & carry format should offer a good run for money to others. Some others will also find perfectly legitimate ways to operate in India, for example, Marks & Spencer, Mango and Shoprite.

Change Accelerators The following factors will be significant in driving growth in the retail sector:  Consumer factors  Increase in income  Working women  Changes in lifestyle – demand for “global” trends  Supply side factors  Growing importance of retailing in political and economic agenda  Real estate reforms to be undertaken in the next 24 months  Major restructuring of the manufacturing sector easing product supply constraints for efficient retailing  Reduction in import duties-offering more global sourcing options

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The single biggest opportunity in India in organised retailing is bound to be food and groceries; it is in this sector that the largest amount of consumer spends is concentrated. This sector has maximum opportunity for investments and entrepreneurs to come in and try to make the supply chain a little more efficient. Consumer durables is another promising sector because, with increasing purchasing power, consumers tend to spend the most on this category. Also, there is nothing to prevent a company from putting up shops outside the city limits, because consumer durables are a premeditated purchase. Furthermore, availability of finance options has increased spending in this sector. Third are home products - with increasing private ownership of homes by relatively young couples, across most major cities in India, national retail chains offering home furniture (and accessories) have great potential. Finally, personal care products, pharmaceutical products, and healthcare services have tremendous growth potential. Recently, we have seen some interest from organised healthcare players like Max, Fortis, Birlas and the Reliance group.

Where is this growth going to happen The top 15 cities in India cater to 33 per cent of total urban population, but as high as 38 per cent of Sec A and B (the top two socio-economic consumer strata) urban population. The next 15 cities only add to another 7 per cent of Sec A and B population. So logically the focus will be restricted only to the top 15 cities. Research conducted by KSA Technopak, shows that today 96 per cent of total organised retail is in the top 10 cities, of which the top six cater to 82 per cent. However, the rate of growth will be higher in the

bottom four of the top 10, which will have a 20 per cent share by 2005 against the present share of 15 per cent. 54

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Which formats will grow The research suggests the top four formats to emerge in the next five years are: Shopping Malls  Specialty Stores (in new categories such as office products, specialty food, optical and travel)  Departmental Stores  Supermarkets

Malls in India Over the last 2-3 years, the Indian consumer market has seen a significant growth in the number of modern-day shopping centers, popularly known as ‘malls’. There is an increased demand for quality retail space from a varied segment of large-format retailers and brands, which include food and apparel chains, consumer durables and multiplex operators. Shopping-centre development has attracted real-estate developers and corporate houses across cities in India. As a result, from just 3 malls in 2000, India is all set to have over 220 malls by 2005. Today, the expected demand for quality retail space in 2008 is estimated to be around 40 million square feet. While previously it was the large, organised retailers – with their modern, up-market outlets, and direct consumer interface- who had been a key factor driving the growth of organised retail in the country, now it is the malls which are playing the role. Factors such as availability of physical space, population densities, city planning and socio-economic parameters have driven the Indian market to evolve, to a certain extent, its own definition of a ‘mall’. For example, while a mall in USA is

400,000 to 1 million sq.ft. in size, an Indian version can be anywhere between 80,000 sq.ft. and 500,000 sq.ft. 55

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By 2008, total mall space in the 6 cities of Mumbai, Bangalore, Hyderabad, Chennai, Kolkata, and National Capital Region (Delhi, Noida, Gurgaon) is expected to increase to over 21.1 million sq. ft. Compared to other big cities, Kolkata and Hyderabad are relatively new entrants in the mall segment, but are witnessing quick growth. Smaller cities like Pune, Ahmedabad, Lucknow, Ludhiana, Jaipur, Chandigarh and Indore are also expected to see a formidable growth in the growth of malls in the near future. But malls in India need to have a clear positioning through the development of differential product assortment and differential pricing, in order to compete effectively in a growing mall market. Segmentation in malls, like up-market malls, mid-market malls, etc., proper planning, correct identification of needs, quality products at lower prices, the right store mix, and the right timing, would ensure the success of the ‘mall revolution’ in India.

Progressive retail properties in India India has seen a surge of shopping malls in the recent past. Along with the development of shopping malls, a significant number of multiplexes are being developed as an integral part of these malls. These provide amenities such as food courts and video game parlours adding value to customer's shopping experience. PVR, INOX, Satyam Cineplexes and Shringar Films are driving the multiplex business expansion across the nation, while Appu Ghar, the Delhi-based amusement park, has plans of expanding their operations. Retail sales in India amounted to about Rs 7,400 billion in 2002. With the upturn in economic growth during 2003, retail sales are also expected to expand at a higher pace of nearly 10 per cent. Across the country, retail sales in real terms are predicted to rise more rapidly than consumer expenditure during 2003-2008. The forecast growth in the overall real retail sales during 2003- 2008 is 8.3 per cent per year, compared with 7.1 per cent for consumer expenditure. Sales from these large-format stores are to expand at growth rates ranging from 24 per cent to 49 per cent per year during 2003-2008, according to a latest report by Euromonitor International, a leading provider of global consumer market intelligence. 56

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Investment in retail real estate continues to yield the highest returns when compared to the residential and office segment. For instance, HDFC, the investor in Shoppers' Stop, Pune, has achieved a net return of 15.43 per cent per annum on its initial investment. Similarly, the space leased by Adidas in Ansal Plaza, Delhi has yielded a net return of 15.8 per cent per annum to the investor, according to Knight Frank India Retail Review 2003-2004. Population growth combined with an increase in disposable incomes has given a boost to the retail industry. The brand-conscious urban population forms the largest segment of demand for the majority of retailers. This segment has grown 3.22 per cent per annum over the past decade, compared to the overall population growth of 2.13 per cent per annum. Further, over the past decade, consumer spending has increased at an average of 11.5 per cent per annum. In addition to the growth in population and consumer spending, spending habits are also changing. This has not gone unnoticed by retailers. An increasing number of retailers are focusing on malls.

Realistic scenario in mall development:-a fact-finding Over a year ago, Landmark Construction Company began work on a mall called The Hub in Goregaon, a suburb in western Mumbai. Today, construction is almost over. Go to the site and you will see labourers swarming all over. Work is progressing steadily; an impersonal grey structure that has not a fleck of paint on it and surrounded by scaffoldings looms large over the road, even as the interiors begin to take shape. The labourers are all set to put the final touches on the first phase of the 2.85 lakh square ft complex as they race to finish the mall by January 2004. What's more, in the Kishore Biyani-promoted Food Bazaar, Kumar has managed to get a good anchor tenant. Essentially, anchors are the corner stone of a mall's success: they pull in the crowds. A good anchor could be a department store, a multiplex, a hypermarket – anything that can attract crowds, day after day. Most tenants would enter a mall only if they are convinced of the anchor's capability of pulling in the crowd. No wonder malls 57

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give the anchor tenants discounts on the rents. The Pantaloon group's food and grocery retailing business, along with Movietime, a multiplex, has picked up close to 40% of all the retail space in the first phase of The Hub. And yet, somehow one is not upbeat. Part of this can be attributed to the fact that four other malls are coming up within 2 km of The Hub. More importantly, he is realising that this business might be nowhere as profitable as he initially thought. Take the deal with Food Bazaar, which is anchoring the first phase of his mall (pegged at 1.25 lakh sq. ft). Kumar says: "I have a rental agreement with Food Bazaar, where they will pay a monthly rental of Rs 40 per sq. ft." When prodded on the significance of those numbers, he reluctantly admits: "I can't even recover my construction cost with that kind of rent." That is somewhat ironical. Setting up, running and managing a mall is supposed to be a nicely profitable undertaking. If you set up a mid-sized mall of, say, 2.5 lakh sq. ft from scratch somewhere in suburban Mumbai, you might have to invest as much as Rs 100 crore given land and construction costs. But if you get a monthly rental of Rs 80 per sq. ft, which is par for the course, you can break even within 5-6 years even without a 100% occupancy. That's an annualised 18-20% return on investment (RoI). Now, consider Kumar once again. On the 20% mall space he has leased to Food Bazaar, he will make barely Rs 1.2 crore per year, when it could easily have been double. To compound his problems, while his mall will be ready in another two months, so far he has found takers for less than half of the total space - and for a far lower rate than he wanted. Negotiations are still underway for the rest of the space. Things are coming uncomfortably close to the wire This is the other face of the mall boom in this country. To see the better-known face, zoom into Mumbai, down the Western Expressway highway stretch from Bandra to Goregaon, or along the link road past Andheri, or along the Eastern Expressway highway towards Thane and beyond. You will see countless hoardings tom-toming new malls under construction. Or take the National Capital Region. Drive down the MehrauliGurgaon road. There are as many as eight malls on this stretch of road, with six more to 58

