PROJECT REPORT

ON

RETAILING IN INDIA (Subhiksha)

(Departmental store, Hypermarket, Supermarket)

A PROJECT SUBMITTED

IN PART COMPLETION OF

POST GRADUATE DIPLOMA IN BUSINESS ADMINISTRATION

TO TIMSR

RAJA MALIK

UNDER THE GUIDANCE OF [Link]

THAKUR INSTITUTE OF MANAGEMENT STUDIES AND

RESEARCH

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 CERTIFICATE

This is to certify that the study presented by Raja Malik to Thakur institute of
management studies and research in full completion of Post graduate diploma
in business administration under Retailing in India has been done under my
guidance.

The Project is in the nature of original work that has not so far been submitted for
any other course in this institute or any other institute. Reference of work and
relative sources of information have been given at the end of the project.

Signature of the Candidate

Forwarded through the research guide

Signature of the Guide

Prof.:- R. M. KOSHTI.

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 ACKNOWLEDGEMENT

It was a grate experience to work on this project. This project made me to interact
with many people to whom I should be obliged, and thankful. Though this
project bears my name I would like to say, that it was a joint efforts of all those
who I have acknowledge as below. This project bears the imprints of these hard to
forget people.
I would like to thank my project guide, Mr. [Link], who has been a
helping hand for me while working on this project who guided me in every
possible aspect.
And I would like to appreciate my college, for giving me an opportunity to put
up a project on such a wonderful topic, which added a lot to my knowledge.

Last but not the least I would like to thank all the employees and the staff of
Subhiksha, for giving me valuable insights.

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 Executive Summary

India has already proven its mettle as a super power in world in the area of
information technology. The retail industry offers to bloom to same level if
conductive environment and support is provided to it.
World over, the retail segment has performed exceptionally since its inception in the 20th
century.

SOME FACTS:

Retail is currently the biggest industry in the world with sales of $7.2 trillion every
10th billionaire in the world is a retailer. 25 of the top 50 Fortune 500 companies are in
retail.

The Indian retail story couldn't have been more different. India has approx 12 million
retail stores, more than rest of the world put together. But the per capita square feet area
under retail is just 2 [Link] or 0.2 sq. meters with fragmented keerana stores being the
predominant players. Retailing in India has remained in the unorganized sector and
largely untouched by corporates.

However, times are changing.. With the GDP at an all time high and income levels
shooting through the roof, the average Indian consumer has never had it so good. The
propensity to consume has reached peaks that had never been scaled before. Credit cards
are flashed with disdain and shopping baskets are getting bigger all the time. Here are
some factors that indicate the potential of retail in India:
• At 271 million, one of the largest consuming base in the world, forming 27% of the total
population.
• A high spending community below 45 years comprises 81 percent of the population.
• A young population with 54% population below 25 years.

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• Increased literacy from 58% in 1965 to 70% in 2006.
• Increase in working women from 1.3 million in 1961 to 4.8 million in 1998.
• Increase in media penetration to 38-million cable household and 80-million TV
household in 2001.
Inspite of above factors organized retail stands at 14 per cent in India compared to 85% in
USA, 40% in Thailand, 55% in Malaysia and 20% in China. Consultants have predicted
that retail in India is in a take off stage and expect the share of organized retail to jump
from the current 14 per cent to 28 per cent by 2010.

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 PARTICULARS

A) Introduction

1) Who is Retailer?

2) Channels of Distribution

B) Retailing strategy.

C) Kinds of Retailers

D) Retail sector – Upward Curve

E) Exciting jobs in the retail sector

F) How the customers are categorized

G) What the customers will gain

H) FDI in Retail

I) Big Players in Retail

J) Subhkisha

INTRODUCTION

Almost every thing we use in our daily life including the food we eat, costumes
we wear, and the thing we need for our home or for ourselves, are bought from
retail Stores. Goods manufactured all over the world, but sold through the chain
of retail stores. World over, the retail segment has performed exceptionally since its
inception in the 20th century, Sample these facts:

• Retail is currently the biggest industry in the world with sales of $7.2 trillion.
• Every 10th billionaire in the world is a retailer.
• 35 of the top 50 Fortune 500 companies are in retail.

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LARGEST EMPLOYER IN THE WORLD
The Indian retail story could not have been more different. India has approx 12
million retail stores, more than rest of the world put together. However, the per
capita square feet area under retail is just 2 [Link] or 0.2 sq. meters with
fragmented Father & Sons "keerana" stores being the predominant players.
Retailing in India has remained in the unorganized sector and largely untouched
by corporate.

However, time is changing, with the GDP at an all time high and income level
shooting through the roof (Indian income raised by 29.5% leading rest of the
world in the year 2005-2009) average Indian consumer has never had it so good,
with propensity to consume reaching peak that have never been scaled before.
Credit cards are flashed with disdain and shopping baskets are getting bigger all
the time.

Here are some factors that indicate the potential of retail in India:

At 271 million, one of the largest consuming bases in the World, forming 27% of
the total population:-
• A high spending community below 45 years comprises 81% of the
population.
• A young population with 54% of population below 25 years.
• Will increased literacy from 44% in 1965 to 70% in 2008.
• Increase in workingwomen from 1.3 million in 1961 to 4.8 million in 1999.
• Increase in media penetration to 38-miIlion cable household and 90-million
TV household in 2006.

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In spite of all the above factors organized retail stands at 9 per cent in India
compared to 85% in USA, 40% in Thailand, 55% in Malaysia and 20% in China.
Consultants have predicted that retail in India is in a take off stage and expect
the share of organized retail to jump from the current 8 per cent to 14 per cent by
2010. No wonder that consultants have estimated that by 2005, the retail business
would have absorbed 5 lakh employees directly.

WHO IS RETAILER

A Retailer is a person who specializes in selling certain type of good or services to

consumer for their personal use. There are many kinds of retail stores I including
grocery stores, departmental stores, specialty stores, convenience stores, chemist
stores, and fast food outlets among others. Retailing is the business of buying
goods from a manufacturer or wholesaler and the selling these products and services
to consumer for fulfilling their family or personal need. A retailer is, in fact, the
final link bin the distribution channel connecting the manufacturer with the Itasiimer.

