1. Introduction
Indian Retail Industry is ranked among the ten largest retail markets in the world. Retail has
become a large source of employment and has deep penetration into rural India. The
attitudinal shift of the Indian consumer and the emergence of organized retail formats have
transformed the face of retailing in India. Modern retailing in India is receiving global
recognition and attention as the emerging market of India is witnessing a significant change
in its growth and investment pattern. With the sign of re-emergence of economic growth in
India, consumer buying in retail sector is being projected as a key opportunity area. As a
consequence, Indian corporate houses are refocusing its strategic perspective in retail
marketing with the idea to use resources optimally in order to create core competence and
gain competitive advantage. Although India presents a large market opportunity due to the
number and increasing purchasing power of consumers, there are significant challenges
before the modern retailing as well. At present, popular formats such as hypermarkets and
supermarkets are growing at phenomenal pace. Not only brick-mortar formats but brick-click
and click-click formats are fast becoming functional on the Indian retail landscape. Against
this backdrop, the paper makes an attempt to present an account of organised and modern
retailing in Indian context.
The word retail is derived from the French word retailer, means to cut off a piece or to break
bulk. Therefore, a retailer is a dealer or trader who sells goods in small quantities. Retailing is
the final step in the distribution of products, for consumption by the end consumers. It
consists of all activities involved in the marketing of goods and services directly to the
consumers, for their personal, family or household use. This excludes direct interface
between the manufacturer and institutional buyers such as government and other bulk
customers.
Retail is India’s one of the biggest industry. The key factors responsible for the retail boom
have been the change in consumer profile and demographics, increase in the number of
international brands available in the Indian market, economic implications of the government,
increasing urbanization, credit availability, improvement in the infrastructure, increasing
investments in technology and real estate building a world class shopping environment for
the consumers.
The objective of this study is to understand how retail industry evolved in India with respect
to formats, pattern of buying, and consumer behaviour.
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2. India and Retailing
The Indian Retailing of lifestyle goods dates back to prehistoric period. Evidences of
ornaments, designer apparels, foot wares, handicrafts, paintings and sculpture are found in the
excavations at Mohenjo-Daro and Harappa. Since ancient period the diversity exist in food
and clothing habits in India. In the ancient period the diversity in clothing and food habits
was largely depending upon the climate, physical features and traditions in the respective
regions. There is vast difference between the habits of ancient Indian life and modern Indian
life. The commonality is found in the retailing practices. The common is about the retailers
who were selling in ancient period and who are selling in modern times also. In both the
times they are found catering to the demands of the customers. In medieval times the
customers were found more commanding. The customers in medieval India were found to be
worthy of setting the rules of marketing. Indian Lifestyle goods were always in demand in
India and abroad. Evidences are found that trade flourished in India since ancient times and
urbanization of Indian towns has roots in the growth of trade. Paithan in Maharashtra and
Warangal in Andhra Pradesh were flourished mainly due to the production of fine cloths.
As stated above retailing goes back to centuries; it started as a very primitive business but
today has grown tremendously. First people were doing businesses with their neighbours.
Goods were exchanged between them. Gradually people began to collect themselves to a
given neighbourhood, which provides a geographical place to do the exchange. This not only
increases the exposure of a given good but also helps a lot towards the development of a
more formalized system. Gradually, a few more start to get together to a place that in turn
creates a need for a common place. Later this common place was called a fair. With the
passing of time the number of people doing businesses in a given fair increased, issues like
security, transportation becomes a matter of concern. This semi-formalized system then gave
birth to small-scale groceries, where people start to provide more combinations in their own
neighbourhoods. Then came the issue of choice in given grocery, the choices the customer
had was limited, this was the beginning of the concept of “everything under one roof”. As
time passes, joint family changes into nuclear family. There too both members started earning
which resulted into a new way of lifestyle. From then instead of mom-and-pop type of stores
organized retail stores came into existence.
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Ancient Indian Demographics and Segmentation
Indian Society was segmented into religions and castes and purchase decisions were largely
governed by customs and traditions. The culture was the major influencer to the purchase
decision. The retailers were having an exact idea of what is to be made available to the target
market so as to have assured sale. Occupation was base of caste and birth was base for
religion. Agriculture was the most important occupation of the people in villages whereas
employees of the government, businessmen and others rendering various services lived in
towns. The households in urban and rural India were mainly of joint families and patriarchal.