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be added. In Noida, you will see more hoardings, evidence of a boom in mall construction. Indeed, India stands on the cusp of a mall boom - about 300 malls will spring up all over the country over the next 2-3 years. Between them, they will cover more than 25 million sq. ft of retail space. Mumbai and Delhi alone will have over 20 malls each in the next two years. Is this explosion justified. It is certain that there is a need for the malls.: Consider just 1% of the entire Indian population. Adding a reasonable assumption of 20 sq. ft of retail space per person, there is an immediate requirement for over 200 million sq. ft of space for customers. Nevertheless, the mushrooming of the malls has made him a little cautious. So if there is a requirement for malls, why are people upset. The problem lies elsewhere - in supply outstripping demand. There are simply too many malls chasing too few tenants. Contrast this with the scenario three years ago, when retailers were making a beeline for Crossroads in Mumbai and Ansal Plaza in Delhi. That is not to say that the retail industry is not growing. It definitely is. Only that the retailers seem to have different considerations when it comes to setting up outlets. Consider the Mehrauli-Gurgaon highway. Why would any retailer enter a mall here in the face of competition . A mall developer from Gurgaon said they players to enter his mall, one of eight in a stretch. One really fails to understand, with that kind of competition, how they could add any value to the mall. Yet mall developers probably think the more of their kind the merrier: Fun Republic opened opposite Fame (the Shringar-owned mutliplex) in Andheri, the weekly profit after tax (PAT) came down to Rs 17 lakh from Rs 19 lakh in the first week. But Fun Republic's PAT for the first week was Rs 11 lakh. What interested me the most was not then decline in profits, but the overall increase in entertainment spending of Rs 9 lakh in the same week, on the same patch of road. So traffic on the whole may rise in Mallville.

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But will you, as a retail brand, set up multiple outlets in the same area. Probably not. So how has the playing field changed then? Here are a few interesting outcomes that have emerged: Mall developers are now playing it safe. They are ensuring they have a basic minimum number of tenants before they start work on developing the malls. Does this mean the mall developers have understood the downside risks they face. Mall developers have wisened up. Most of them start construction only after they are sure that they have got tenants to occupy 35-40% of the mall. This would ensure at least a cash break-even before the project gets off the ground. In orbit in Malad, Mumbai, and Unitech in Noida, scheduled to open soon, secured tenants for one-third of the space before getting the projects off the ground. However, on the condition of anonymity, a mall developer admitted he had to complete construction even before he could convince tenants to move into the mall, because the clients wanted to see the physical representation of the mall. This becomes an unviable proposition if tenants do back out eventually. Malls give anchor tenants space at a rate lower than for the rest of the mall. Now there are but a handful of players large enough to anchor a mall. The department stores include Shoppers' Stop, Pantaloon, Westside, Ebony and LifeStyle. There are just two hypermarkets, Big Bazaar and Giant, while multiplex players include Fame, Inox, Adlabs and PVR. Moreover, a multiplex and a hypermarket don't even make for an ideal anchor tenant: The limited basket of large-scale organised retailers makes it very difficult for malls to get the kind of anchor tenants they want. A mall developer has to approach every available retailer to get him to anchor his mall. Even today, the country has no big retail chain in the white goods or the pharmaceutical segment. The balance of power has shifted in favour of the retailers. Faced with a severe anchor crunch, mall developers have to bend over backwards to facilitate anchors, some of

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whom have reduced rentals by as much as 60% of the original lease rentals. It would take some time before parity is restored between these two.: The advent of FDI (foreign direct investment) in retail will definitely shake the local retailers out of their smugness. It is a pity we don't have the Selfridges of the world as yet in India; they would provide for a larger retail basket. Developers are themselves driving away other tenants. This is because of the high maintenance prices they charge from these secondary tenants. Since getting an anchor at a reasonable rental (for a mall developer) is going to be difficult, a mall will try and hedge its bets with the other tenants by factoring in an additional component to the rentals called the common area maintenance (CAM) charge. This is essentially the cost of infrastructural facilities - air-conditioning, energy, etc. - that a mall provides the tenant. Malls charge as much as Rs 20 per sq. ft every month as CAM and drive up the rentals, a Scenario that many tenants find, well untenable. Suffice to say, malls will lose tenants if they overcharge. How then can they change the rental scenario. Rentals should be a direct function of footfalls after the mall is set up. So if the footfalls increase, only then should a mall developer hike rentals for a new tenant. Learning to float. This scene today is reminiscent of California during the Gold Rush: lots of prospectors rushing in and staking out land, hoping to strike it big. Most fell by the wayside. That will be the case here too, unless... The thorniest issue still remains the rentals. As rental expectations of the mall developer and the tenant are unlikely to match, the best way out would then be to enter into a revenue-sharing agreement. A tenant would give the mall owner a percentage of his revenues, with or without a minimum guarantee. (Few anchors pay the mall owners in advance for construction, the way it happens elsewhere in real estate development.) The agreement would vary for different tenants depending on the real-estate cost of the tenant - it would be low for an apparel store, whose inventory expenses will be higher, and high

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for a gaming and entertainment hub, which doesn't really require any additional expense after the machines have been set up. This is the simplest way for a retailer to minimise his risk. Even if retailers have poor sales, a large part of their turnover is not lost to rentals. There are signs that such agreements are becoming common.: We have facilitated a revenue-sharing agreement ;whereby the mall receives 3.5-4% of the monthly turnovers. Shoppers' Stop has also entered into an agreement with Inorbit, where Shoppers' will pay either monthly rentals of Rs 30-40 per sq. ft, or 6-7% of the turnover, whichever is higher. Barista has an agreement with Inox, as does McDonalds. Such agreements have other benefits. They could reduce tenant turnover significantly and ensure that the mall remains well occupied. They could also prompt the mall developer to look for ways by which footfalls can be increased, as that would be to his advantage. That last benefit has prompted many mall developers to rope in consultants to study catchments, psychographics and spending habits of consumers. The idea is to map out the brands they want in their mall. Only after an exhaustive study of consumer patterns did we decide what brands we wanted in the mall. This is important as most malls cater to SEC A of the population; the number of brands this class of people buys are still limited. Inorbit has also conducted studies to tap synergies that exist between tenants. So, it decided to plug its anchor multiplex (Fame) along with food options McDonalds and Pizza Hut, and an entertainment hub, Timezone. So, anyone who visits the mall is offered a complete entertainment option. One really can't expect a behavioural sea change from the average Indian consumer. One don't expect him to buy jewellery or books when he comes to watch a movie, but we would like to bundle the entertainment and food options together, because that seems like a good synergistic combination. Other malls are trying to sort out basic infrastructure issues. Even today, many do not have sound infrastructure facilities. Crossroads, for instance, doesn't have a service entrance for its retailers. At a mall in Gurgaon, an employee of a food court was spotted cutting his veggies right outside the mall entrance before operating hours, simply because there was no place within the mall to do so! But now, Inorbit has a separate freight

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elevator and a loading and unloading dock so that the regular mall activity is not disturbed. Prestige Forum in Bangalore got Shoppers' Stop to anchor the mall after it ensured a 2-tonne basement and service capacity. GVK One in Hyderabad has a car park for 800 cars, while Inorbit has one for 1,200 cars. Malls developers have also been roping in the best designers and architects, both locally and from abroad to ensure that looks aren't compromised on. Yet, this is not enough. Malls also need to be sensitive to retailers' needs. A multiplex owner cites the example of a mall turning off the lights at 9 p.m., before the last show began, giving the impression that the mall was shut. As a result, the box office slackened. It took some confrontation before the mall managers kept the lights on longer. The same mall also refused to help the multiplex with food and theatre licences. Mall developers have traditionally been real estate businessmen looking to diversify. Most have not really bothered with the daily operations of the mall once the tenants are in. But now, they are realising the need to actively do so even as they understand how low footfalls could lead to an exodus of tenants. For that, they need to put a premium on quick, efficient and satisfactory service, both to consumers and to the retailers. Inorbit and Prestige Forum are already moving in that direction. They have installed footfall counters to map the entire mall and study exactly where customers head to and how much time they spend in different areas of the mall. With this kind of competition, sustenance for malls will only happen if they continue to draw in the crowds. And that task is not easy. But if one attracts the numbers, he will thrive in the compounded growth that the industry expects to see over the next 10 years.