According to the Philip kotler, "Retailing includes all the activities involve in
selling goods or service directly to final consumers for their personal, non
business use". Through the many institutes like manufacturers, wholesalers and
retailers are engaged in retail business. The store retailer, whose income comes
from retailing, accounts for a major portion of retail.

In the chain of distribution of goods from the producer/manufacturer to the

consumer the retail play an extremely crucial role. Consumer gets an opportunity
to choose products and brands that he wishes to buy in retail store. Hence, the
retailer knows the specific need of the customer and can accurately, successfully
monitor the changes in the consumer demand from time to time.

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Wholesalers aid distributor buy product from the manufacturers and sell them, in
the turn, to the retailers, who finally sell this product to the final consumer.
Wholesalers therefore satisfy needs of the retailer, while the latter direct there
efforts towards satisfying the need of the consumer. The retailer thus signifies the
last but most important link in the process of sell of any product since out of all
the sellers, the retailer alone comes into direct contact with the ultimate consumer.

Sometimes manufacturer as well as, wholesaler also performs the function of

retailers by themselves by directly marketing the product that they manufacture
or distribute.

However, such a decision should be taken for the good reason, as retailing itself
is very specialized and complex subject. It is these complexities of retailing that
deter most manufacturers and distributors getting involved in it. It is generally
better to focus on just one of the channels of distribution for optimal use. This is
where the retailer plays a crucial role; the manufacturer would concentrate on
manufacturing, while the retailers would concentrates on catering customers with
betters service and product.

CHANNELS OF DISTRIBUTION

Numbers of channels for distribution are available to the retailers, from which
they must choose the one most suitable for them considering the circumstances
under which they operate. From the diagram given bellow, we should note that
retailers outsource the goods from the distributors; many of the retailers also
prefer to do so from the manufacturer. Many companies perform more than one
function, but they must fully understand the feasibility of and the risks implicit
in their multifarious functions. When retailer performs both the function of
distributor and the retailer, it is called as "VERTICAL INTEGRATION".

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In such a situation, a retailer not only buys directly from a manufacturer but also
distributes its merchandise to the stores. Some retailer also gets vertically
integrated, as they also are involved in designing the product that they sell.

MANUFACTURE  DISTRIBUTOR  RETAILER  CONSUMER.

MANUFACTURE   RETAILER  CONSUMER
MANUFACTURE   CONSUMER

Because of its very nature, many of the expanses in the retail business are fixed
expanses. While this is true for both independent retailers as well as chain store
retailers, the magnitude of expanses is far greater in the case of the latter.

Since economics of scale make retailing more profitable when the major fixed
expenses are apportioned over a number of stores, chain store retailing has
become more popular than independent retailing this is testimony to the fact
most retail companies are fully aware of the benefits of chain store retailing
(Subhiksha, Wall Mart, Shopper's Stop etc.)

Consequently, retailing is today one of the large industries in the world and even
the largest in some countries. In many of the developed countries, more than so
percent of the population is directly or indirectly employed in retailing. The
retail business is also one of the largest employers in many of the developing
countries. In fact, the number of people employed in the retail business even
exceeds the manufacturing sector.
Broadly speaking, the term retailing refers to an activity of sale to an individual
customer. Based on the nature of there retailing operations, companies are
grouped into - Retail (Apparel), Retail (Grocers), Retail (Pharmacies), Retail
(department and discount stores), etc. Given below is the classification of
different store formats within the retail industry.

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 RETAILING STRATEGY

To be successful, a retailer must distinguish itself from other retailers and

develop a strategy for satisfying the needs and preferences of a specific consumer
group. This strategy, called a retail mix, involves careful consideration of (1) the
product to sell, (2) the quantity at which to make the product available, (3) the
location at which to sell the product, (4) the time to make the product available,
(5) the pricing of the product, and (6) the appeal that can be generated to attract
the consumer's interest.

A) THE PRODUCT
Retailers strive to offer products that appeal to the tastes of the consumer, are of
good quality, and function properly. Sometimes the product must also provide
psychological and emotional benefits, such as prestige or convenience. For
example, an expensive watch with a well-known, visible brand name may give
its owner a sense of prestige.

B) QUANTITY
Unlike wholesalers, who sell goods in quantities that often are too large to be
useful for individuals or families, retailers sell products in small quantities that
are more s convenient for consumers. For example, wholesalers may sell jeans to
retail stores in lots (units) of a dozen pairs each. Retailers then sell consumers
jeans by the individual pair.

C) LOCATION
A retailer's location must be convenient. In locating retail stores, retailers consider
the market or town in which they want to establish themselves, the part of town to
be in, and the actual site of their store. In some cases, no store is involved because
the right location for shopping for a product is the consumer's home or place of
business. These retailers without stores, known as non store retailers, act as

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direct marketers by contacting customers directly through mail, the Internet,
television, telephone, or other means.

D) TIMING
Retailers must make their products available at times when consumers are
willing and able to buy them. Retailers identify consumer-buying patterns and
adjust such things as store hours, inventory levels, and promotional programs to
accommodate consumers. Retailers also identify special times that generate
opportunities to sell merchandise, such as holidays, changing seasons, and
special occasions, such as weddings and school graduations.

E) PRICING
Retailers use different pricing strategies to attract different consumers. For
example, some stores use low or discount prices to attract economy-minded
consumers, while some stores set higher prices to convey an upscale image.

F) APPEAL
Retailers work hard at creating an image of their store or product that customers
find appealing. Retailers use such promotional techniques as advertising and
public relations to create awareness and build interest in their products. These
techniques also attract customers to the retailer's store, provide valuable
information about the retailer, and persuade customers to buy.

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KINDS OF RETAILERS

There are many kinds of retailers and they can be categorized according to their
store format. Each format has different management and selling techniques for
satisfying the needs of a select group of customers. By using different formats,
retailers are able to differentiate themselves from their competition. The most
common kinds of retailers include specialty stores, department stores, discount
Stores, retail chain stores, warehouse retailers, and off-price retailers.