The status of women was of subordinate, although their role in family was important. The
spread of education in the society was limited. An individual learned his occupation in the
family itself. There were universities and colleges but they were mostly in to fundamental
education rather than professional education. Economically the Indian society was to be
segmented into three classes during the medieval period. The first was the class of rich people
like the members of royal families, the nobility and the feudal lords called as zamindars. The
second was the class that consisted of the subordinate officers of the state, traders and
farmers. The third was the class of peasant‘s, artisans and landless labourers. The children in
these households were enjoying status of third citizens. They did not have influencing power
in the family matters. The reason was that their number in the household was more. The
household was of joint family nature and having command of only one elderly person in the
family. The activities of the family members were routine and mostly related to the
occupation. The recreational activities include festivals, and religious ceremonies. The
lifestyle of the people was largely influenced by their occupation, gender, socioeconomic
status, education and the place of living.
Today’s Demographics and Standard of Living
The age of renaissance in Europe had laid the foundation of the modern age in India. The post
1991 India has substantially improved the society‘s well-being. The rapid economic growth
has fundamentally changed the country‘s consumers. The average household income is
rapidly growing, the massive middle class escaped from desperate poverty is concentrating in
cities. The new kinds of occupations have emerged with requirements of new skill sets;
enhancing the requirements of new types of education mostly in professional nature. The
households are nuclear and patriarchal with enhanced role and status of women. Many
households have single parents also. Apart from routine work and domestic activities the
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urban citizens are involved in activities like Anti-ageing and healthcare Weight loss
programmes, skin- and hair-care regimens, Education Professional re-education via part-time
and online courses, Travel Trekking and adventure holidays, travelling to exotic destinations,
learning music of Hindustani. It can be concluded that human being in urban areas is living a
life of certain standard. They are busy, caring, spiritual, health conscious and dynamic. The
Indian society is changing and hence the Spending pattern of these urban citizens is also
changing. The discretionary spending is capturing majority of consumer spending. This is
shift from necessities. The food expenditure is losing its share in total consumption it has
gone down to 25% from 42%. This is because the citizens are mostly eating out during the
working day and during nights on holidays, and eating out is part of discretionary expenditure
and not the necessary expenditure. Spending on purchases that improve the economic
prospects and quality of life is increasing. The other major areas of increasing spending share
are health, education, transport, and communication.
3. Evolution of International Retail: Implications for India
The arrival of modern retail in developing countries occurred in three successive waves. The
first wave took place in the early to mid-1990s in South America (e.g., Argentina, Brazil, and
Chile), East Asia outside China (South Korea, Malaysia, Philippines, Thailand, and Taiwan),
North-Central Europe (e.g., Poland, Hungary, and Czech Republic) and South Africa. The
second wave happened during the mid to late 1990s in Mexico, Central America (e.g.,
Ecuador, Colombia, and Guatemala), Southeast Asian countries (e.g., Indonesia), SouthernCentral Europe (e.g., Bulgaria). The third wave has just begun in the late 1990s and early
2000s in parts of Africa (e.g., Kenya), some countries in Central and South America (e.g.,
Nicaragua, Peru, and Bolivia), Southeast Asia (e.g., Vietnam), China, India, and Russia.
Thus, the third wave countries which include China, India and Russia are late comers in the
diffusion of modern retail. According to the authors, the main reason why they lagged behind
was the severe restrictions on foreign direct investment (FDI) in retailing in these countries.