Retail as an Employment Generator The retail sector can generate huge employment opportunities, and can lead to jobled economic growth. In most major economies, ‘services’ form the largest sector for creating employment. US alone have over 12% of its employable workforce engaged in the retail sector.

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The retail sector in India employs nearly 21 million people, accounting for roughly 6.7% of the total employment. However, employment in organised retailing is still very low, because of the small share of organised retail business in the total Indian retail trade. The share of organised retailing in India, at around 2%, is abysmally low, compared to 80% in the USA, 40% in Thailand, or 20% in China, thus leaving the huge market potential largely untapped. A modern retail/retail services sector has the potential of creating over 2 million new (direct) jobs within the next 6 years in the country (assuming only 8-10% share of organised retailing). Retail can create as many new jobs as the BPO/ITeS sector in India. A strong retail front-end can also provide the necessary fillip to agriculture & food processing, handicrafts, and small & medium manufacturing enterprises, creating millions of new jobs indirectly. Through its strong linkages with sectors like tourism and hospitality, retail has the potential of creating jobs in these sectors also. Though the Planning Commission has identified retail as a prospective employment generator, in order to strengthen the multiplier effect of the growth in organised retailing upon the overall employment situation, a pro-active governmental support mechanism needs to evolve for nurturing the sector. Issues like FDI in retail, allocation of government-controlled land on more favorable terms, strong political and bureaucratic leadership, etc., need to be addressed adequately.

Retail Sector in the East: Current Scenario & Growth Prospects The retail sector in Eastern India is largely Kolkata-centric. The city of Kolkata has come a long way in terms of retail maturity with a proliferation of brands and organised retail chains. Shopping trends in the city have witnessed a radical shift over the recent years; from the conventional trader run stand-alone shops to more organized & large retail formats. Evidently, the future of retailing in the city lies in new-age shopping malls, which provide variety, value and convenience in a more comfortable environment. This is also

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evident by a surge in the consumer spending on branded goods in the recent times; for example the city's Music World outlet has recorded the highest earnings per square feet amongst all its outlets in the country. The city has also welcomed the other retail chains such as Pantaloons, Westside and Shopper’s Stop.Though Kolkata has been a bit late in catching up with the retail revolution in the country, the city has great potential to become a retail hub in the near future. Going by the 1991 census, the city qualifies as the second largest metro market in India; nearly one out of every six shops located in the country’s top 25 cities, can be traced to Kolkata. To a market strategist, Kolkata undoubtedly is an ideal location for the growth of the retail industry. Besides being the principal retail-and-services market to a vast hinterland comprising of the eastern and northeastern states of the country, the city also serves as a center of trade and commerce for the region. Its proximity to Bangladesh, a country of 13 crore consumers, and to the South-East Asian markets, is another factor for which the city is fast emerging as a vibrant business center. The Kolkata Port and the Haldia Port are also instrumental in acting as gateways to landlocked countries like Nepal and Bhutan. The disposable incomes of Kolkatans have also been on the rise – according to a report by the National Council of Applied Economic Research (NCAER), about 62% of the households in Kolkata had annual incomes of up to Rs.18, 000 in 1985-86; while just a decade later, the figure had touched Rs.25,000-77,000 for some 61% of the households. The city truly represents an amalgamation of the advantages of a metro city, and the comparatively modest living costs of a non-metro town. Lately, Kolkata has emerged as a strong prospective destination in the expansion plans of retailers and is now perceived as a latent but highly potential market. Prominent retail chains like Music World, Westside, Dominos, Pizza Hut, Shopper’s Stop, WillsSport, Barista, and Pantaloons have already established their presence in the market. Apart from these new-age, large retail chains which have started operating successfully in the city, there are a large number of traditional, specialized markets like the: -

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 Bowbazar market,  Bagri market,  China bazaar,  Lake market,  Burrabazar market,  Chandni market, etc.,  and high-street markets at Park Street,  Esplanade area,  Camac Street,  Shakespeare Sarani,  Gariahat, which offer a wide variety of items like stationary items, dairy products, electronic goods and appliances, glassware, crockery, wooden furniture, jewellery, musical instruments, fruits, flowers, vegetables, fish, flesh meat, textiles, spices, dry fruits, sugar, salt, groceries, paints, hardware items, etc. Besides these markets, there are small-format, nonbranded shopping complexes/malls like the A/C Market, Vardaan Market, New Market, and the Shreeram Arcade, which offer a wide variety of items, from garments, watches, and footwear, to consumer durables like household electronic gadgets. The local retail chains which have become household names in Bengal include:  Arambagh Hatcheries Ltd.  Khadim’s, and  Sree Leathers. Operational since 1998, Arambagh Hatcheries Ltd. is today one of the foremost companies in the marketing of poultry products. Encouraged by the success of its “chicken” brand, and the realization that there was a void in the Kolkata market for quality food stuff sold under a single roof, the company took the initiative in starting “convenience stores” named “ Arambagh’s Food Mart” in 2000. An aggressive expansion strategy has seen the company’s physical strength grow to 14 outlets in Kolkata, with

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another 5-6 outlets being in the pipeline. Each of these stores are between 500 & 800 sq. ft. in dimension, and packed with at least 4000-4500 food and other FMCG items.  Good quality,  the right quantity,  use of correct weights,  and a low MRP are the main factors which have contributed to an impressive growth of this chain. Arambagh has tie ups with Nicco Park, Kwality Walls, Kellogs India and Frito Lays, among others. These tie-ups help the chain in product and services promotion. Both Khadim’s and Sree Leathers are local footwear companies which have been tremendously successful, and have now reached out to international markets. Khadim’s has exclusive showrooms not only in West Bengal, but also in states like Bihar, Jharkhand, Tripura, Orissa, Madhya Pradesh, Andhra Pradesh, Karnataka, Gujarat, and Tamil Nadu. The company offers products like Premium shoes, Gents’ shoes, Ladies’ shoes, Kids’ shoes, and Leather Accessories. Khadim’s has become the destination for people from all walks of life, with a great range of footwear to choose from. The motto of the company is to provide good quality fashionable shoes at affordable prices. Sree Leathers entered the Kolkata market in 1987 with its first outlet in the city at Lindsay Street, which became hugely successful. The company’s second mega outlet at Free School Street, which has a floor area of more than 7500 sq. ft., provides a great shopping experience to its customers. Today the company has a number of outlets scattered over West Bengal, Orissa and Bihar, and has ventured into the international markets of the Middle East, Singapore, Maldives, USA, Denmark, Greece, Germany, Netharlands and Austria. Sree Leathers has started a new R&D section under the guidance of Italian and German experts, to enhance the comfort level of it’s products, and has plans of setting up a modern footwear factory at Kasba Industrial area in Kolkata. The two prominent fun-entertainment/amusement parks in Kolkata, which have gained immense popularity among the masses, particularly children, are Nicco Park, and

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Aquatica. Situated in Salt Lake, and spread over an area of 40 acres, Nicco Park, promoted by the Nicco Group, can be termed as the ‘Disneyland of West Bengal’, with a variety of unusual and exciting games and rides like the Toy Train, Cable Car, Tilt-aWhirl, Water Chute, Water Coaster, Flying Saucer, Pirate Ship, and Moonraker. The Cave Ride is the latest addition, and is perhaps the only of it’s kind in this part of the world. Aquatica, an 8-acre water park, is situated at Rajarhat in Kolkata, which came up in 2000. This Theme Park offers visitors a cool respite from the heat and grime of city life. The park, which can accommodate around 5000 people, has an artificial river meandering through it. Visitors can swim and wade in the river water, which is recycled every hour for maintaining the cleanliness. Aquatica has breathtaking rides such as the Black Hole, Tornado and Wave Pool. The Aqua Dance Floor, where visitors can sway to non-stop music, has waterspraying nozzles on the roof which fill the surrounding air with water. Aquatica also hosts big events and programmes like fashion shows which are great crowd-pullers. The medium and large-format, branded and non-branded shopping complexes/malls, which have come up in Kolkata, and are operating successfully, are: Forum: It is a two lakh square feet mall, situated on Elgin Road, in South Kolkata with Shopper’s Stop as anchor. This shopping mall established by Sunsam properties within the Saraf Group was opened to the public in March 2003, with the launch of Shopper’s Stop. Along with the retail brands having their outlets, the Forum also houses, a 300 capacity food court and a 4-auditorium multiplex called INOX. The multiplex, INOX has been the first of its kind in the city, having a sitting capacity for over 1000 viewers, and situated over 30000 square feet. Hence it can be really a great experience of shopping and movie going for the Kolkatans, who do not want to compromise on the quality aspect. The retail outlets at Forum have witnessed almost 30-35 % increase in sales after the opening up of the multiplex in 2003. Most retailers are extremely happy with the growth rate and expect their sales to increase further in the coming months .At INOX, ticket sales have been averaging at almost 90% of the theatre capacity – the highest box office sales