A) SPECIALTY STORES
Specialty stores offer a limited number of different product lines, such as women's
clothing or sporting goods, but provide their customers with an extensive
selection of brands and styles within each product line.

B) DEPARTMENT STORES
Department stores feature a wide variety of different product lines and a selection
of merchandise within each line. These large stores have many separate
departments that sell different types of merchandise, making a wide variety of
goods available to consumers in one place. Bloomingdale's and Macy's are
examples of two national department store chains.

These are in tern Classified into:

1) FULL -LINE STORES:

Stores that offers a boarder array of merchandise than specialty stores.
Merchandise sold includes apparel, small appliances, electronics, cookware, bath
and kitchen wear, gift ware, etc.

2) SPECIALTY STORE:

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The main Focus in these stores is men's women's, and children's apparel, shoes and
accessories.

C) DISCOUNT STORES
Discount stores, such as Wal-Mart and Kmart, sell a wide variety of merchandise at
low prices. Discount retailers focus on attaining a large volume of sales and in return
some profit margin per sale.

D) RETAIL CHAIN STORES

Retail chain stores are multiple stores that carry much of the same merchandise and
are managed with the same policies. In many cases, chain stores have the same
owner, although sometimes individuals own franchises that are part of a chain.
Any kind of store, such as a specialty store, a department store, or a supermarket,
can be a chain store.

E) WAREHOUSE RETAILERS
Warehouse retailers offer a limited selection of many kinds of products. They deal in
large quantities and tend to have lower prices. Home improvement canters and
warehouse clubs are examples of warehouse retailers.

F) OFF-PRICE RETAILERS
Off-price retailers include factory outlet stores, closeout stores, and one-price
retailers. These stores sell irregular or flawed merchandise, factory overruns—
that is, excess merchandise—and other goods at prices below regular retail prices.

STORE TYPE Length and Breath of Product assortment.

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SPECIALTY STORES Narrow Product line depth assortment
Food Bazaar, Planet Sports, Cross words, Archie's
galore.

DEPARTMENTAL STORE Wide variety of product line i.e clothing, home

furniture, & House hold items Ex Shopper's
stop, Lifestyle, Pantaloons.

SUPERMARKET Wide Variety of food, Laundry, & House hold

Product Ex DMART.

CONVENIENCE STORE Limited lines of High-Turnover convenience goods Ex

Dadhaia, Dall mill.

SUPERSTORES Large Assortment of Routinely Purchased food &

Non food Products, Plus Services Ex Big Bazaar.
Giant Specialty Store that carries a very Deep
Assortment of a Particular Line.

HYPERMARKETS Huge Superstores Ex Sencer.

DISCOUNT STORES Wide variety of merchandise at low prices. Ex Big

Bazaar.

RETAIL CHAIN STORE Retail chain stores are multiple stores that carry much
of the same merchandise and are managed with
the same policies.

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THE RETAIL INDUSTRY

India's retail sector is wearing new clothes and with a three-year compounded
annual growth rate of 46.64 per cent, retail is the fastest growing sector in the
Indian economy. Traditional markets are making way for new formats such as
departmental stores, hypermarkets, supermarkets and specialty stores. Western-
style malls have begun appearing in metros and second-rung cities alike,
introducing the Indian consumer to an unparalleled shopping experience.

Retail sector: on an upward curve

India's vast middle class and its almost untapped retail industry are key
attractions for global retail giants wanting to enter newer markets. While
organised retail in India is only two per cent of the total US$ 215 billion retail
industry, it is expected to grow 25 per cent annually, driven by changing
lifestyles, strong income growth and favourable demographic patterns.

KSA-Technopak, a retail consulting and research agency, predicts that by 2010,

organized retailing in India will cross the US$ 21.5-billion mark from the current
size of US$ 7.5 b

Retailers on the looking for more space

With the continued expansion of retailers, the operational retail space is likely to
reach 100 million sq ft by 2008, with an estimated 500 malls across India.
Retailers are however, still hungry for more space and the high cost of real estate
is becoming a serious handicap in their plans. Reliance alone is expected to have
30 million sq ft of space by 2010 with its range of hypermarkets, supermarkets,
convenience stores in 784 cities and 6,000 rural mandis.

Other big players such as Pantaloon have signed for space in over 100 malls that
are still in development stages, Max Retail and Provogue have secured 800,000 sq
ft and 1 million sq ft of space. According to Pranay Vakil, chairman of Knight
Frank, “There will be a significant gap between supply of retail space and demand over
the next two years.”

By 2007, an estimated 50 million square feet of quality retail space will be

available across India. This is in sharp contrast to the situation a decade ago.
Then, there was not one shopping mall in India. Today, in Delhi, Mumbai and
their suburbs, there are about 100 malls. Of the 700 new malls coming up all over
India, 40 per cent are concentrated in the smaller cities. Organised retailing in
small-town India is growing at a staggering 50-60 per cent a year compared to
35-40 per cent in the large cities.

A push for branded retail

India's branded retail sector, estimated at about US$ 6 billion, makes up only
three per cent of the total market, but is forecast to grow at 25-30 per cent a year
over the next four years, with plush department stores and malls springing up
across the country.

Food retail
Food dominates the shopping basket in India. The US$ 6.1 billion Indian foods
industry, which forms 44 per cent of the entire FMCG sales, is growing at 9 per
cent and has set the growth agenda for modern trade formats. Since nearly 60 per
cent of the average Indian grocery basket comprises non-branded items, the
branded food industry is homing in on converting Indian consumers to branded
food.

The mobile revolution

The retail market for mobile phones - handset, airtime and accessories - is
already a US$ 16.7 billion business, growing at over 20 per cent per year. In
comparison, the consumer electronics and appliance market looks paltry, at just
US$ 5.6 billion, with growth rate just half of the mobile market, and that too in a
good year.