The demand side features of these countries, such as income, size of the middle class,
urbanization, and the share of women in workforce, etc., have been similar to countries in the
second wave. In China and Russia these restrictions were progressively relaxed in the 1990s
and in India partially in the 2000s. In January 2006, India allowed foreign companies to own
up to 51 per cent in single-brand retail joint ventures (JVs), but multiple-brand foreign firms
are still barred in retail although they can set up wholesale operations. There has been a
creeping internationalization of retailing over the recent period. As home markets have
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become crowded and with opportunities in emerging markets rising, modern retailers from
developed countries have been turning to new markets. The retail sales growth of companies
which have ventured into foreign markets has been faster than those that have confined
themselves to home markets. As far as the international expansion is concerned, West
European and South African retail companies are the most outward looking. The West
European firms, among the top 250 retailers, expanded into an average of 9.9 countries in
2005-06 and generated 28.1 per cent of their sales from foreign operations, largely in Central
and Eastern Europe. A “supermarket revolution” has indeed occurred in developing countries
since the early-to-mid-1990s. In many countries, supermarkets have gone well beyond the
initial middle-class clientele to penetrate the food markets of the poor. This “shock”
downstream in the food system has made an impact on traditional retailers; has set off ripple
effects upstream in the food system, on the wholesale, processing, and farm sectors; and has
incipient effects on trade. Supermarkets started in the United States in the 1920s and 1930s
and became dominant in the late 1950s. The traditional food retail system that dominated the
country before supermarkets looked in essence the same as India’s traditional retail system. It
consisted of (a) wetmarkets (similar to those in Asia, with many small stalls) for fresh
produce, fish, and meats; (b) tiny “mom and pop” stores (man at the till taking orders, wife
pulling down products from little shelves and measuring out and packing orders) with no selfservice by customers; (c) street hawkers with pushcarts or shoulder or head burdens; and (d)
home delivery of milk and mobile (cart) delivery of dry goods—for example, by the famous
Jewel Tea Company horse carts. The advent of modern retail (i.e., chain stores) started in the
late 1870s, long before the supermarket format emerged as large self-service stores in the
1930s.
Three key demand-side socio-economic changes occurred over a century. First, the United
States was mainly rural in 1900 (the urban share was 40 per cent) and mainly urban by 1990
(urban share, 75 per cent). Second, few American women worked outside the home in 1900,
and even by 1970 only 15 per cent of married women were counted among the national
workforce. A massive societal change occurred in just a few decades, and by 2000 the share
of working women was 75 per cent. Third, incomes per capita increased substantially over
the century. All three changes are taking place in India today, except they are happening
much faster than they did in the United States.
Modern retail started with chains of stores that were about the size of kirana stores. Called
“five and dime” or “five and ten cent” stores, they bought nonfood goods in volume and sold
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at discount. They further cut costs by moving to self-service. These chain stores were an
innovation of the tiny shop owners. As a major format, they lasted into the 1950s. The most
famous example was Woolworths, started in the 1870s in big cities in the boom zones. From
one tiny store in 1878, a chain was born that built to the first global retail multinational of
medium-sized non-food shops, with 2,866 stores in five countries (including the United
Kingdom) 50 years later.
The nonfood five-and-dime stores acted as an “idea spark” model for chain-store formation
by food stores that were formerly just small stand-alone grocery shops. The owner of a little
tea shop (selling the ingredients for the main beverage of the day) got an idea in 1878 to build
a chain of stores in big cities in boom zones and buy tea directly from Chinese plantations to
cut the cost and beat the competition. That chain was A&P. From selling just tea in the 1870s,
it grew to a grocery store format (dry foods) that opened as the first A&P Economy Store, the
same size as a “neighbourhood store” format in India today, and focused on oils, packaged
foods, soap, and so on. A&P procured in large volumes, drove down costs, and standardized
store layouts. By 1915 the chain comprised 1,600 stores, and by 1925 it had 13,961 stores; in
the early 1930s, A&P was operating approximately 16,000 stores with a combined revenue of
US$1 billion (equivalent to US$10 billion in 2000 dollars).
In 1936, A&P opened its first “supermarket” (just a few times larger than a neighbourhood
store). By 1950, A&P ranked second in sales in the world (after General Motors). In the mid1950s, A&P was by far the number one food retailer and had moved from small-to-mediumsized supermarkets. However, by 2000, A&P had become a minor chain because its retailing
and procurement strategic positioning had not kept up with chains that arose in the 1970s and
1980s, like Wal-Mart.
Sam Walton is an important example of a kirana man who used entrepreneurial spirit in a
situation of opportunity. He started in 1950 with a tiny five-and-dime store in a rural
Arkansas village with a population of 3,000. It was one of the most underdeveloped regions
of the United States, bypassed by the boom development of the past 100 years. Walton
started by building a chain of kirana stores in the surrounding towns and then states, and by
1962 he had decided to open a small supermarket called Wal-Mart.
Supermarkets
Supermarkets have been around for half a century in several developing countries, but the
phenomenon was limited mainly to large cities, upper-middle-class or rich consumer
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segments, and domestic capital chains. In contrast, a supermarket revolution in developing
countries took off in the early-to-mid-1990s. The patterns and determinants of that revolution
are detailed in the following subsection.