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amongst all the multiplexes in the country. Forum has truly changed the experience of Kolkatans with regard to shopping and entertainment in the city. 22 Camac Street: This large format-shopping complex is located on Camac Street .The retail brands like Pantaloons, Westside , Pizza Hut , Planet M, Grain of Salt and Add Life , have already set up their outlets in the complex. It has 4 distinct blocks with a common atrium. The most advantageous aspect here is its huge parking space in the basement. It also houses smaller multi-branded outlets. The footfalls stay steady throughout the week and gets to an uncontrollable high over the weekend. Some of the outlets rank among the leading individual retail outlets of the country. The total floor area of the complex is 380,000 square feet, and has 4 restaurants and 3 banquet halls. . Metro Plaza: Situated on Ho Chi Minh Sarani, this is basically a large-scale retail cum office development area. The lower three floors with an area of 50,000-60,000 square feet is meant for retail business. Along with the retail units there is also a space for Bowling which is frequented by younger people. Emami No. 1: This mall is located on Lord Sinha Road. Its close proximity to the Chowringhee-Park Street belt helps it to cater to a large section of quality conscious consumers. The usual facilities of power backup, vertical transportation and parking are available over here. The biggest disadvantage that it faces is its car parking area, which has a meagre capacity of just 70 cars at a time. The biggest attraction here is its“Landmark bookstore“ on the third floor, which has a wide range of books, music and stationary items. City Centre: The recently inaugurated ‘City Centre’ project adds another feather to the already vibrant retail business in the city. The project, promoted by industrialist Harshvardhan Neotia, and located at Salt Lake, has been designed by one of India’s bestknown architects, Charles Correa. ‘City Centre’ is a dynamic mix of shopping mall, Cineplex (INOX), entertainment area, food court, offices, and residences- nestling amidst open spaces, lush greens, and the contours of an ideal cityscape. Big brands like

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Shopper’s Stop and Adidas have set up their shops in the complex. There are several aspects to ‘City Centre’; with no boundaries to separate it from the street, it is open to everyone- all income and age groups. The Complex has a parking space for as many as 800 cars, 14 entry and exit points, and large spaces to amble around. The ‘City Centre’, which is the single-largest architectural endeavor in Kolkata in recent times, has truly changed the way the city looks, and complements the city’s artistic heritage. The location of the project makes Salt Lake the epicenter of not just its immediate population half a but also of the upcoming, adjoining township of Rajarhat . Enclave: Spread over 36,000 sq. ft., the Enclave, has come up at up-market Alipore, and has five shopping levels, and an open-to-sky atrium. The complex, promoted by the Calcutta Metropolitan Group, has fine restaurants including Food Bar, Red Bar, Cookee Bar, coffee shops, a childrens’ entertainment zone named ‘Kool Kids’, among other facilities. Another prominent supermarket, which offers a wide range of products, and provides customers with a great shopping experience, is C3- the Market Place. The shop commands over 6100 sq.ft. in the heart of Kolkata, at Lee Residency, 26, Lee Road. The approximately 25,000-strong product menu includes a wide range of products like fresh fruits and vegetables, rare herbs, groceries, ready-to-eat food, personal-care items, confectionaries, chocolates, home-care products, newspapers, magazines, and so on. Though the retail business mainly revolves around Kolkata, towns like Durgapur, Siliguri and Haldia also have the potential of becoming busy retail addresses. Already, the Durgapur City Centre project, promoted by Bengal Shristi Infrastructure Development Ltd., has come up in Durgapur, in Burdwan district. The project, which was inaugurated on the 10th of August, 2003, is a modern, multi-facility, multi-utility, urban plaza, spread over a sprawling 370,000 sq.ft. It is a confluence of shopping, commerce, entertainment, education, recreation, health, hospitality, medical amenities, and premium residential accommodation. Lush green open spaces, an integrated entertainment multiplex, and various other urban amenities, provide a fascinating experience. Durgapur is well connected by both rail and road, and the project location is easily accessible from the bordering towns of Asansol, Ranigunj, Santiniketan, and Burnpur.

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A number of prominent projects in the retail sector are coming up in Kolkata. Some of these are:South City: The upcoming, 31-acre South City projects promises of a lifestyle of international standards. The project will have four 35-storey residential towers, a sprawling club, a shopping mall with entertainment zones, and a multiplex. Modern technology will ensure earthquake resistance, high-speed elevators, adequate fire fighting and protection systems, internal security and traffic management, and all conceivable civic comforts. The in-complex South City Academy, spread over 3.5 acres, will be equipped with a learning resource center, gym, cafeteria, an auditorium for extracurricular activities like debates, dramatics, and sports, and a soccer field. The South City Club will have an air-conditioned sports center, guest rooms, banquet facilities, swimming pools, a dining restaurant, a pub lounge, a business center, and a health club, among other things. The mega complex will also have India’s largest shopping mall- the Junction, spread across an area of 700,000 sq.ft., which will have large anchor Stores, a multiplex, a food court, a six-screen Cineplex, an entertainment zone, and parking space for nearly 800 cars. The team behind this big venture comprises a host of experienced architects and developers. Among them are: Dulal Mukherjee & Associates (the principal architects); Smallwood Reynolds Stewart Stewart & Associates Inc., the Atlanta-based international design consultants; Peridian Asia PTE Ltd., Singapore-based landscape architects;Meinhardt (Singapore) PTE Ltd., structural consultants; and MN Consultant, structural engineers. Mani Square: Mani Square, a proposed project on a 4-acre plot next to Apollo Gleneagles Hospital on E.M.Bypass, will have a 500,000 sq ft. space, which will include a technology park, a 6-screen multiplex, a food court, business club, a multilevel 1000car parking area , a 40,000 sq ft. hypermart ( “Giant” ), as well as other direct retail stores .Designed and engineered by SAA Architects of Singapore and Meinhardt of Australia , and promoted by the Mani Group, Mani Square will be the single stop solution to all requirements of modern-day professionals and customers . The project will have readyto-use centrally air-conditioned offices with 100% power back-up, leaselines and round-

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the-clock support services, which will be extremely attractive for IT and ITeS companies .Retail giants like Lifestyle , Westside , Shoppers’ Stop and Cineplex majors like Shringar and PVR have already shown interest to set up units in the complex . Fort Knox: Fort Knox, a mega jewellery mall, owned and promoted by the Fort Group, is scheduled for a September, 2004 inauguration. The project, a 9-storied complex, on an area of approximately 80,000 sq.ft., will have an estimated 37 showrooms, 40 offices, backed by 4 lifts, 8 escalators. The Fort Group is confident about eliciting a positive consumer response, and providing the customer with a comfortable, secure, and refreshing shopping experience, by creating access to the best products, from the best jewellers, at the best prices. The project, which is coming up at Camac Street, will have a formidable line-up of security measures including alarm system with instant links to the police headquarters and fire services, 24-hour armed security guards, etc. Gariahat Mall: Gariahat Mall, which is coming up at an area between the Gariahat crossing, and the Rashbehari- EM Bypass Connector, will approximately be of 80,000 sq.ft, and will be accessible from every point in the southern belt of the city. The 5-floor structure will boast of world-class facilities and ambience, an expansive atrium, high ceilings, capsule lifts, and multi-level access up to the top floor. The scientific fusion of lofty ceilings, flat slabs, and a central atrium illuminated by natural light, is intended to evoke a sense of space, height, and depth. While an entire block has been earmarked for the anchor shop, the 3rd and the 4th floors are entirely reserved for jewellery outlets, and the 5th floor will house restaurants and eating places. Toplight Commercials Ltd. (TCL), one of the prominent real-estate developers in Kolkata, and the promoter of the mall, expects to complete the project by December, 2004. Metropolis: The 1,41,000 sq.ft. ‘Metropolis’ will be one of Kolkata’s newest retail-cum entertainment addresses. The complex will have a 4-screen, 1000-seater Cineplex, a 6outlet food court, a sports bar, a restaurant, and a 350-capacity car park. Being developed by the Calcutta Metropolitan Group (CMG), the ‘Metropolis’ is designed by the reputed architectural firm, Peddle Thorp International of Hong Kong, and will come up at an area