Kids retailing: no child's play

Kids retailing is growing by leaps and bounds in India and those in the industry
say it is likely to see 30-35 per cent growth per annum. From clothes to
stationary, sportswear, outerwear, tailored clothing, eyewear, watches, fragrance,
footwear and accessories, the list is endless. Apparel, however, remains the key
revenue driver accounting for almost 80 per cent of total sales. According to
industry insiders, “The total apparel market in India for kids is around US$ 2.9
billion, out of which about US$ 668.2 – 780.5 million is branded apparel.”

The retail road ahead

The Indian retail market is estimated at US$ 350 billion. But organised retail is
estimated at only US$ 8 billion. However, the opportunity is huge—by 2010,
organised retail is expected to grow to US$ 22 billion. With the growth of
organised retailing estimated at 40 per cent (CAGR) over the next few years,
Indian retailing is clearly at a tipping point. India is currently the ninth largest
retail market in the world. And it is names of small towns like Dehradun,
Vijayawada, Lucknow and Nasik that will power India up the rankings soon.
 EXCITING JOBS IN THE RETAIL SECTOR

The retail boom is here to stay and it brings with it the promise of a lucrative
career, money and growth potential for the young and ambitious. Here's why
you should consider joining the retail sector:
PART I: A fast-moving, well-earning career!

Next, you need to find a JOB PROFILE in line with your interest and aptitude.

Sales
~ Every retail store depends on the sales force to sell its merchandise. If you
enjoy interacting with people and love to be a part of the customer's final
purchasing process than retail sales is for you.
~ You would be expected to provide a high level of service and expertise. Since
you will directly interact with those buying the products, you must know the
product well.
~ You must be flexible, levelheaded, and have a knack for problem solving

Store manager
~ If you always wanted to run your own business or thrive in an environment
that changes rapidly then store management is the perfect career option for you.
~ Store managers are responsible for managing an individual store. Most store
managers take on the duty of day-to-day operations of the store.
~ You would be responsible for encouraging and inspiring the staff to do their
best.
~ You would have to understand and analyse the business and execute plans to
achieve sales and profit targets.

Retail manager
~ The role of retail manager involves understanding the mindset, habits and
lifestyle of the customer.
~ He/she also plans and coordinates the operations of the outlet.
~ This involves determining the layout of merchandise, monitoring the stock
levels, placing orders for new stock, managing the supply chain and keeping and
analyzing records of all financial transactions

Retail buyers
~ Retail buyers are responsible for selecting the merchandise for a store and then
physically buying the goods.
~ They must look at a variety of products and select the right goods for the store.
~ They are expected to study their customers and buy merchandise for the
customers' particular requirements.
~ A buyer's measure of success is calculated in terms of sales, profit, and
customer satisfaction.
~ Retail buying can lead to these career paths.
 Successful retail buyers get into store management.
 They could climb up the ladder to become divisional merchandise
managers.
 Some buyers can branch into product development.
 If you have a strong aptitude for numbers, merchandise planning is the
way to go.

Product Development
~ Retailers today have identified private label merchandise as a viable option. So
if you are looking at creating merchandise, working with designers and
manufacturers, and developing marketing plans, if you think you can draw the
end product from a sketch or concept, then you will thrive in product
development.
~ Most product developers have a background in merchandising.
~ A product development manager needs to understand the timing, quality of
product, assortment planning, and financial issues facing a buyer.

Merchandise Planning
~ In many large retail organisations it is observed that buyers usually do not
develop the financial plans, and distribute the quantities of merchandise to each
store. This function is largely handled by the merchandise planner.
~ Do you have the knack for numbers, organisational and people skills? Do
you enjoy analysing the business and suggesting changes on ways to improve
the wrong? Then merchandise planning may be the path for you.
~ The merchandise planner is expected to understand the challenges of both a
buyer and the store manager. The merchandise planner works closely with the
buyer to understand the assortment plan and marketing strategy.
~ The planner may also be involved in inventory control and price changes.

Retail Design/Visual Merchandising

~ Retail design or visual merchandising plays an important role in this
business. Designers or visual merchandisers are the ones who give a face to the
brand.
~ Corporates are realising the importance of brands and their image. It is
through good designs that a retailer can enhance the brand image and attract the
customers to the store.
~ If you have an eye for detail and a creative mind, retail design can give you the
opportunity to go wild with your ideas.

HOW THE CONSUMERS ARE CATEGORIZED?

The Indian consumers are divided into two categories.

1. High-income urban consumers:-

The high-income urban consumers are willing to pay a higher price for having
the choice of quality products and the complete shopping experience in the large
retail stores.

2. Low-income urban and rural consumers:-

The low-income urban and rural consumers will go for the price sensitive
products which are easily available in the smaller stores located nearby.

The markets in both categories are very large and hence, there is little direct
competition between the two retail sectors. As the awareness and disposable
incomes increase in India, the two categories will merge slowly, before the
competition actually begins. The minor players do not pose a major threat to the
big retailers, because the target consumers are different and the Indian markets
are very large. For the up-market client, who wants the experience, quality and
choice, the shopping mall concept of the larger retail players is very well suited.
However, for the less fortunate clients who prefer lower cost, personal service
and home delivery, the smaller unorganized retail players are best suited. So, the
threat is minimal in the urban areas for both the small and large retail players,
since the markets are very large and varied. But in rural areas, competition will
be present, and the minor players will prevail.

India remains one of the last frontiers of modern retailing. The complexities of
the vast and varied market will be a challenge. But the retailer who can shape the
nascent retail market as well as adapt to India’s unique characteristics will reap
larger rewards over the long term. It is clear that the winner in this retail rush is
going to be the consumers.

CUSTOMERS TO GAIN FROM ORGANIZED RETAIL SECTOR

As the KPMG survey clearly indicates, the Indian retail market is highly
fragmented and distributed. Small mom-and-pop stores have dominated the
market without any semblance of consolidation. The distribution systems of
companies in India have, therefore, evolved to be highly complex.