4. Foreign Direct Investment in India
According to International Monetary Fund, FDI is defined as “investment that is made to ac
quire a lasting interest in an enterprise operating in an economy other than that of the
investor. The investor’s purpose being to have effective voice in the management of the
enterprise”. FDI refers to capital inflows from abroad that is invested in or to enhance the
production capacity of the economy. The FDI Policy is governed by the Government of India
and with the provision of Foreign Exchange Management Act. It usually involves
participation in management, joint venture, transfer of technology and expertise. FDI can be
used as one measure of growing economic globalization.
The regulation is framed by Government FDI in sectors, not covered under automatic route
requires prior approval of the government which is considered by Foreign Investment
Promotion Board (FIPB), Department of Economic Affairs, and Ministry of Finance.
FDI Monitoring and Reviewing Agencies
1. Ministry of Commerce and Industry, Government of India.
2. Reserve Bank of India
3. Foreign Exchange Promotion Board.
4. Department of Industrial Policy and Promotion
After the opening of the economy in 1991 it has been seen that traditional markets are paving
way for development of departmental stores, supermarkets, specialty stores. Modern retailing
in India is receiving global recognition and attention as the emerging market of India is
witnessing a significant change in its growth and investment pattern. Not only the big global
players like Wal-Mart, Metro group and Tesco are eying to capture a share of this market but
also the domestic corporate like KK Modi, Aditya Birla group, Reliance, and Bharti group
too are at some stage of retail development. Organised and modern retailing in India is a huge
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industry in terms of size. According to A.T. Kearney’s annual Global Retail Development
Index (GRDI), for the third consecutive year India has topped maintaining its position as the
most attractive market for retail investment.
The passing of 51% FDI in multi-brand retail despite intense uproar has proved the way for
retail innovation and competition with the multi-brand retailers such as Walmart, Carrefour
and Tesco, as well as single brand major such as IKEA, Nike and Apple. Foreign retailers
will now be allowed to open stores in cities that have a population of less than one million.
Earlier, supermarkets could only come up in 50 cities. A relaxation was permitted only in
case of states that did not have a single city with a population of one million. The move will
allow stores to come up in cities such as Gurgaon and Aurangabad.
Source: TechSci Research
FDI policy details on single and multi-brand retail in India
51% FDI in multi - brand retail

Minimum investment cap is USD100 million

30 per cent procurement of manufactured or processed products must be from SMEs

Minimum 50 per cent of total FDI must be invested in backend infrastructure
(logistics, cold storage, soil testing labs, seed farming and agro-processing units)

Removes middlemen and provides better price to farmers

Development in retail supply chain system

50 per cent of jobs in retail outlet could be reserved for rural youth and a certain
amount of farm produce could be required to be procured from poor farmers
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
To ensure the Public Distribution System (PDS) and Food Security System (FSS), the
government reserves the right to procure a certain amount of food grains

Multi-brand retail would keep food and commodity prices under control

Will cut agricultural waste as mega retailers would develop backend infrastructure

Consumers will receive higher quality products at lower prices and with better service
100% FDI in single brand retail

Products to be sold under the same brand internationally

Sale of multi-brand goods is not allowed, even if produced by the same manufacturer

For FDI above 51 per cent, 30 per cent sourcing must be from SMEs

Consumerism of retail market

Any additional product categories to be sold under single brand retail must first
receive government approval
The benefits of FDI in retail are as follows:
Apparel retail has a strong organized presence. After the first round of changes in the FDI
policy for single-brand retail in 2006, retailers ventured into the market with EBOs across
categories such as footwear, personal products, food services and entertainment, thus making
this format a popular choice in the Indian organized retail market.
While allowing foreign investment in SBRT (Single-brand retail trading), the
GoI(Government of India) was aspiring to:
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a. Attract investments in production and marketing;
b. Improve the availability of goods for consumers;
c. Encourage increased sourcing of goods from India; and
d. Enhance competitiveness of Indian enterprises through access to global designs,
technologies and management practices.