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adjacent to CMG’s prestigious existing residential complex, ‘Hiland Park’, which has about 900 apartments and 35 penthouses. ‘Metropolis’ will have the Hyatt Regency, ITC Sonar Bangla, Peerless Hospital, and Udayan Condoville among its distinguished neighbours. Pam Shopping Centre: The marvellous Pam Shopping Centre, promoted jointly by Pam Developers, and the Kolkata Municipal Corporation, is scheduled for an endAugust (2004) inauguration. This 60,000 sq. ft. eye-catcher at Rashbehari Avenue, will boast of a unique reflective glass curtain, and an artistically landscaped entrance ramp, besides having five levels of shopping. The Complex will have shops selling a wide range of products including garments, and jewellery. Homeland: Homeland, a 1,00,000 sq. ft. exclusive shopping mall, promoted by the Merlin Group, is coming up in the heart of Central Kolkata, close to Chowringhee and Elgin Road crossing. The five-storied, centrally air-conditioned shopping centers will have stylish spaces ranging from 300 sq. ft. to 2000 sq. ft., and spacious exhibition and product launch area. The mall will also have ATM centers at convenient points, internationally styled café and food stops, 24-hour power backup facility, and adequate car parking facilities. Silver Springs: ‘Silver Springs’, a prestigious joint venture project between Bengal Silver Springs Projects Ltd. and the Kolkata Municipal Corporation, is due for a December, 2005 completion. Shapoorji Pallonji has done the piling of ‘Silver Springs’ and renowned architect J.P.Agarwal has designed the project. The project will have around 500 residential flats, 10 high-rises of 18 and 14 stories, a magnificent shopping mall named ‘Silver Arcade’, of 70,000 sq.ft. area, and a ‘Spring Club’ of an area of 70,000 sq.ft. The vendors at the shopping mall include Mainland China and a Hyundai dealer- showroom. ‘Silver Arcade’ will be a G+3 mall, with the 3rd floor being taken up by Mainland China for 3 speciality restaurants; while the 2nd floor will have a Food Court with 17 multi-cuisine food counters. The mall will be backed by a large parking space for150 cars. ‘Silver Springs’ will boast of a modern, up-market residential

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complex, the shopping mall, ‘Silver Arcade’, a Montessori School, an AC Community Hall, among other new-age facilities. Bhubaneshwar is another city, which has the potential of becoming a retail hotspot in the East. The city is fast developing into a bustling center for economic activity, with software giants like Infosys and Satyam have already set up their offices. This is giving rise to a new breed of consumers with high disposable incomes; thereby creating lifestyle and aspiration levels at par with other fast-moving metropolitan cities. Bhubaneshwar represents two faces of retailing - one, a traditional store evolving with time, and another, a recently inaugurated mall from a group that is credited with having revolutionized the retail scenario in Kolkata. Satyam Shivam Sundaram: This 25-year-old multi-brand department store is famous for its offerings in textiles and ready-to-wear garments. The uniqueness of the store lies in its ability to inculcate the latest retail concepts in terms of selection and display of merchandise in-store ambience, and other attractive features. This 8,000 sq ft. store, which is being upgraded to a 16,000 sq ft. one, spends a good amount of money annually on brand-promotion exercises. At the store, half of the retail space is devoted to menswear, 25 % to womens’ wear, 15% to children’s wear, and the rest 10% to teenagers. About Rs. 25 lakh in systems, while the standing stock of merchandise is worth about Rs. 5 crore. Forum Mall: Bhubaneshwar’s Forum mall, launched on 29th of March, 2004, is expected to bring in a turning point in the city’s retailing and retail real-estate development. Located at Kharvel Nagar, Unit III, in the Central Business District, the mall is the brainchild of Rahul Saraf, the man who masterminded the success of Forum at Kolkata. The 4-level Forum mall has a total area of 170,000 sq.ft., with 115,000 sq.ft. Devoted to the retail and F&B. The ground, first, and second floors, is dedicated to pure retailing, while the food court and entertainment zones are located on the third floor. The top floor is reserved for IT and related business and trade. The prominent brands that have taken space in the mall include Big Bazar (anchor), Pizza Hut, Moustache, Dukes,

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Sree Leathers, Baskin Robins, Planet M, among others. The upcoming brands include Benetton, Blackberry’s, Chandrani Pearls, Bata, and Siyaram’s. The mall has received a great response; the average footfalls being 7000 per day, with expectations of an increase to 8000. Forum has not only become a shopping destination for the people of Bhubaneshwar, but also for people from surrounding areas like Cuttack and other towns in the state. The retail revolution is slowly making changes in lifestyle in smaller towns also. This is evident from the fact that even a small town like Bhagalpur in Bihar, today has it’s own shopping mall. The already operational shopping center, named “Sriyash Aap Ka Apna Bazar”, located at Jiwan Sagar Towers, D.N. Singh Road, has been promoted by the Kishorepuria Group of Companies. The 2 floor- Rs.1.10 crore project has about 11,000sq.ft. of total retail space, and offers a wide range of products like garments, appliances, furniture, cosmetics, electronic items, among others. The mall, which has a parking space for 10 cars, and 50 motorbikes, has received great response- the average footfalls being 900-950. There are plans to further improve infrastructural facilities in the complex; a well-equipped food court is coming up, with Hindustan Lever Ltd. (HLL) as one of the possible partners. The East is fast emerging as a formidable retail market. The spread of retailing beyond Kolkata would create an integrated ‘retail zone’ which would change the way people in this part of India work and live.

Significance of IT in organised Retail Retailing, India's largest industry and one of the biggest sources of employment in the country, generates more than 10 per cent of India’s GDP. Organised retailing, however, occupies a miniscule two to three percent of the overall Indian retailing industry. Organised retailing, which aims at providing an ideal shopping experience for the consumer based on the advantages of large-scale purchases, consumer preference

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analysis, excellent ambience and choice of merchandise, has been adopted in a large number of cities in India with many business houses investing in this segment. Increasingly, the organised retail industry is realising the importance of information technology in bringing about process improvements, which would result in greater operating efficiencies and hence increased profits. But the awareness of IT systems that are available is low, resulting in poor decision-making. A number of organised retailers in India have installed solutions ranging from simple Point of Sale (PoS) systems to complex Retail ERPs. But who are these retailers and what kind of IT systems have they employed. Broadly, one can classify the retailers into four types, namely:(2) Large retailers having a chain of over 30 stores: These large retailers, mainly supermarkets and departmental stores, use custom-built systems. Some of them have implemented ERP packages to take care of their back-office systems. (2) Mid-sized retailers handling more than 5 stores, with plans to expand to about 15-20 stores in the next two years: These retailers primarily have departmental store formats catering to a variety of merchandise. A number of them have their own private labels for all the merchandise sold in their stores. This large group of retailers has spent a lot of time and effort in implementing packaged IT solutions for PoS, demand forecasting, purchase orders and inventory management. A proven solution in many countries, which has found acceptance with many retailers in India, is Retail Pro, a good fit for retailers with 1-50 stores. Higher-end solutions like JDA, SAP IS Retail or Retek, targeted at larger retailers with more than 300 stores, have also found acceptance in India, though the payback period for such investments can be as high as five to eight years. (3) The manufacturer-retailer: These retail showrooms are exclusively owned by the manufacturer or are owned and managed by franchisees of the manufacturer. Some of these retail outlets also have Retail Pro for PoS as well as the back-office, while others have their software developed from vendors for the same functionalities. In this segment

