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Impact of Organized Retail in Changing Perspective of Unorganized Retail Sector in India

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Impact of Organized Retail in Changing Perspective of Unorganized Retail Sector in India Amity Journal of Commerce and Financial Review S P Singh Impact of Organized Retail in Changing Perspective of Unorganized Retail Sector in India SP Singh1 Abstract The retail sector in the current scenario is an emerging part of the Indian economy. The retail revolution has brought many changes and has also opened the door for many players in India and abroad. Indian market has the capacity to absorb a lot of retail players as a small proportion of the pie is still being organized. The retail sector has expanded significantly in recent years. In India, the organized retail sector has only a share of approximately three percent of the overall retail sector, while the largest chunk is doing the unorganized sector. A number of studies show that the organized sector posed a threat to the unorganized sector that is facing a strong degree of organized retail industry rivalry. The organized sector, on the other hand, is a major influence and impact on the unorganized sector. This paper is a humble effort to examine effects of organized retail industry from the various aspects and open areas for further study on the unorganized retail sector. Keywords: Indian retail market, organized and un-organized retail 1. Indian Retail Market - An Overview: The Indian retail market is expected to rise from US$790bn in financial year 2019 to US$1400bn by financial year 2024. Traditionally, retail has been a big sector that employs millions of people in India. Retailing in India accounts for over 10% of country’s GDP and 8% of total employment. The unorganized retail sector dominates the Indian retail market; it forms around 93% of the total Indian retail market. The unorganized retail form is characterized by stores owned by a single – family, specific product selling shops, e.g. kirana stores, medicines shops etc. Organized versus Unorganized Retail In the developed economies, the organized retail constitutes about 75 to 80 percent of the total retail, while in developing economies the unorganized retail dominates the retail sector. There is big difference in organized retail proportion from 1 percent in Pakistan and 4 percent in India to 36 percent in Brazil and 55 percent in Malaysia (Table – 1). In developed countries the retail outlets like hypermarkets, supermarkets, 1 Assistant Professor, Head, Computer Science Department, Govt. P.G. College, Noida, G. B. Nagar, U.P. 57 | P a g e Volume 2, Issue 2, 2019 Amity Journal of Commerce and Financial Review S P Singh and convenience stores are available commonly while these outlets are just introduced to developing countries. In developing countries unorganized retail continues to dominate over organized retail resulting, the wholesalers and retailers directly purchase the products from manufacturers and agricultural producers and provide them to small shops and unorganized markets. In India the retail sector is dominated by small retailers like general stores, medicine shops, cloth emporiums, shoe showrooms, paan – beedi centres, kirana stores, local mandi etc. which together form to which we called “unorganized retail” or traditional retail outlets. A number of integrated retailers opened in the last 3-4 years. Table 1: Total Retails and Share of Organized Retail Country Total Retail Sales Share of Organized Retail (US$ in Billion) (%) USA 2,983 85 Japan 1,182 66 China 785 20 United Kingdom 475 80 France 436 80 Germany 421 80 India 322 4 Brazil 284 36 Russia 276 33 Korea, South 201 15 Indonesia 150 30 Poland 120 20 Thailand 68 40 Pakistan 67 1 Argentina 53 40 Philippines 51 35 Malaysia 34 55 Czech Republic 34 30 Vietnam 26 22 Hungary 24 30 Source: Planet Retail and Technopack Advisers Pvt. Ltd. Table 2 gives the category wise growth of organized as well as total retail sector in India in recent years. In comparison to the growth of total retail of 11 percent compounded annually, the organized retail grew more approximately 20 percent annually. It results in the growth of share of organized retail in total retail from 3.3 per cent in 2003-04 to 4.1 per cent in 2006-07. 