Until recently, FDI to the tune of 100% was permitted under SBRT, with prior government
approval being a pre-requisite. However, the regulations have now been liberalized further as
follows:
• Up to 49% is permissible under the automatic route (no prior approval of GOI required)
• Beyond 49% is permissible subject to prior GOI approval
Overview of India’s FDI policy for SBRT
Single brand: Products to be sold should be of a single brand
Same brand internationally: Products should be sold under the same brand internationally,
i.e., products should be sold under the same brand in one or more countries other than India.
Branding during manufacturing: Products should be branded during manufacturing
Investment by more than one non-resident entity: A non-resident entity or entities, whether
owner of the brand or otherwise, is permitted to undertake SBRT, directly or through a
legally tenable agreement, with the brand owner The onus for ensuring compliance with this
condition shall rest with the Indian entity carrying out SBRT in India.
E-commerce prohibited: Retail trading, in any form, by means of e-commerce, would not be
permissible, for companies engaged in SBRT in India.
Sourcing: In cases where FDI exceeds 51%, sourcing of 30% of the value of goods purchased
by the SBRT entity should be done from India, preferably from micro, medium and small
enterprises, village and cottage industries, artisans and craftsmen, in all sectors. It is sufficient
to comply with the 30% sourcing condition cumulatively in the first five years of FDI
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investment. Thereafter, sourcing
requirement to be complied on an annual
basis. Overall, the SBRT policy has been
attracting global players to the Indian
market. However, it is vital for foreign
retailers to evaluate their business models
and strategies as per the Indian regulatory
environment.
Historically, franchise or licensing was
the popular route; going forward, foreign
brands are expected to opt for the
ownership model. With the evolution of
the Indian organized market, the commitment levels of foreign brands/retailers have
increased, resulting in higher capital investment in their Indian operations. Some players have
set up a subsidiary in India and operate the store network through unit/ store-level franchising
models, while others establish a joint venture with Indian partners to derive benefit from the
policy liberalization. Single-brand retailing is typically dominated by categories such as
luxury goods, apparel and accessories, and footwear. Nevertheless, it also encompasses a host
of other product categories. For categories such as jewellery and watches, personal care,
CDIT (Consumer durables and information technology products) and travel goods, leading
players largely focus on MBOs/department stores to drive sales. However, driven by the
width of merchandise and the pull of brand, leading players across categories such as
personal care, CDIT, and jewellery and watches are increasingly setting up EBOs.
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5. Modern Retailing in India
Growth in the Indian retail market is driven by a combination of demand, supply and
regulatory factors. The three pillars are expected to continue being the growth engines of the
Indian consumer and retail market: demand factors, supply factors and regulatory factors.
Demand factors
Increasing urbanization and migration to towns and cities.
The contribution of urban areas to India’s GDP is expected to increase from 60% in 2001 to
70% in 2018.
Rising disposable income and consumption expenditure
Consumption spending is expected to increase from US$1077 billion in 2012 to US$2046
billion in 2017.
Growing number of working women and young population
India’s median age is the lowest among major economies (BRIC, the US, the UK), and it is
expected to be 31 years in 2025.
Changing consumer preferences
Increase in foreign travel and exposure to Western lifestyle have resulted in a shift in
consumption habits, leading them to up-trade.
Supply factors
Rapid real estate and infrastructure development
Mall space supply across metro cities is expected to increase 40%- 50% between 2012 and
2017.
Easy availability of credit
Number of credit cards was estimated at 18 million in 2012, and it is increased to 28 million
in 2014.
Creating a differentiated experience
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Leading modern trade stores stock products/brands procured by local importers; some of
them directly partner with leading foreign consumer product companies to exclusively retail
and distribute their products in the Indian market.
Introduction of innovative formats
Specialty format: e.g., wedding malls
Luxury format: high-end malls for retailing luxury goods
Transit format: near airports and metro stations
Liberalization of FDI policies for retailing
Between 2006 and 2012, the GoI has progressively liberalized the FDI policy for retailing.
Introduction to GST
The GOI has proposed GST and is close to a consensus on this. Once implemented, it will
simplify the supply chain and bring down prices to consumers.
The rising income & purchasing power of the consumer, higher brand consciousness & brand
choice, easy credit facility, increase in consumer class, FDI, internet & are some of the
factors behind the phenomenal growth of modern retailing in India. The dominance of the
young and working class under the age of 30 years in the population of India which is
estimated to be more than 1.2 billion augurs well for the modern retail sector. At the same
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time strong rise in income and purchasing power of the people backed by robust employment
generation is helping the modern and organised retailing in its prosperity. Along with a
significant growth in discretionary income, the changing lifestyles are being seen as major
growth driver of Indian retailing market.