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of retailing, it has been noticed that the manufacturer's own stores and franchisee have different IT packages, which lead to data integration problems and delayed receipt of information at the head office of the manufacturer retailer. (4) Small retailers with less than five stores: These could be specialty apparel retailers, discount stores or departmental stores. They usually have a vendor developed PoS system connected to an inventory system, though some of them have started using more sophisticated software packages. Future IT trends for the retail segment The last few months have not been very good for retailers around the world. The Indian retail industry has grown just 5 per cent, compared to a 10 to 15 per cent year-on-year growth in the previous years. In the next few months, Indian retailers will try to make do with their current IT systems. New stores will be opened; different formats will be experimented with, and the existing IT systems will be extended, or additional licenses will be bought for IT applications. In the short term, the emphasis would be on using the existing IT resources to generate more information. At this stage, retailers plan to leverage gains from their IT investments. One way of ensuring this is to have information about their customers and devise ways to get repeat business from existing customers. In order to do this, the retailer would need Customer Relationship Management (CRM) or On-Line Analytical Processing (OLAP) software to run on top of its existing database. Customer relationship management CRM could be used for, amongst other things, campaign management, to understand the buying patterns of 'loyalty cardholders' and the integration of multi-channel sales. There are a number of CRM packages like Talisma, Siebel, Clarify, Retek CRM, Sales Logix, etc., which could be used for this purpose. The only concern here is that the database to be analysed by the CRM package only records purchases identified through the customer loyalty cards of the retail chain, which adds up to about 25 to 30 per cent of all sales. For

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the retailer, the flip side to this is that he gets detailed information of the buying patterns of his existing customers and he can plan strategies to get those customers to come back to his store. Online Analytical Processing (OLAP) tools To analyse a wider spectrum of data, retailers could use OLAP tools in order to segment the sales and carry out behaviour analysis. OLAP tools that could be used are Arthur Planning, Oracle Analyser, Adaytum, Cognos, Business Objects, etc. These OLAP tools are very versatile and can analyse the sales data from the PoS and determine the trend of sales for the categories and sub-categories of merchandise sold from the various stores. This analysis would enable the retailers to understand the type of merchandise sold, the frequency of sale, the geographical spread of the sales, and also provide 'what if' analysis for projected sales, price changes, etc. Retailers can then increase sales by providing the correct merchandise and devising promotion strategies. B2B software For manufacturer-retailers and other retailers who promote their own private labels, the need in the current context would be to monitor the complete manufacturing and supply chain. This can be done through vendor management software, which utilises the Internet for accessing the details. This B2B site would entail confirming the garment design to the vendor by the retailer, monitoring the fabric purchases from the fabric vendors, monitoring the stitching and delivery of the apparel to the retailer's delivery centre (DC), and the invoicing and payment to the vendors by the retailer. Accessing the Internet from any location could do all this. The vendors would enter the relevant data from their end. This would help reduce costs and ensure the availability of merchandise at the stores. Collaborative planning and forecasting (CPFR) tools The use of collaborative planning and forecasting tools (CPFR) would help control costs for the vendor and the retailer, as production would take place after taking into account the planned merchandise requirements of the retailer. This would be a Web-based system, and can be built to suit the needs of the retailer and the vendor.

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Hence, the short term IT needs of the organised retailer would revolve around his ability to service the customers in a better manner by using CRM and OLAP tools, and to reduce costs by using Web-based systems of vendor management and CPFR.To meet the growing needs of the future, there is a need now to take stock of the present IT infrastructure and look at the requirements for the future. The requirement of the future would be to evolve IT as a strategic enabler for the organisation. With reduced business due to the weak economic situation in the country reducing sales and productivity, retailers need to look closely at their internal systems and procedures. Non-value-adding activities need to be weeded out and replaced by efficient systems and procedures. This exercise would help retailers to define the efficient functionality required for the future. Having defined the functionality, retailers need to understand how information technology would support the efficient implementation of the revised systems and procedures in terms of computer systems, hardware, software and networking. Retailers also need to understand how the IT systems would be integrated and networked across the country's stores and the head office of the retailer. With the projected growth of organised retailing in India, large to mid-sized retailers need to upgrade their IT systems and take into consideration the technology trends — some of which are currently nascent, but which will evolve to become important assets for the future. Retail ERP packages In the future there would be a need to evaluate if retail ERP packages like JDA, SAP IS Retail and Retek are suitable for Indian retailers. These products have an integrated solution for demand forecasting, merchandising, replenishments, supply chain, etc. Most of these packages have built-in CRM, OLAP tools, collaborative planning and supply chain systems that are tightly integrated with the merchandising and forecasting functionality. Though the flip side is that these packages are costly, the return on investment takes longer and expertise to implement the systems are gradually being developed in India. Hence, it would be a good idea to evaluate these packages, determine

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the cost-benefit analysis, and wherever possible, source the software from one vendor organisation that would provide all the functional requirements of the retailer from an information technology perspective. The Indian experience in implementing Retail ERPs has been difficult due to the lack of trained ERP package implementers in India. Hence, the cost of implementation has gone up, as package experts have to be brought in from abroad. But this is true for all ERP implementation in India, whether in the retail sector or in the manufacturing sector. In the past, manufacturing industries also faced difficulties in implementing ERP packages specifically meant for the industry, but over time, with expertise in the packages and in their implementation building up within India, the success rates of such implementations have increased. Hence, over the next two to three years, Retail ERP expertise will grow and will be able to support the needs of Indian retailers, who in that timeframe would have progressed up the learning curve on the benefits of information technology. Business optimisation software (a.) Product pricing software One of the most critical challenges faced by retailers carrying thousands of products / SKUs is 'pricing' — the ability to price almost all the products suitably, all the time, so that sales of even individual items yield a net profit. The advent of sophisticated price optimisation / revenue management techniques offer significant prospects for enhancing profitability. DemandTech and Khimetrics, two US-based software product vendors have come up with products that help retailers to optimise the prices of their products. These companies have been beta testing their software product with some of the retailers in the US. The advent of pricing decision support techniques for the retail industry has opened up various possibilities for the retailers. Though it will take some time for such products to come to India, retailers here need to understand the features of the products and how these products can help them in their pricing decisions.

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(b). Merchandise optimisation software Retailers still have difficulty in ensuring that customer requirements are fulfilled. There are a large number of occasions when customers have found that the items are not available when they visit the stores. Increasingly, from a retailer's perspective, there are times when goods are sold at marked-down prices. Now a new set of software applications has been developed which apply sophisticated data processing techniques to existing inventory and sales data to accurately determine future patterns of supply and demand at the item and store level. These types of business optimisation software are still at a nascent stage in terms of usage. But in the years to come these software applications will be used by a large number of retail organisations. Mobile computing The use of mobile computing for optimising inventory and supply chain efficiencies have been enabling retailers to reduce costs. WAP (Wireless Application Protocol)-enabled, handheld personal digital assistants (PDA) and mobile phones are becoming increasingly important for retail operations. With the use of mobile computing, inventory positions of actual stock in hand at the stores can be entered in the mobile handheld devices and transmitted to the back-office computers for verification of stock. Similarly, supply chain efficiencies can be increased by ordering items through WAP-enabled PDAs, which will reduce the timeframe for the supply of stocks. B2C The growth in B2C retailing has not taken off in India, primarily because of the apprehension in the minds of the consumer about the security of the payment systems and the efficiencies of the supply chain. The consumer is concerned about the fact that the articles ordered might not reach him due to inefficiencies in the logistics of delivering the product to his home/office. Over time, these inefficiencies will also be removed, and over the next two to three years, retailers will have to cater increasingly to this channel. They would need to start building the IT infrastructure to enable such transactions over the Net. 81

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Retail exchanges Various retail exchanges have been set up in the US and in Europe. One of them is the World Wide Retail Exchange, which enables retailers to interact with vendors and with other retailers for B2B transactions. Such exchanges help in reducing transaction costs. They need to be set up in India too. Overall, in the long run, Indian retailers need to look at an integrated IT support system to take care of their information requirements. Indian retailers would have to plan their IT requirements keeping in mind these future developments. They need to start now so that they are prepared when business picks up in the months ahead