Off late, however, organised retail has become a buzz word. The major players of
the Indian industry have all got into the act. Reliance Industries has also made
grand plans to deploy their petro-cash into the retail space. ITC's choupals have
an element of organised retail for the village life where 65% of India resides. The
Tatas made their entry through Trent (Westside). The discount retailer Big
Bazaar has made a presence in almost every city. There have been the smaller
regional players such as Foodworld, Nilgiris, Subhiksha and Trinetra.

Who has benefited in this entire retail game? Quite undoubtedly - the customers.
Today, shopping has become an experience in itself with offers and discounts
screaming for the consumer's attention from every shop corner. Discount
retailing has contributed in driving down prices at a time when inflation deems
that the prices should be sky-rocketing.

Who has suffered in this process? I'll start off by saying > the suppliers. Ask the
heads of any major FMCG company today and they will tell you that with the
entry of organized retail, their bargaining power has fallen. With the growth of
huge retailers, the scramble for shelf space boils down to these major retail
players. In developed companies, more than 25% of category sales can happen
through a single retailer. As a result, companies simply have to be seen at these
outlets to avoid loss of revenues. And to do so, they take a cut in their margins
which some discount players pass on to the customers. Numerous studies across
the world have undoubtedly shown that the entry of Walmart into an area has
completely destroyed the small stores in the vicinity. But the key question to the
nay-sayers of FDI into retail is this: Are these local players not doing what you
fear the foreign players will do?

FDI IN RETAIL GETS A BOOST

With the growing integration of the Indian economy with global markets, the
domestic retail sector has undergone rapid transformation.

With India emerging as a major sourcing hub for global retailers, opening up of
the retailing sector to foreign direct investment (FDI) assumed considerable
significance with both private players and India Inc pitching for it.

In a clear signal that it is committed to the reforms process, the UPA government
finally took the first step towards partial liberalization of the retail sector last
month.

The cabinet allowed 51 per cent FDI in single-brand retail. What it essentially
means is that foreign retailers selling goods internationally under a single brand
can now set up their retail chains in India with majority stake instead of
depending on local franchisees.

Simply put Marks & Spencer, Giordano and many others can now have their
own stores in India. The move will also help companies like Nokia and sports
goods majors Nike, who already have a significant presence in India. It could
also be the precursor for the entry of foreign retailers like Wal-Mart and
Carrefour.
Brushing off concerns that the decision will not hurt local kirana stores,
Commerce and Industry Minister Kamal Nath said it would encourage
investment and create jobs. The idea of opening up more sectors to FDI is to
attract more foreign capital by reducing the levels of control in most sectors of
the economy, Nath added.

The Centre has already issued guidelines in this regard that will permit MNCs to
offer multiple products under a single brand with prior government approval.

The timing couldn’t have been more appropriate as it comes against the
backdrop of soaring stock markets, robust economic growth and good Q3
numbers.

LEFT RAISES RED FLAG

Anything with the R-word is an anathema to the Comrades. The Left, which has
consistently opposed FDI in retail said it will hamper employment opportunities.

In a statement, CPI (M) Politburo said the decision to allow 51 per cent FDI in
retail sector would have "serious deleterious effects on the economy and the life
of the people".

On the other hand, industry associations hailed the decision to liberalize the
retail sector.

Terming it as a 'significant step', they said the move would increase inflow of
foreign capital, eventually creating more job opportunities. They further felt that
it would give a fillip to manufacturing of branded goods in the country and
attract best international players.

The green signal to 51 per cent FDI in single-brand retail stores, however, has
had a mixed response from India Inc and foreign labels. While some felt that its
impact will be largely limited to attracting more luxury brands, others viewed it
as a step in the right direction.

The doubting Thomases of the lot felt that unless 100 per cent is permitted, it
won’t do much good to their business. Another question being asked is whether
India has the necessary environment and are Indians game for high-end luxury
brands?

SUNRISE SECTOR

According to a study by the Indian Council for Research on International

Economic Relations (ICRIER), retailing contributes to 11 per cent of the GDP and
employs seven per cent of the total national workforce.

The share of the organised sector in retail trade is currently a mere 3 per cent and
is expected to reach 12-18 per cent by 2010, indicating a huge opportunity for
prospective new players.

Global retailers have already been sourcing from India and their presence will
enhance exports from India as they leverage relationships with local suppliers.

To reach its potential, the Indian retail sector requires significant capital,
technology and best practices to bridge the existing productivity gap and achieve
scale in operations, which are critical to the sector’s success.

So while the government may have shown the way, only time will tell how
promising it will be for global retailers to set up shop in India.

BIG PLAYERS IN RETAIL

The big Indian retail players include Shopper’s Stop, FoodWorld, Vivek’s,
Nilgiris, Pantaloon, Subhiksha, Ebony, Crosswords, Lifestyle, Globus, Barista,
Qwiky’s, Café Coffee Day, Wills Lifestyle, Titan, Raymond, Bata and Westside.
Most of the Indian players have ready and easy access to prime real estate
locations. The international players comprise McDonald’s, Pizza Hut, Dominos,
Gautier, Spencer’s, Levis, Lee, Nike, Adidas, TGIF, Bennetton, Swarovski’s, Sony,
Sharp, Kodak, and The Medicine Shoppe. Most of the foreign companies have to
depend upon shopping malls and rentals for their outlets. This has been a
deterrent, since such prime real estate is relatively expensive in Indian cities.

Birla Group to invest Rs. 6,000 for its retail venture

The Aditya Birla Group will reportedly be investing Rs. 50-60 billion into its
retail venture in the initial phase. Birla TMT Holdings will be partly financing the
investment with the balance to be raised through debt. So far, Birla TMT has
raised $980 million by selling 33% stake of Idea Cellular to 6 private equity firms.
The company will also leverage on its retail reach via Birla Sun Life and Idea
Cellular with its 11 million users and 11.5% share of the GSM market.
Pantaloon plans to dilute stake in divisions

Pantaloon Retail’s Kishore Biyani is planning to dilute stake in some of his

subsidiaries to take on the new entrants in the retail field. The divisions that will
be diluted are Future Media, Future Capital, Future Logistics and Central,
although the method of dilution is not clear whether it would be via IPOs,
preferential allotment or a strategic sale.