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6. Retailing Patterns in India
The total retail sector in India can be divided into organized and unorganised sectors. The
trading activities undertaken by licensed retailers are categorized as organized retailing.
Licensed retailers are those who are registered for sales tax, income tax, etc. These include
the corporate-backed hypermarkets and retail chains, and also the privately owned large retail
businesses. Unorganized retail or traditional retail on the other hand, include a large number
of small retailers that consists of local kirana shops, owner-manned general stores, chemists,
footwear shops, apparel shops, paan and beedi (local betel leaf and tobacco) shops, hand-cart
hawkers, pavement vendors, etc The Indian retail sector is highly fragmented. More than
ninety per cent of its business is being run by the unorganized retailers like the traditional
family run stores and corner stores. The organized retail in India is at a very nascent stage.
However, in order to increase its share in total retail, attempts are being made so as to bring
in a huge opportunity for prospective new players. India's retail sector is heading towards
modernization. New formats such as departmental stores, supermarkets and speciality stores,
westernised malls are fast appearing in metros and tier-II cities.
The overall retail market in India is estimated to be around 630 Billion USD in 2015. The
organized market is estimated to be 9-10% of the total market i.e. 60 Billion USD. The sector
has grown at 12% over the last decade and going forward we expect growth to be moderately
higher. We expect the retail market to be 1100-1200 Bn USD by 2020, of which organized
retail could be potentially 140-160 Bn USD.
The overall growth would be driven by significant demographic shifts: 70% increase in
income levels, 100 Mn youth entering the workforce, increasing nuclearization. & 35% of
Indians living in urban centres. The ratio of retail sector’s revenue to GDP in India is
amongst the highest in the world. For most developed markets retail sector revenues are 1520% of overall GDP, whereas India it is around 25%.
Organized retail is a difficult business in India. As can be seen in the exhibit, the sector
performance lags most other sectors on key metrics. The top companies are considered across
the sectors to evaluate on their performance and their RoCE.
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Globally retail has been one of the better performing sectors. BSG publishes the Value
Creators ranking an annual report based on an analysis of five year period Total Shareholders
Returns of around 2000 global companies. During 2010-2014 global retailers delivered an
impressive annual median TSR of 21%. In comparison Indian retailers delivered TSR in
single digits only. The difference is explained by the challenging environment faced by
Indian retailers as compared to their global counterparts.
Share of organized retail in India is much lower compared to other global markets. As a result
retailers in India have lower bargaining power and margins as compared to their global peers.
In the recent past there have been attempts to provide regulatory unlocks to the industry. The
growth is expected in overall retail market to accelerate going forward. This growth would be
driven by significant demographic shifts: 70% increase in income levels. In 2014, food &
grocery accounted for nearly 69 per cent of total revenues in the retail sector, followed by
apparel (8.0 per cent). Demand for Western outfits and readymade garments has been
growing at 40–45 per cent annually; apparel penetration is expected to increase to 30-35 per
cent by 2015. In 2014, jewellery accounted for 6 per cent share in India retail sector and its
share is expected to increase from 6 per cent to 8 per cent in FY20.
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Organised Retail Penetration (ORP) in India is low (8 per cent) in 2015 compared with that in
other countries, such as the US (85 per cent). This indicates strong growth potential for
organised retail in India. In 2019, it is estimated that organised retail penetration share would
reach 13 percent and unorganised retail penetration would hold a major share of 87 percent.
Organised retail (growth across categories)
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India’s ‘grocery’ retail segment is the world’s most attractive. Grocery retailers recorded
healthy growth during 2014 and is expected to become world’s third largest grocery market
with an estimated revenue of USD 566bn by 2016.
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Single Brand Retail
Single-brand retailing is typically dominated by categories such as luxury goods, apparel and
accessories, and footwear. Nevertheless, it also encompasses a host of other product
categories. For categories such as jewellery and watches, personal care, CDIT and travel
goods, leading players largely focus on MBOs/department stores to drive sales. However,
driven by the width of merchandise and the pull of brand, leading players across categories
such as personal care, CDIT, and jewellery and watches are increasingly setting up EBOs.