58 | P a g e Volume 2, Issue 2, 2019 Amity Journal of Commerce and Financial Review S P Singh In India grocery and meat are the majority retailers and their proportion in 2003-04 dropped by about two-thirds to about 60% in 2006-07 (Table 2). The next important factor is apparel and shoes, which accounted for roughly 7 percent in 2003 – 2004 and it increased to 9 percent in 2006 – 07. The third largest group is non – institutional healthcare, the proportion of which dropped gradually from 9 percent in 2003 – 2004 to 8 percent in 2006 – 2007. After healthcare, the sector of home appliances, the proportion of which increased from 5 percent in 2003 – 2004 to 7 percent in 2006 – 2007. In 2006 – 2007, the category of ornaments accounted for approximately 6 percent of total retail sector in India, growing from 5 percent in 2003 – 2004. Table 2: Category wise growth of organized as well as total retail sector in India Items 2003-04 2004-05 2005- 2006- 06 07 CAGR (%) 2004-07 India Retail (Rs. In Billion) 1. Food and grocery 7,028 7,064 7,418 8,680 7.3 2. Beverages 212 309 373 518 34.7 3.Clothing and footwear 777 993 1,036 1,356 20.4 4.Furniture, furnishing, appliances 512 656 746 986 24.4 andservices 5.Non-institutional healthcare 950 972 1,022 1,159 6.9 6. Sports goods, entertainment, 212 272 308 395 23.0 equipments and book 7. Personal care 371 433 465 617 18.5 8. Jewellery, watches, etc. 530 610 655 863 17.7 Total Retail 10,591 11,308 12,023 14,574 11.2 Organized Retail (Rs. In Billion) 1. Food and grocery 39 44 50 61 16.5 2. Beverages 11 12 13 16 14.7 3.Clothing and footwear 168 189 212 251 14.3 4.Furniture, furnishing, appliances 67 75 85 101 14.8 andservices 5.Non-institutional healthcare 14 16 19 24 20.0 6. Sports goods, entertainment, 25 33 44 63 37.0 equipments and book 7. Personal care 11 15 22 33 46.9 8. Jewellery, watches, etc. 18 24 33 49 40.5 Total Retail 350 408 479 598 19.5 59 | P a g e Volume 2, Issue 2, 2019 Amity Journal of Commerce and Financial Review S P Singh Share of Organized Retail in 3.3 3.6 4.0 4.1 Total Retail (%) Source: CSO, NSSO, Technopark Advisers Pvt. Ltd. 2. Objective of the study: Retail is one of India's booming industries. But as opposed to organized retail, the share of unorganized retail is quite small. The present study is a humble attempt to study the effect of organized retail on India's unorganized retail sector and open research arenas on India's future retail trends. The Indian Retail Industry is getting more and more dynamic and is ready to compete with the international players in the near future. In the upcoming few years many international retail companies will enter into the Indian market. It will create a big competition in the market which creates lots of job opportunities and also demand of understanding consumer buying behaviour, preferences, demand and taste. 3. Research Methodology: The present study is quantitative in nature, largely based on a country-wide survey conducted by ICRIER, dividing it into four regions, to study retail status in India and the future of unorganized retail as influenced by the organized retail. The survey was carried out by means of questionnaires, specifically designed by ICRIER for the purpose. Unorganized retailers are being researched in two ways. One is the group of unorganized retailers located near organized retail shops; these are called "treatment samples." Another is the group of those unorganized retail shopkeepers away from the organized shops; these are called "control samples." The two conducted a comparative study using different similar parameters to study the impact of organized retail. To make comparisons, tables, bar diagrams and line graphs were used. 4. Impact of Organized Retail on Indian Economy: Since 2002 – 2003, organized retail has expanded tremendously in India, and this is correlated with economic growth and the associated increase in consumer buying capacity. Organized retail has started to reach huge market, still its proportion is tiny. With very aggressive expansion plans, most of the big market players have come into retail business. Key retailers of international market are willing to enter into Indian market, and this become possible due to change in foreign direct investment rules of the government. Organized retail has a key role during their period of high growth in 60 | P a g e Volume 2, Issue 2, 2019 Amity Journal of Commerce and Financial Review S P Singh today's developed countries. It has also contributed significantly to the development of developing countries since the early 1990s. Organized retail in India is poised in the near future to make a mark. The report here gives findings of unorganized retailers all – India survey on the effects of organized retailing. India’s Planning Commission, in its Approach Paper for the Eleventh Five Year Plan, (2006, pp. 27-8) has noted: “Organized retailing brings many advantages to producers and also to urban consumers, while also providing employment of a higher quality. Organized retailing in agricultural produce can set up supply chains, give better prices to farmers for their produce and facilitate agro-processing industries. Modern retailing can bring in new technology and reduce consumer prices, thus stimulating demand and thereby providing more employment in production.” Unorganized Market Size: The average size of the sampled traditional retail outlets was 217 sq.
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