Edelweiss Securities has estimated that PRIL requires Rs. 45 billion, of which Rs.
10 billion is likely to come from equity dilution.

Another Rs. 23 billion would come from external sources. ICICI Ventures, and
Kotak SEAF India have already bought 15% and 6% of Home Solutions, another
PRIL subsidiary.

According to Kishore Biyani, CEO of the Future Group, “For retail chains across
the globe, the world is becoming a single market. We are looking at markets
across the world from where one can source merchandise at the lowest price. We
have opened our global sourcing offices in Hong Kong and China a few days
back.”

Pantaloon is keen on spinning off a mall division, from its in house Central Mall,
to create a new company. The new company will most likely go in for an IPO in
end 2008. According to Rakesh Biyani, director of Pantaloon Retail, "Currently,
Central is a division under the Pantaloon Retail, and there are only four Central
malls in the country — Bangalore, Hyderabad, Pune and Vadodara. We will be
coming up with a new company for the same and will list it on the stock
exchange.”
Big Bazaar to open 60 new stores

At the launch of the second Big Bazaar in Hyderabad, Pantaloon Retail

announced that it will be aggressively increasing its stores, adding 60 new stores
in the next eight months. According to Rohit Malhotra, Operations Head for
South Zone, “Our aim is to have 100 Big Bazaars this year.” Twenty two of the
new stores will be located in the south of which close to half will be in tier II
cities.

Shoppers Stop in different cities

Department store chain Shoppers’ Stop opened its first store in Lucknow,
making it the company’s 21st store in the country. Covering an area of 45,000 sq
ft, the store is spread over three floors and required an investment of an
estimated Rs. 100 million. The company already had 200 members from the store
loyalty programme First Citizen that have been shopping at other cities.

Bharti-Wal-Mart to open in Hyderabad

Hyderabad seems to be gearing up for the next mega retail entry, after Reliance
and landmark’s Max Retail stores as Bharti-Wal-Mart is reportedly looking for
land to set up 2 hypermarkets. Sources say that the hypermarkets will cover
80,000 sq ft of space and will be on the outskirts of the city. In total the company
is looking for 3 acres of land.

Aditya Birla Group acquires out Trinethra.

The Aditya Birla Group has bought the controlling stake in Trinethra Super
Retail Ltd, which has over 100 food and grocery retail stores in south India.
Trinethra recorded a turnover of Rs. 1.7 billion and has 83 stores in Andhra
Pradesh, 26 in Bangalore, where it operates under the Fabmall name, and 15 in
Chennai. A few new stores are also coming up in Kerala and other smaller Tier II
cities in south India.

With the purchase of Trinethra, the Aditya Birla Group has leapt ahead of
Reliance in retail space. The food and grocery segment is key to the Indian retail
market, an estimated 55% spend of a total of $300 billion each year. Bangalore
based Nilgiris was sold to Actis due to differences in the family that ran the
company. Another company on the lookout to sell is Jaipur based Bardiya Group
who is looking to either sell or form a strategic association for its 4 Big Shopper
stores in the city.

Market sources estimate that the Birlas paid an estimated Rs. 1.47 billion for the
company which has 172 stores and is spread across the southern states.

Comparatively, Reliance’s purchase of the Adani Group which has 54 stores for
Rs. 1.1 billion seems more expensive.

GODREJ IN RETAIL

The Godrej Group plans to set up a chain of retail outlets across the country as a
surging economy and rising affluence create new business opportunities for one
of India’s oldest business houses. The Rs. 6000-crs soaps-to-software major wants
to use its brand equity in the retail space and is looking at tying up with a foreign
retailer, people close to the development. The group derives one-third of its
turnover from the FMCG business and the rest from sectors such as agri
business, appliances and furniture, properties etc.

The retail initiative may be undertaken through Godrej Industries, which holds
more than 80% in Godrej Properties, handled by Mr. Godrej’s son Pirojsha. At
present, Godrej Properties is developing 20 million sqft of land across India.
There are clear synergies in the retail business for the group, which enjoys
tremendous brand equity and has a sound understanding of the Indian
consumer market through Godrej Consumer Products, Godrej Appliances.

Godrej & Boyce has also roped in Bollywood actress Preity Zinta as brand
ambassador for the appliance division. The company has decided to spent nearly
4% of its turnover for advertising purpose.

KMART

KMART, one of America’s leading discount retailers, is the latest to vie for a
share of India’s $12-billion organized retail market. KMART executives recently
met Department of Industrial Policy and Promotion officials and discussed their
entry plans.

KMART operates in the discount store and hypermarket formats, hopes to get an
insight into the Indian retail market through the chash-and-carry venture, which
could be leveraged when the government allows FDI in multi-brand retail.

RELIANCE IN RETAIL
Reliance Industries chairman Mukesh Ambani, equipped with a war chest of an
estimated Rs 100,000 crore (Rs 1000 billion), is understood to be on a global hunt
for acquiring a retail giant of the size of Wal-Mart or Tesco.

Listed as world's 14th richest person by Forbes, Ambani is believed to have let
loose his advisers to scout the globe, hoping to market India's agriculture
produce, including fruits and vegetables that could fetch much higher value
abroad than the domestic market.

After the merger of group company IPCL with flagship RIL, the Indian business
tycoon is believed to have created a trust with cash up to Rs 25,000 crore (Rs 250
billion), which could be doubled with other investors for leveraging the
equivalent debt for global acquisitions, a source in the know of the development
said.

Mukesh Ambani has already committed an investment of Rs 25,000 crore for the
retail operations in India, which would comprise hypermarkets, supermarkets
and speciality stores.

Reliance Retail has already emerged as the single largest player in the fresh food
format stores within months of its launch and Ambani is believed to be keen on
taking his farm-to-fork project global.
Towards this, he is entering into massive contract farming and strengthening the
supply chain, which includes creating a huge cold storage network and
streamlining transportation.