Recipe for Success Focus on the consumer:- It is clear that consumers have changed and they are looking for something different. Understanding their evolving needs, aspirations and lifestyles is the underlying key to success for any retailer. The primary emphasis should be on access, experience and service and the secondary emphasis on product and price. There should be an effort to improve service by having better trained sales staff, better availability of products, and minor but important conveniences, e.g. delivery of goods either to the car or even home. Collaborative advertising and promotion can then round off this effort. Brand the store: -branding the store will increase volume and enhance customer loyalty. Branding is critical to maintaining competitive differentiation in an increasingly challenging retail environment. However, the brand needs to be clearly communicated to the customer. Develop private label brand:- Private labels act as margin generators, increasing sales Volume by positioning the label as providing higher perceived value to consumers. In the long run, they also increase the retailers’ bargaining power with national brand suppliers. 82

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Private labels generate customer loyalty by providing exclusive products, which works towards differentiation strategy, much sought after by the retailers. (1) In terms of geography some entrepreneurs should put efforts in creating customdeveloped solutions for tapping the rural and semi-urban spending potential. Even in nonmetro urban centres, there are very good opportunities in looking at starting or expanding operations. Some cities that should see greater organised retail action in the future would be Ludhiana, Chandigarh, Lucknow, Nagpur, Ahmedabad, Surat, Pune, Kochi, Thiruvananthapuram, Guwahati and Bhubaneshwar. (2) In terms of format malls have a sustainable competitive advantage over other formats. Consumer preferences are shifting towards malls from traditional markets. As a result of consumer shifts, retailers also prefer to be located in malls in anticipation of higher footfall and increasingly consumers prefer "All Under One Roof” destination for shopping as well as eating out and entertainment. These findings together indicate an excellent potential for a mall with the following features: a superior well-managed leisure experience  targeted at all members of the household  comprising of shopping, dining and entertainment, all under one roof  a wide range of products and services  proximity to homes

An Emerging middle-class: Great prospects The income distribution of households has also undergone a sea change in recent years. The consolidated purchasing power of the country has gone up, and the trend is projected to continue. A significant share of population will move up the affordability and affluence ladder by 2006 - 07

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With about 40 cities that have a population of more than 1 million, India is a very attractive market for large retail players. Both disposable incomes and consumer spending are rising. These are the fundamentals driving the change within India’s retail sector. The growth of organized retailing holds immense opportunities for retailers, developers, institutions and

investors.

The organized retail sector in India grossed over Rs. 20,000 cr in 2002, a mere 2 per cent of total retail sales. This is expected to grow to 6 per cent by 2006-2007, when the sector is expected to gross more than Rs. 40,000 cr. The top 10 cities account for 95 per cent of organized retail business and the top six for over 80 per cent. The total additional real estate demand from organized retailing across the top six cities by 2007 is expected to be about 25 million sq. ft. Mall developments are expected to account for over 80 per cent of this opportunity.

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Several factors are responsbile for the slow transition to organized retailing in India. These include the slow proliferation of retail brands, tax advantages to the unorganized sector, lack of many attractive catchments, and the relatively unorganized and unstructured nature of real estate markets. If these factors are set right, we could have a differentiated retail real estate market with low rental rates and a high level of product innovation. So far, apparel and food have dominated organized retailing in India. Most existing players plan to double/treble their investments in the next three to four years. Many corporate players have entered organized retailing business and more are expected to enter in the coming years. Most of these are national players. Foreign retailers have so far Entered the market through the franchise route. The emergence of India as the preferred sourcing base for some of the world’s top retailers is leading to a rise in the manufacturers’ learning curve thereby resulting in greater product proliferation. This will be a vital factor when large international retailers Plan their forays into India. While the past three years have seen large growth and entry by a number of players into retailing, most of the activity remains concentrated in the top five-six cities. As the markets within the top cities mature, more and more opportunities will emerge in the second tier urban clusters. In addition, smaller towns also have opportunities for a differentiated retail play. In the top cities, most organized retail developments occurred in a scenario where demand for retail space exceeded supply. In future we could witness a scenario where sharply differentiated real estate offerings will first come to the market, and this will in turn create demand for space. This will hold true especially in the under-served second tier markets, and the underserved catchments within top tier cities. Therefore, analysis of the location, up-to-date market information regarding the nature of space requirement, usage patterns, etc will assume great importance, specially in the under-served retail markets.

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Existing up-market retail locations will witness newer formats. Retailers could enter into joint ventures with landlords, thereby sharing, and thus reducing, the latter’s risks. Real estate rentals could get pegged to the amount of sales or to some other common denominator. But this format will emerge when retail markets mature and mall developers operate in a competitive environment for gaining a larger share of the retail pie. Most mall developments are planned on the back of confirmed demand from major anchors and sub-anchors. Also, the pace of entry by speciality retailers is on the rise owing to changing demographics. While some pockets in the top cities could get overserved and may witness a fall in prices, this will lead to a win-win situation for developers as well as retailers as the markets would get corrected. A correction in rentals due to competition could result in a more structured real estate market that would allow the retailers a higher margin on their real estate investments, thereby enabling them to expand faster. The relatively overserved cities could witness higher activity, as real estate space gets more affordable. This would reduce the break-even time of retailers. At present, the break-even time is approximately two years, and three to four years are required for getting a positive return on investment. These are the markets that will see the creation of highly differentiated retail spaces in future. The ability to attract anchors and sub-anchors will determine the success of a mall - the higher the better. But what happens to the developer’s profit margin if the bulk of space is leased to anchors that pay sub-market rentals. To avoid this, malls in top urban cities will need to create differentiation in terms of size, provide the crucial parking infrastructure that is often under-estimated, and so on. The under-served markets could witness a frenzy of retail development projects in the form of redevelopment of brownfield sites as well as greenfield projects. For the retailer, some under-served markets could provide enough margins to compensate for the loss of margins in top urban markets. Under-served markets - primarily the tier 2 cities - will

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witness increased interest in the next 3-4 years as these are nascent territories that offer attractive opportunities to developers, investors and retailers. What is required to ensure that the pace of retail activity remains strong in both these markets? A number of issues such as the rationalization of real estate markets, lowering of entertainment taxes, increased sources of funding for real estate, allowing FDI, changing import norms, and uniformity in taxes for the organized and unorganized sectors, need attention. For their part, retailers need to be highly flexible. They must time their entry well, and select a store format and business model best suited to the particular area. The size of the retail store and the pace of expansion will determine the financial success of retailers over the long run. A lot will depend on the performance of existing malls and of those coming to the market in the next two years. The performance of these malls will depend on a host of factors: right positioning, design, tenant mix, maintenance, etc, and also on the quality and cost of real estate. The operational and financial success of operating malls will in turn affect the growth of the organized retail sector, and will be closely benchmarked for the planning of newer retail formats. Other factors remaining constant, it remains to be seen how much real estate reforms take place and retail rentals become affordable in the coming years so that they support the impending boom in organized retail. Allowing FDI in the retail sector will go a long way towards boosting the sector as many international retailers await the relaxation in FDI norms for entering the Indian market.

CHALLENGES OF RETAIL VISION 2010 87

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Courtesy: www.thomasnet.com Challenges in Retail In-Store Environments RFID systems spending for retail in-store applications reached nearly $88 million globally in 2005, according to a recently released report by Venture Development Corporation (VDC). VDC forecasts growth of more than 35% per year in retailer spending on RFID for in-store point-of-sale (POS) applications through 2010, when the market is expected to reach nearly $400 million. Global Shipments of RFID Systems for the Retail POS Vertical Segmented by Product Category (Millions of Dollars) 2005 Hardware: $58.3 Software: $7.9 Services: $21.8 2010 Hardware: $241.5 Software: $31.8 Services: $122.1 Big retailer interest in and commitments to RFID have been well documented. Their technical approaches and application priorities are widely divergent, but their goals are fairly consistent. VDC telephone surveys of retailers conducted during Q1 2006 reveal a common vision for RFID retail POS applications that includes the following: o Accurate and efficient inventory control; o Consequent cost reductions related to better inventory management; - Optimal stock levels based on real-time customer activity/demand; - Reduction of out-of-stocks; Lower warehousing costs via automated processes and improved tracking efficiencies;

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o Improved margins associated with the cost reductions cited above. The key to RFID for retail in-store applications is the cost-effectiveness, reliability, and ease-of-use of item-level tagging solutions. Without item-level tagging, VDC believes that most value propositions, revenue enhancement goals, and margin improvement objectives will not be attainable. Some of the most significant challenges to item-level solution development, deployment, and operation include: o Software coding and proper systems integration: Conversion code needs to be written to convert all existing databases so that a retailer can cart EPC information. Managing the enormous volumes of data generated by RFID systems is expected to be a complex task, requiring significant retailer attention; o Unsynchronized adoption across the supply chain: Retailers are concerned that their IT suppliers and distributors may not be quick to implement RFID. Retailers and manufacturers need to collaborate on RFID efforts to receive the full benefit, including determining how best to place/position RFID transponders onto products or into packages in the most cost-effective and efficient way; o Extensive training requirements of new systems: Retail personnel must be trained on how to use the new systems and to learn new job functions. In addition, some retailers may need to renegotiate labor contracts due to collective bargaining agreements regarding work rules for employees; and o Cost of technology replacement: In addition to the costs of system components and business process changes, there is also the potential expense of replacing existing scanners in stores with new devices that are both bar code magnetic stripe and RFID enabled. With retailers supporting more and more checkout lanes across hundreds of stores, the number of devices that will potentially be replaced/upgraded is significant.