While the Indian market offers significant potential and it is critical for foreign brands to
conduct a detailed opportunity assessment and tailor their business models and strategy as per
the Indian environment.
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A typical decision road map for entry into single brand retail in India is given below for
reference.
Opportunity Analysis: Macroeconomic assessment of India Market/Competition analysis
Regulatory framework
Strategy and business plan development: Vision for the Indian market Strategy design
financial projections and funding requirements
Assess the need for a partner: If the foreign brand intends to invest 100% in Indian
retailing, there may not be a need for an Indian partner. However, in categories where it’s
difficult to meet the sourcing norms, a partner would be necessary.
Choose a partner: Partner requirements and profiling evaluation, shortlisting, selection,
negotiation and closure structuring and due diligence.
Setting up operations: Tax structure and FIPB approval Incorporation in India
Organizational structure.
Pre-operative considerations: Indirect tax registrations – VAT, CST, etc. establish a supply
chain and sourcing model. Develop an internal control framework.
Growth strategy: Review the strategy and business plan, update rollout plan. Opportunities
for inorganic growth.
Multi-brand retail
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Many foreign retailers engaged in this segment globally have set up a wholly owned
subsidiary in India to undertake business-to-business trading activity and have forged
partnerships with Indian retail partners.
One important area that needs to be addressed in the proposed policy is the mandatory
sourcing of 30% of the value of products from small enterprises, which are defined to mean
enterprises having a total investment in plant and machinery not exceeding 1 million USD. It
is possible that such small enterprises may become large organically on account of long-term
contracts with the retailers in compliance with the said conditions. To encourage
development of small enterprises that organically become large, they should also be
considered as eligible suppliers to the Indian retail trading companies for meeting the said
requirement. This principle is similar to the concept of the ‘carry-on business licence’, which
historically applied to small-scale enterprises which grew large organically, to carry on their
business and continue to avail benefits of the SSI sector.
E-commerce
E-commerce activities are also governed by the principles mentioned above i.e. companies
can engage only in B2B e-commerce trading and not in retail trading (except single-brand
retail trading).
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7. Analytics in retail
Data generated from the various digital touchpoints is already providing insights into
customer behaviour. Trends like new payment types and variable store footprints continue to
redefine ways in which consumers are interacting with retailers. Although stores remain an
indispensable part of the shopping journey, digital channels have become the first touchpoint
for consumers today. CEOs of retail and consumer goods companies who were interviewed
as part of PwC’s 19th Annual Global CEO Survey rated data and analytics technologies as
their key area of focus. The new operating model will be customer centric, with data analytics
at the heart of the decision-making process, enabled by appropriate technology and tools.
While physical retail constitutes a larger share of total retail, online retail continues to show
accelerated growth. This is because the latter offers convenience in terms of anytime,
anywhere gratification, along with the best deals on products. Retailers today do not just sell
products; instead, they are offering services which focus on delivering a differentiated
experience. Many leading retailers have merged their online and offline divisions so that the
same team oversees merchandising, planning and marketing for their physical stores and ecommerce. In-store customers are now able to browse products and place orders on handheld
devices, following which they can pick up their items from a collection point. Retailers are
improving their profitability by merging in-store and digital operations.
Retailers are taking to social media with campaigns and promotion activities. Clearly, social
media is the ‘great influencer’. Retailers are now focussing on offering a differentiated instore experience. While in-store customer traffic has been an important metric to measure
marketing spend effectiveness and conversion rate, digital channels are becoming important
touchpoints for an omnichannel experience. With this wealth of customer data, retailers will
be able to drive newer strategies for revenue generation and cost management in the race
towards turning profitable.
The new challenges retailers are facing today include engagement, digitisation, trust and
disruptions. A structured analytics-driven approach can help retailers successfully undertake
the journey from discovery to trust, description, prediction, optimisation, empowerment and
finally embedding of intelligence in their existing operations workflows. Retailers can use the
business insights generated from analytics to effectively align physical and digital store
operations under a single management team with incentives that are agnostic to channel of
sale. They can set up flexible data infrastructure that is able to build a ‘single view of a
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customer’ and deliver real-time operations. As a result, retailers would be able to successfully
spot opportunities, quickly assess ideas and test and learn from these experiences.