The group has its own fleet of cargo aircraft, which could ensure supplies to any
part of the globe overnight. The move comes amid a rush among global retail
giants to enter India, one of the most promising retail markets with a population
of over one billion.

While the likes of Wal-Mart, which has a revenue of around $320 billion, is
looking at the Indian retail market worth $300 billion, sources said Ambani
believes the value for Indian farm produce abroad could be ten times more than
what it can fetch at home.

When R Subramanian became an entrepreneur and

started a retail chain called Subhiksha, there were not
many entrepreneurs in India. In his family too, there
were no entrepreneurs.

After obtaining an engineering degree from the Indian Institute of Technology-

Madras, he decided to join Indian Institute of Management-Ahmedabad as he
was sure about one thing -- that he would not leave India to go abroad.
Ten years after Subhiksha was set up, the retail chain has around 500 outlets all
over India which Subramanian wants to double by 2007-end.
INTERVIEW OF Mr. SUBRAMANIAN

Entering the retail market ten years ago there was no great logic behind entering
the retail market in 1997. It made a study of two areas: software and retail.
Between software and retail, We thought we were a bit late for software as
Satyam, Infosys, Wipro, TCS, etc had already established by then. We didn't
want to be a small and late entrant.
In retail, we would be one of the early entrants, so we would have the learning
curve much to our advantage. We allocated a Rs 5 crore (Rs 50 million) corpus to
it and entered the retail business. There was a lot of thought process behind it.
We wanted to attract not the top end customer but the aam aadmi.

From our research of three months, we found that consumers prefer buying
groceries from closer home. So, we decided to set up 1,000 sq ft shops all across
the city and not a 10,000 sq ft big store at one location in Chennai.

The next question was why would he come to our store abandoning the existing
store? It had to be the price, because ultimately there is no difference between the
branded products like say Boost or Surf or such things. So, we decided to sell
branded products at a lower price.

On starting Subhiksha.
We looked at all sorts of names; and finally we chose the Sanskrit word
Subhiksha (prosperity) because it reflects the Indian ethos and it is a word that can
be understood all over India. What we were trying to do was different from the
western model; our model is truly Indian. Our theme was, why pay more when
you can get it for less at Subhiksha?

In March, 1997, we opened our first store in Thiruvanmiyoor in Chennai with an

investment of around Rs 4-5 lakh (Rs 400,000-500,000). We opened it with the
clear idea that it is part of a larger system. We thought the day we opened, there
would be a stampede because the prices were low and we would sell goods of Rs
30-40 lakh (Rs 3-4 million) by the month end. But there was nothing of that sort!
We sold goods of only Rs 5-6 lakh (Rs 500,000-600,000) in the first month.

Yes, consumers were very surprised, and they gingerly looked at the products
and asked, are they seconds or old stock or defective products? In the first year,
we opened ten stores in Chennai.

We also started selling medicines at a discount. On the third day of our opening
the pharmacy, there were about 100 people outside our store in the morning. We
thought all of them were waiting to buy from our store. What we were expecting
on day one happened on day three, we thought happily.

But we soon found that they were not there to buy anything; they were chemists
from the neighborhood who had come to do a dharma (protest) saying we could
not sell medicines at a discount.
Finally we had to go to court, and it was only in 1999 that the Supreme Court
gave a ruling that we could sell medicines at a discount. We were doing quite
well on the pharma front and we enjoyed all the attention we got.
Another thing is the medicines that we were selling at a discount were bought
mainly by the elderly who have no fixed income and they welcomed any
discount. We were quite happy to be able to help them in some way. Medicine
retailing is more of a service than business for us. Of course, it is good business
for us too. But our main motto is service.

ON HIS EXPANSION PLANS

By March 1999, we started expanding rapidly. From 14 stores, we expanded to 50

stores by June 2000. In the next two years, we had 120-130 stores across Tamil

Nadu. Another big thing was, in 2000, ICICI Venture invested in our company.
Today, we have 145 stores all over Tamil Nadu.

We saw to it that the moment we got into a city, we started as many stores as
possible there. Only that made business sense. Then, till 2004, we made sure that
we consolidated before we expanded, though there was a lot of pressure on us to
expand nationally.

We decided to look at every part of India which is significantly literate and is a

significant consumption market. We wanted to be everywhere. We looked at the
telecom companies as our role model. They employed capable regional managers
and expanded.
Our business is also extremely local. We can't sit in Chennai and run a store in
Chandigarh. We decided to have very good quality people to run the region,
area, town and the store.

In 2004-05, we decided to have 420 stores in places like Gujarat, Delhi, Mumbai,
Andhra and Karnataka by 2006. In 2005, we started recruiting people in various
regions. Today, we have 500 plus stores in all the places that we had planned. It
will go up to 600-plus by the month end.

We are already India's largest retail chain store with 500-plus stores. We plan to
have 1,000-plus stores by the end of this year.

India is a large country and there are still opportunities to avail of. Though now,
the thought of opening stores outside India is not tempting because there are
enough opportunities in India. We may look at overseas markets too. . . Maybe
later, after we open 2,000 or 2,500 or 3,000 stores in India.

RISK IN RETAILING AND EXPANSION?

We are not mad risk takers. We are not producing movies. We do a lot of
research before starting business in an area, and we have back-up plans in place.
We work with very good people, and if something goes wrong, we try to take
corrective steps.
The big advantage we have is, we are not creating products. So there are no
worries about whether it would succeed or not. Consumers are smart and they
are all price-conscious and they want to finish the work as fast as they can. They
don't go to a provision store for fun.
On the entry of MNCs and Reliance in the retail market

Everybody has been asking me, are you worried about Wal-Mart coming to
India? Ultimately Wal-Mart is also going to be run by people like us. The point is
you need not worry about anybody's entry. There is a huge potential for growth
in India. There is potential for another ten people to come in.

Ultimately the share of the unorganised kiranas will come down and the share of
organised sector will go up because of the efficacy in buying and distributing.
Also, this is an extremely low margin business. Ultimately, everybody has to sell
within the cost. It is not that we are geniuses; we have been in the business for
ten years, and we have made enough mistakes and learnt from them.