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According Michael J. Liard, Director of VDC's RFID Annual Research Service, "Itemlevel tagging will be rolled out slowly, over time. Deployment decisions will be determined as much by the value (or liability) of items merchandised, as by the volume of units sold. Current implementation costs - particularly tag prices, are simply too high for widespread adoption." About VDC Venture Development Corporation (VDC) is an independent technology market research and strategy consulting firm that specializes in a number of retail automation, RFID, AIDC, embedded, component, industrial, and defense markets. VDC has been operating since 1971, when the firm was founded by graduates of the Harvard Business School and Massachusetts Institute of Technology. Today, we employ a talented collection of analysts and consultants who offer a rare combination of expertise in the market research process; experience in technology product and program management; and formal training in engineering and marketing. VDC's clients include thousands of the largest and fastestgrowing tech suppliers in the world and the most successful investors participating in the markets we cover.

QUESTIONNAIRE “RETAIL INDUSTRY� 90

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Name: ____________________

Occupation: ____________________

Age : ____________________

Area

: ____________________

Marital Status: ______________ (Here in the ranking 1 indicates the highest rank and decreases with increase in numbers) 1. Do you visit malls? Yes

No

2. How many malls are there in your area or nearby area?

3. In the malls in your area or nearby area are there Store’s like: E.g. Big bazaar, Food bazaar, Pantaloons, Vishal Megamart, Westside etc. Yes

No

4. Do you like buying clothes and accessories from these Malls or from the places like Sarojini Nagar, Kamla Nagar, Karol bagh, Kachey quarter etc. Give reasons? a) Malls Reasons Ambience

Service

Brand

b) Local Markets Reasons Price

Variety

Accessibility

c) Both Malls and Local markets 5. How often do you visit these malls/retail stores? Daily

Weekly

Monthly

Occasionally

6. What is the purpose of visiting these places? Freak-out

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Dating

Other reasons……………….

7. What do you prefer to buy from these places? Rank in order of preference? Buying Clothes Accessories Groceries

Rank

8. What propels you to buy clothes and accessories from these retail stores? Need Discount Sale Variety Quality

10. Where do you like buying groceries from? Rank in order of preference? Preference Rank Retail Stores Kirana Shop Local Vegetable Vendors Reasons: Quality

Variety

Discounted price

Accessibility

11. Will these Malls/Retail Stores grow over a period of time? Yes

No

Give reasons: ……………………………………………………………………………………… ………………………………………………………………………………………

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1. Do you like buying clothes and accessories from these malls or from the places Sarojini Nagar, Kamla Nagar etc. Malls – 21

Local Market – 5

Both – 34

21, 35%

Malls local markets

34, 57%

Both 5, 8%

The above pie chart shows that the highest population goes for both malls and the local market for their shopping requirements. This show, how malls as well as local markets are equally important. 34.57% of the population goes to both local market and the malls because the RFID system of the Retail Stores is not yet successful as per challenges of retail vision 2010. So the accessibility of the consumers towards the malls is not yet very convenient. Apart from that price and variety are the other factors. Some more reasons are showed below in the pie chart: Reasons for Malls Ambience – 9

Service - 9

Brand – 14

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Reasons for Malls

28% 44%

Ambience Service Brand 28%

The above pie chart shows that 44% of the population who visits the Retail Stores in the Malls goes for the branded products, as they are High Net Worth Income Group consumers. These consumers never make any purchases from the Local Markets. Along with that the Ambience and the Service provided in the Retail Stores are up to the mark. Reasons for Local Markets Price – 4

Variety – 1

Accessibility – 4

Reasons for Local Market

44%

45%

Price Variety Accessibility

11%

The above pie chart shows that 44% of the consumer makes their purchases from the local markets as the market are easily accessible. Price is always a factor for them as they are Middle Class consumers. They always get a wide range of variety at a lower price in the Local Market. 94

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2. How often do you visit these malls/retail stores? Daily – 4

Weekly – 30 Monthly – 19 Occasionally – 7

12%

7%

Daily Weekly Monthly

32% 49%

Occasionally

The above pie chart shows the frequency of the population of visiting malls. The highest population i.e. 49% of the population visits malls weekly for various purposes e.g. shopping, freak out, dating etc. 32% of the population who visits malls monthly, they normally goes for planned shopping and sometimes for freak out only. 3. What is the purpose of visiting these malls? Freakout – 26 Dating – 18

Planned Shopping – 41 others – 5

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17%

5%

Freakout

25%

Planned shopping Window shopping

14%

Dating

39%

Others

The above pie chart shows that the highest population i.e. 39% visits these malls/retail stores for planned shopping. These consumers falls in the category of HNI group, while others mostly for freak-out followed by dating, window shopping and other reasons as well. 4. What propels you to buy clothes and accessories from these retail stores? Need – 7

Discount Sale – 27

Variety – 22

Quality – 28

8% 34% Need 32%

Discount sale Variety Quality

26%

The above pie chart shows that 34% of the consumers goes for quality while purchasing clothes and accessories, 32% consumers goes for discounted sale, as they get the same quality at a lower price, while 26% of the consumers believes in variety and the rest 8% makes their purchases only when they 96

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are in need. But apart from the 34% consumer who believes in quality only, the rest of the 32%, 26% and 8% consumers also lie on quality and value for money. 5. Will these malls/retail stores grow over a period of time? Yes – 56

No – 4 7%

Yes No

93%

The above pie chart shows that 93% of the population of the sample size believes that the malls and the retail stores will definitely grow over a period of time, as this industry is going to generate a huge number of employment, places for recreation and it will also help in grooming other industries viz: Real Estate, Banking, Food, Power etc. This is like the theory of DEPENDENCY. One industry depends on the other to grow. According to VDA report of “Challenges of Retail Vision 2010” the Retail Industry will grow due to following reasons:  RFID systems spending for retail in-store applications  Accurate and efficient inventory control o Consequent cost reductions related to better inventory management  Optimal stock levels based on real-time customer activity/demand  Reduction of out-of-stocks

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 Lower warehousing costs via automated processes and improved tracking efficiencies  Improved margins associated with the cost reductions cited above.  Software coding and proper systems integration  Unsynchronized adoption across the supply chain  Extensive training requirements of new systems  Cost of technology replacement

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

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Appendix NPA : -

Non performing assest.

PAN :-

Permanent account number.

SSN

:–

Social Security number.

ROI

:–

Return on Investment.

PAT

:–

Profit after tax.

FDI

:–

Foreign direct Investment.

POS

:–

Point of sale.

ERP

:–

Entrepreneur resource planning.

CRM : –

Customer relationship management.

OLAP : –

On-Line Analytical processing.

DC

Delivery Centre.

:–

CPFR : –

Collaborative planning and forecasting tool.

WAP :–

Wireless application protocol.

PDA :–

Personal digital assistants.

CAM :-

Common Area Maintenance

RFID :-

Radio Frequency Identification Device

VDC :-

Venture Development Corporation

POS

:-

Point of Sale

HNI

:-

High Net Worth Income

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BIBLIOGRAPHY  MARKETING MANAGEMENT –PHILIP KOTLER  WWW.GOOGLE.COM  WWW.THOMASNET.COM  WWW.KSA.COM  WWW.VDC-CORP.COM  OFFICIAL WEBSITES OF O WALMART O TARGET O EBONY O BIGJOS O OTHER SUCCESSFUL RETAILERS  MAGAZINES, NEWSPAPER

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