They would be able to innovate continuously and understand and embrace new business
models. Data and analytics would act as a core enabling capability and help them to exploit
the latest technologies to deliver better digital experiences for their customers and integrate
digital channels and operations into the fabric of their businesses.
The two important areas under marketing analytics are pricing and promotion analytics.
Retailers are faced with daily inventory decisions and often lack the time and tools to take a
step back and strategically address how to better align supply and demand.
Adopting a forward-looking and analytics-based approach to inventory management gives
retailers a clear view of how much is left on the table with their current inventory
replenishment strategy and the impact of alternative strategies. This enables the retailer to
take a more informed decision about which replenishment strategies better align supply and
demand, reduce excess inventory, cause fewer lost sales, and improve customer experience.
Mobile technologies, cyber security and data analytics are important areas of investment for
retailers. These can help them to significantly improve their operational efficiency and
deliver a better customer experience.
The components of a successful retail analytics strategy comprise the following six areas:
a) Self-service analytics: Making analytics a more democratic process by allowing users
to make decisions based on their own queries without requiring any sophistication
b) Real-time in-memory: A move ahead of the traditional relational database based
approach to in-memory real-time analytics to process requests virtually in real time
c) Predictive modelling: Developing an analytical model to predict future outcomes and
empower business users to take decisions quickly
d) Big data and hybrid architectures: Convergence of structured and unstructured data
through data integration across apps, sensors, social media and other channels
e) Cloud analytics: Highly scalable and easy way to store and access relevant
information, which allows users to access more data faster
f) Advanced visualisations: Present data in visually compelling ways, enabling
companies to expand business intelligence capabilities extended to their executives
and other employees
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These components can help the retailer to create a truly advanced analytics programme
and to capitalise on the valuable insights generated to better connect with customers and
increase profitability.
Retail Analytics framework
Retail Analytics can be used in the following areas.
a) Merchandising
b) Marketing
c) Supply Chain
d) Store Operations
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8. Conclusion
“There is only one boss: the customer. And he can fire everybody in the company from the
chairman on down, simply by spending his money somewhere else.” As rightly observed by
Sam Walton, retail is all about customer experience and taking it to the next level. In these
changing times, price is no more the only differentiator; customer experience has emerged to
be equally important. While retailers are doing everything to woo customers, the ‘million
dollar’ question is ‘How do I increase customer stickiness to the brand?’
Customer loyalty has been shifting across all formats—be it the kirana stores or the
hypermarkets. Stores are reinventing themselves to stay relevant and convenient. Retailers
are not necessarily adopting one-size-fits-all strategies. Thus, success lies in the fact that
‘what can be measured can be managed’. Expanding the product offering, promotional
strategies and offers to draw higher footfalls is passé. Innovation is a more tactical term now,
and it is having positive effects. For the generation that works on laptops and mobile phones,
quick turnaround time is utmost important. Thus, being present across multiple channels has
become inevitable. The discussion point is when and how to monetise it.
Growth is no more seen as a success measure. Profitable growth is the norm in the board
rooms. Shedding all inhibition, letting go of formats that do not make business sense and
closing unprofitable stores are some steps taken to send a clear message to the stakeholders,
that profitability is the key to sustainable growth.
Online shopping experience are still lagging behind consumer expectations. Faster delivery,
quality and price the pillars defining value for online consumers.
Indian customers are tremendously evolving digitally. Post demonetization in 2016 the mode
of payment has factored shopping styles. Cash on delivery which was a prevalent mode of
payments has now taken the backseat. Growth of digital payment companies have grown. As
anticipated retail industry was one of most affected sector hit by demonetization. Automobile
retail companies suffered from lowest sales in the last 5 years.
The evolution of retail in Indian economy in the last decade has not been tremendous. A
bigger part of the pie is still enjoyed by unorganized sector. FDI restrictions on multi brand
retail mean consumers have to still wait for the offerings of Walmart, Carrefour etc. Unless
some more local players join the competition the retail landscape will still remain in the
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rudimentary stage. Revolution in e-commerce can add some value to the consumers but the
sustainability of Indian online players like Flipkart, Snapdeal etc. are still doubted.
The Indian customers today have several choices that they can make. The boundaries among
cities are fading quickly. Infrastructure and connectivity are improving by the month and
customer awareness is at an all-time high.
The Indian customer is creating the new ‘Indian Bazaar’.
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