I don't think any child will learn to walk without falling down first, however
good the parent is.

We made our mistakes when we were small. The bigger you are, the mistakes
will cost you more.

SATISFACTION

There are two kinds (of satisfaction). We genuinely believe that through efficiency,
we are helping the consumers save more. We are also happy that we are bringing
in a model that is Indian, capable of supporting the middle class of India.
On what he does other than thinking about Subhiksha?
I would like to say I think of Subhiksha all the time, but I do not. I read a lot,
mainly online. I lead a reasonably balanced life. Working 12-13 hours a day six
days a week, is my working pattern. I keep Sunday evenings and afternoons only
for family. But I travel 12-15 days a month visiting all the Subhiksha regions.

I am a pretty cool person, relaxed all the time. I am not hassled about anything.
Personally I am not a very ambitious person; I am happy with my curd-rice!
What gives me a kick is to show that a business model from India is superior to a
business model imported from the West.

We are living in an age where we do not have to be taught by the West what we
should do in our country.

Subhiksha to open 100 stores in Mumbai in one month; announces 1,000 stores
within one year

Subhiksha, the Chennai based, a decade old, no frills, food, grocery, pharma and
telecom, discount retail chain is gearing up to open 180 neighbourhood,
convenience retail stores in the eight cities of the state of Maharashtra including
Pune, Nasik, Aurangabad and Nagpur, Kolhapur, Sholapurand Sangli. Of these
the lion’s share will go to Mumbai, which will have 100 of the 180 stores planned.
80 of the 100 Mumbai Subhiksha stores are slated to go on strean by mid-
January, 2007, reports PTI.
The rapidly-growing retail chain has already crossed the 450-store mark across
five states in the country and is currently occupying retail space of more than one
million square feet.

“We are targeting a 1,000-strong retail network by end-2007. We are looking at

providing customers across the country with a viable smart shopping option,” R
Subramaniam, Managing Director, Subhiksha Trading Services, said today. At an

average cost of Rs. 50 lakhs per outlet, Subhiksha will invest Rs. 500 crores to
expand its network to 1000 outlets. Subhiksha, is targetting a turnover of Rs.
3,500 crore during 2007.

“With the implementation of our expansion in Maharashtra, we will complete

our 600-store target. We will shortly activate Phase II of our expansion plans by
foraying into the north and east including Chandigarh,

Punjab, Madhya Pradesh, Uttar Pradesh, Haryana and West Bengal” he said.
Phase II involves Rs 200-crore investment in opening 400 stores.

The rapidly expanding chain, which claims to be the biggest chain in the country,
is following the carpet bombing strategy for its expansion, wherein, to create
maximum impact, it simultaneously launches a cluster of stores in a given
geography.
It may be recalled that only a few months back Subhiksha to finance its
ambitious expansion drive had raised Rs. 300 crore. It has also recently raised Rs.
80 crore through the rights issue. Currently, ICICI venture Capital holds 24% in
the equity capital of Subhiksha.

Subhiksha claims five Reliance ‘heads’

In the midst of reports doing rounds in the business media of Reliance Retail
eyeing ‘Subhiksha’ as a takeover target , here comes the news of five senor
executives leaving Reliance Retail to join the food, grocery, pharmaceutical and

the telecom chain ‘Subhiksha.’ As per a news report published in the Economic
Times, in the past six weeks, five Reliance managers, at VP and AVP levels, have
left Reliance Retail to take up assignments with the discount chain Subhiksha,
which is expanding its decade old chain to 1,000 stores by end 2007.

The exodus of managers from Reliance Retail is rather intriguing, particularly

when they have announced the biggest investment retail roll out in the country.
Only a few weeks back the high profile Rajeev Karwal, who was heading the
consumer durables’ operations at Reliance Retail, had left the organisation.

Reliance people have moved to Subhiksha across various regions where the retail
chain is on an expansion spree. It may be recalled that R. Subramanian
promoted, Chennai based no frills, neighbourhood, convenience store formate
chain of late is growing at a break neck speed. It claims to be aiming the turnover
of Rs. 3,500 crore in the year 2007.
“Retailing in India is at a stage where people movement is happening at a
furious pace as every player requires personnel for their operations,” said
Subramanian to the Economic Times.
 RESEARCH

FACTS TOLD BY RIYAZ ANSARI ([Link] Subhiksha Kandivali E.)

1. Subhiksha ranks 6th in Retail Industry of India.

2. Subhiksha Biggest outlet in Mumbai is in Malad, Thane - 2200 sq ft.

3. Currently there are 74 retail outlets in Mumbai, planning to increase

upto120 outlets by 2008.

4. Subhiksha has its 4 Wherehouse in Bhivandi.

5. Subhiksha does its product pricing on daily basis, They charge 1 -1.5% as
per the competitors pricings..

6. Subhiksha opens 9:00 Am – 9:00 Pm in 2 shifts.

7. Subhiksha holds (84 Stors * 23 ) 1,932 employees in Mumbai.

8. Profit margin: Subhiksha is working on 4% profit margin. It is distributed
into 4 categories.
 Store Management -: 1%
 Store Maintenance -: 1%
 Salaries -: 1%
 Profit -: 1%

9. Subhiksha’s competitors are working on 10 – 12% Profit margin.

10. Subhiksha’s per year Turn Over is 300cr Rs. Top management is Expecting
they charge 1 -1.5% as per the competitors pricings.

11. Subhiksha is planning to penetrate in International market by 2015.

12. Subhiksha’s per store foot falls is around 185-210 per shift.

13. Subhiksha’s partners are:

 ICICI -: 40%
 TIMES INTERNATIONAL -: 30%
 RADIO MIRCHI -: 12%

14. Subhiksha has tie up with HLL and P&G for FMCG products.

15. Subhiksha is providing training to the managers. For per manager

training process ,the cost incurred is around 4 to 5 lakhs. The traning is
done by the trainers called from outside India like Australia, Canada, US,
with great experience and knowledge.
BIBILOGRAPHY:

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MAGAZINES:

Economic Times

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